Proposed amendments to MCHI Rules, 2019

Proposed amendments to MCHI Rules, 2019

Note: The amendments in Items A, B & C below respond to amendments to the ACT Associations Incorporation Act 1991 (the Act) which came into effect on 1 July 2019.  Other significant amendments to that Act that members should know about are dealt with in a separate briefing note.  The amendments proposed in Item D are to correct existing errors and clarify certain concepts and procedures for members and the committee.

Other significant amendments are to comply with MHCI’s obligations in relation to its tax deductibility status (Item E) , and to recast the objects of the association in a form that, without changing our range of activities, complies with the legal requirements of an organisation with tax deductibility status (Item F). 

In accordance with the provisions of sections 33 and 70 of that Act, to come into force each of the substantive amendments to MCH’s Rules set out below must be passed by special resolution, which requires that at least 21 days notice be given to MCH members of the intention to propose the resolution as a special resolution, and must be passed by at least ¾ of the votes of qualified members voting in person or by proxy. 

A.                 Amendments to provide for a dispute resolution procedure for disputes between members or between members and the association

  • To implement and supplement the provisions of new section 65B of the Act (see Explanation below), insert the following Part IVA after clause 16 ‘Disciplining of members’:

Part IVA—Dispute resolution procedure 

        16A.     Application 

    (1)     The dispute resolution procedure set out in this Part applies to disputes under these rules between— 

  • a member and another member (in their capacity as members); 
  • a member and the association (including the committee). 

    (2)     A member must not initiate a dispute resolution procedure in relation to a matter that is the subject of a disciplinary procedure under clause 16 of these rules until the disciplinary procedure has been completed. 

        16B.     Parties must attempt to resolve the dispute 

The parties to a dispute must attempt to resolve the dispute between themselves within 14 days of the dispute coming to the attention of each party. 

        16C.     Appointment of mediator 

    (1)     If the parties to a dispute are unable to resolve the dispute between themselves within the time required by clause 16B, the parties must within 10 days— 

        (a)     notify the committee of the dispute; and 

        (b)     agree to or request the appointment of a mediator; and 

        (c)     attempt in good faith to settle the dispute by mediation. 

    (2)     The mediator must be— 

        (a)     a person chosen by agreement between the parties; or 

        (b)     in the absence of agreement— 

              (i)     if the dispute is between a member and another member—a person appointed by the committee; or 

              (ii)     if the dispute is between a member and the association (including the committee)—a person appointed or employed by a conflict resolution organisation.

    (3)     A mediator appointed by the committee may be a former member of the association but in any case must not be a person who— 

        (a)     has a personal interest in the dispute; or 

        (b)     is biased in favour of or against any party. 

      16D.            Mediation process

    (1)     The mediator to the dispute, in conducting the mediation, must— 

        (a)     give each party every opportunity to be heard; and 

        (b)     allow due consideration by all parties of any written statement submitted by any party; and 

        (c)     ensure that natural justice is accorded to the parties throughout the mediation process. 

    (2)     The mediator must not determine the dispute. 

        16E.     Failure to resolve dispute by mediation 

(1)      If the mediation process does not resolve the dispute, the parties may seek to resolve the dispute in accordance with the provisions of section 65B of the Act or otherwise at law.

(2)      In the case of a proceeding in accordance with section 65B of the Act, the committee must adopt procedures consistent with the provisions of that section.

Explanation: From 1 July 2019, new section 65B of the Act requires the rules of associations to include a dispute resolution procedure for disputes between members of an association, or between a member and the relevant association.  Section 65B provides the opportunity for parties to be heard, consideration by an unbiased decision-maker who must notify parties in writing of a decision and must give reasons for the decision, as well as completing the procedure as soon as reasonably practicable.  An appeal process is also mandated.  The section seems to anticipate a determinative procedure, and makes no mention of alternative dispute resolution processes such as mediation.  No Model Rules are provided to implement section 65B.

The committee believes it would be desirable to add a requirement to attempt mediation before applying a determinative procedure, and has received legal advice from Not-for-profit Law/Justice Connect that the above amendments are consistent with the new provisions in section 65B. The following amendments adapt the 2012 Reform Model Rules in use in Victoria.  We note that no State or Territory has adopted detailed Model Rules as to a determinative process to follow unsuccessful mediation, although New South Wales specifically provides for arbitration in that case. 

B.         Amendment to provide the way in which a committee member resigns (following introduction on I July 2019 of new section 64A of the Act)

  • To provide consistency with new section 64A of the Act, it is proposed to add the words ‘by notice in writing given to the public officer’ to clause 22(1)(c) of the Rules so that it provides that ‘a vacancy occurs in the office of a member of the committee if the member – …(c)  resigns the office by notice in writing given to the public officer; …’.

C.         Amendments to refer to new sections 65A (disclosure of material personal interest) and 65C (disciplinary action) and to add a Note concerning new Division 4.2 of the Act, Duties of officers

  • Add the following subclause and note after clause 26, Voting and decisions:

27A.     Disclosures of material personal interest

  •  The association must adopt and keep up to date a policy concerning disclosure of material personal interests and the procedure to be followed where a committee member has a material personal interest in a matter being considered by the committee.
  • Subject to the exclusions in section 65A(2) of the Act, a member of the committee who has a material personal interest in a matter being considered at a committee meeting must –
  • as soon as the member becomes aware of the interest, disclose to the committee the nature and extent of the interest, and the relation of the interest to the activities of the association; and
  • disclose the nature and extent of the interest, and the relation of the interest to the activities of the association, at the next general meeting of the association;

and must not –

  • be present while the matter is being considered at the meeting; or
  • vote on the matter.
  • The details disclosed in accordance with subclause (3)(a) and (b) must be recorded in the minutes of the committee at which the disclosure is made.

Note:  The Act provides for penalties of 20 points for a committee member who breaches the provisions of sections 65 and 65A reflected in subclause (3).

  • Add the following subclause to clause 16, Disciplining of members:

(1A)      The principles set out in section 65C of the Act apply to any procedure for disciplining members.

  • In order to remind office-bearers of newly–introduced statutory duties, add the following note after clause 21, Treasurer:

Note: Division 4.2 of the Act, Duties of officers, provides that officers of an incorporated association have duties of care and diligence, to act in good faith and for proper purposes, and a duty not to improperly use their positions, or information gained from holding those positions, to gain advantage for any person, or cause detriment to the association (sections 66A–66D). 

Explanations:  1.  While it is not strictly necessary to include rule 27A which summarises the most important new legislative provisions concerning conflicts of interest, it is easier for committee members or others to refer to the new rule than go to the Act.  At least one other organisation has done something similar.  It will be necessary under new rule 27A(1) to update the policy MCH adopted last year.  The changes are welcome (eg the previous provisions didn’t exclude from discussion committee members with conflicts about a matter before the committee).  2.  The reference back to new section 65C of the Act on the principles governing disciplinary procedures is a useful reminder for those applying MCH’s current disciplinary procedure, which is the same as that still in the Model Rules.  If the Model Rules on disciplinary procedures are changed, MCH may wish to adopt them.  3.  The note on the newly–legislated duties of office-bearers is included to bring those duties to their attention.

D.     Minor amendments to Rules to correct errors in present version and to clarify several matters for members

  • In order to make clearer to members the complex requirements of a ‘special resolution’, amend rule 1(1), Interpretation, by inserting the following definition of ‘special resolution’ after the definition of ‘secretary’, and add an accompanying note:

“special resolution”  means a resolution passed in accordance with section 70 of the Act;

Note:  Section 70 of the Act states that a resolution of an incorporated association is taken to be a special resolution if (a) it is passed at a general meeting of the association of which at least 21 days notice has been given of intention to move it as a special resolution (reflected in subclause 30(2) of these Rules), and (b) “it is passed by at least ¾ of the votes of those members of the association who, being entitled to vote, vote in person or, if the rules of the association permit voting by proxy, vote by proxy at the meeting”.

  • Omit reference in subclause 1(3) to the Interpretation Act 1967 and replace with reference to the Legislation Act 2001.  This provides reference to the applicable Act and follows the current Model Rule.
  • To make clearer to members the process for changing rules and objects, add notes to rule 39, Alteration of objects and rules, stating:
  • Notes:  1. Sections 30 and 33 of the Act provide that an incorporated association may, by special resolution, alter its objects and rules. The meaning of “special resolution” is defined in  rule 1(1) of these Rules.  2. Those sections of the Act also include requirements to lodge a notice setting out the particulars of alterations to objects or rules with the registrar–general and, in the cases of rule changes, including a declaration by at least 2 committee members that the special resolution was duly passed. The sections also  provide that such alterations do not take effect until such a notice has been lodged.
  • Insert ‘PART VI – GENERAL MEETINGS’ before clause 27 ‘Annual general meetings – holding of’.  This corrects an accidental omission.
  • Amend ‘PART V – MISCELLANEOUS’ to ‘PART VII – MISCELLANEOUS’.  This corrects a numbering error.

 

E.      Amendments concerning registration as a cultural organisation and endorsement as a deductible gift recipient (DGR)

Explanation: While the MCH Rules have always contained provisions for registration of a cultural fund on the Register of Cultural Organisations (maintained by the Department of Communications and the Arts (DCA)) as the basis for endorsement as a DGR, those provisions do not cover all the matters currently required by the legislation and guidelines for these purposes.  In order to comply with those requirements, the following changes to the Rules are proposed based on the Model Rules set out in the Register of Cultural Organisations Guide, DCA, 2018.  The amendments form part of a strategy to reactivate use of our tax deductibility status.  Following legal advice from Not-for-profit Law/Justice Connect concerning this strategy, additional changes to the Objects clause of the MCH Rules to meet tax deductibility requirements are proposed in Item F below.

  • Delete the whole of ‘Part III – Registration as a Cultural Organisation’ of the existing Rules and substitute the following new Part III.  (New provisions are shown in bold.)

PART III – REGISTRATION AS A CULTURAL ORGANISATION

  • The association must at all times be registered on the register of cultural
    organisations established under Division 30, Subdivision 30-F of the Income Tax
    Assessment Act 1997
    (the Income Tax Assessment Act)
    and comply with the eligibility criteria for continued registration.
  • [Note:  Clause 4 has been deleted from Part III, and  moved to renumbered Part VII (see below) as new clause 39A ‘Funds – no distribution of profits or financial surplus’.]
  • (1)        The association must maintain a public fund (the public fund)
  • to which gifts of money or property can be made and credited for the principal cultural purposes of the association;
  • that does not receive any other money or property; and
  • the monies in which must not be distributed to members or office-bearers of the association, except as reimbursement of out-of-pocket expenses incurred on behalf of the fund.

(2)        The association must comply with any rules made by the Treasury Minister or the appropriate Minister responsible for the Register of Cultural Organisations to ensure that gifts made to the public fund will only be used for the association’s principal purposes.

  • (1)        Gifts made to the public fund, or any money received as a result of such gifts, must only be used for the principal purposes of the association.

(2)        The public must be invited to contribute to the public fund.

(3)        Receipts for gifts to the public fund must state –

                        (a) the name of the public fund;

(b) the Australian Business Number of the association;

(c) that the receipt is for a gift made to the public fund; and

(d) any other matter required to be included on the receipt pursuant to the requirements of the Income Tax Assessment Act.

7A.       (1) Investment of monies in the public fund must be made in accordance with guidelines for public funds as specified by the Australian Taxation Office (ATO).

(2) The public fund will be administered by a subcommittee of the management committee consisting of three persons the majority of whom, because of their tenure of some public office or their position in the community, have a degree of responsibility to the community as a whole.

(3) The association must notify the Commonwealth Department responsible for the administration of the Register of Cultural Organisations (the Department) of any proposed amendments or alterations to provisions relating to the public fund, in order that it may assess the effect of any amendments on the fund’s continuing Deductible Gift Recipient status.

(4) Every six months, in June and December, the association must provide to the Department statistical information on the gifts made to the public fund.

7B.       Upon the winding up or dissolution of the public fund listed on the Register of Cultural Organisations, or where its endorsement as a Deductible Gift Recipient is revoked, if there remains any property or funds after satisfaction of all its debts and liabilities, the property or funds must not be distributed among its members, but must be given or transferred to some other fund, authority or institution having objects similar to the objects of the former public fund, the rules of which prohibit the distribution of its income among its members, and which is eligible for tax deductibility of donations under Subdivision 30–B, section 30–100 of the Income Tax Assessment Act.

7.         [Note: Present clause 4 has beendeleted and moved to renumbered ‘Part VII – Miscellaneous’ as clause 44 below.]

Consequential amendments

The following consequential amendments are made to renumbered ‘Part VII – Miscellaneous’, located with other provisions concerning funds.

  • After clause 38, insert the following as new clause 39A (the existing clause 4 slightly amended (shown in bold) to bring it into line with the requirements for a Deductible Gift Recipient):

39A.     Funds – no distribution of profits or financial surplus

The association must not pay any of its profits or financial surplus, or give any of its property, to its members or office-bearers.

  • Insert as new clause 44 ‘Winding up or dissolution of association’ (existing clause 7 amended significantly to bring it into line with section 92 of the ACT Associations Incorporation Act 1991).  New material is shown in bold, while paras (c) and (d) of existing clause 7 have been omitted as not required by section 92:

44.      Winding up or dissolution of the association

            If upon winding-up or dissolution of the association, there remains any surplus after payment of all its debts and liabilities, the surplus property must not be paid to or distributed amongst its members,but, subject to any trust affecting the property or part of it, vests in –

  • some other organisation or organisations nominated for this purpose in the Rules or by a  special resolution of the former association, that –
  • has objects substantially the same as the objects of the former association;

(ii)  whose rules prohibit the distribution of its income among its members;

(iii)  is not carried on for the object of trading or securing pecuniary gain for its members; and

(iv)  has a provision in its rules requiring any surplus property of the association to be passed, on the dissolution or winding up of the association, to another association that has objects substantially the same as the former association and that is not carried on for the object of securing the pecuniary gain of its members; or

(b)  a fund, authority or institution mentioned in subdivision 30–B of the Income Tax Assessment Actthat is nominated for this purpose in the rules of the former association or in a special resolution of the former association.

                Notes to new rule 44 (for inclusion in amended rules):

1. Section 93(3) of the Act provides that an association, that has by special resolution nominated another body as a successor, must lodge a statement signed by at least 2 members of the committee with the registrar–general certifying that the special resolution was duly passed (2 penalty points for breach).

2.  In addition to the two options stated in clause 44, section 92(1)(c) of the Act provides that if no association, fund, authority or institution has been nominated in accordance with paras (a) and (b) of that subsection, any relevant surplus property vests in the registrar–general.

F.      Recasting objects clause in rule 2 to clarify the principal purposes of MCHI

Explanation:  The current objects clause of the MCH Rules in clause 2 was introduced in 2006.  It was intended to reflect the association’s activities and aspirations at that time, adding slightly to and rearranging the provisions of the original 1997 objects clause.  In the course of the strategy exercise concerning MCHI’s tax deductibility status, referred to in Item E above, MCHI obtained legal advice from Not-for-profit Law/Justice Connect that as they currently stand, the provisions of the objects clause would not satisfy the legal requirements for eligibility for tax deductible status.  To meet that concern, the objects have been recast in a form that, without changing our range of activities, complies with the legal requirements of an organisation with tax deductibility status.  If we are successful in retaining our tax deductibility status, that will assist MCHI to augment its cultural program again in the future.

  • Delete the existing ‘Part II – Objects’, and replace it with the following new Part II:

PART II – OBJECTS

2.          Objects

Inspired by the vitality and impact of the lives and work of Manning and Dymphna Clark based on their home at 11 Tasmania Circle, Forrest in the ACT –

(1)        The association’s principal object is to promote cultural forms specified in subsection 30–300(2) of the Income Tax Assessment Act 1997 (the Income Tax Assessment Act) including the following –

(a)        promoting, encouraging and nurturing the production of creative and scholarly literature (especially but not only in Australian history and Australian literature) and of visual and performing arts works;

(b)        promoting the protection of movable cultural heritage, including but not limited to  assessing, curating and interpreting  Manning and Dymphna Clark’s collections within the heritage-listed site, including books, significant artworks, manuscript material and other significant objects from their period of occupation; and

(c)        promoting as appropriate other cultural forms specified in the Income Tax Assessment Act.

(2)        In addition to the matters referred to in subclause (1),  the association will:

 (a)       provide members and the community with a program of cultural, intellectual and social activities in Canberra or elsewhere, including but not limited to promoting and encouraging –

(i)         vigorous discussion and debate within Australian society on issues of public importance and in all areas of scholarly interest; and

(ii)        a liberal education in the humanities, the social and natural sciences and the visual and performing arts; and

 (b)       conserve, present and interpret the heritage-listed site at 11 Tasmania Circle, Forrest at the centre of the association’s program of activities.

 (3)       The association may use all appropriate means to carry out the objects stated in subclauses (1) and (2) including:

(a)        organising, supporting and hosting, in Canberra and elsewhere:

(i)         lectures, classes, addresses, seminars, debates, conferences, symposia and similar events;

(ii)        exhibitions and performances;

(iii)       book launches and readings;

(iv)       meetings and other functions;

(b)        through a program of visiting/residential scholars, providing facilities and opportunities for Australian and overseas scholars, creative artists, writers, community leaders and others to assist their studies and work;

(c)        conducting teaching and research programs and publication through appropriate media in the areas referred to in subclause (1)(a), in particular in the areas of literature, history and the visual and performing arts;

(d)        making the late Manning Clark’s library available for research by individual writers, scholars and artists;

(e)        cooperating with Australian institutions of learning and other appropriate institutions and organisations in pursuit of common goals; and

(f)        providing public access to the building, grounds and collections in a way that as far as possible preserves their physical integrity and heritage significance.

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