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Answers to your legal questions

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Trademarks are quite costly but can also protect an organisation. Are trademarks something not-for-profits can’t afford or can’t afford not to have?

Laura Kaczkowski

How important is the good name, image and branding of your organisation, both now and into the future? For most not-for-profits their reputation is one of their most important assets. Registering a trademark may be a cost-effective form of legally protecting this reputation.

Registering a trademark provides the following benefits:

  • Awards the exclusive right to use the trademark in Australia, in relation to the goods or services categories for which it is registered
  • Provides a right to prevent a competitor from using an identical or deceptively similar name
  • Adds value to your organisation – it is an asset.

Currently, the application fees for registering a trademark are $120–$160 per category if you apply online and $180 per category if you apply by paper. You will then have to pay a further $250 if your organisation’s trademark has been accepted for registration. Once these fees are paid a trademark continues indefinitely as long as the $300 renewal fee per category is paid every ten years.

I am concerned that the branches of a not-for-profit don’t have liability insurance for their events. Are committees correct in assuming they would be covered by the insurance of the venue they use?

Jesse Shore, Australian Science Communicators

You need to closely review the terms of your public liability insurance policy. If the branch is a separate legal entity, is it listed in the insurance policy as a party covered by the policy? If it is not a separate legal entity, check that the organisation is listed. For clarity, you may wish to list the branches anyway.

The branches may not be covered by the venue’s insurance – it depends on the terms of the venue’s insurance policy. Ask the venue if the branch is covered. The answer may depend on the how the branch intends to use the venue and whether this type of use is covered.

Your broker should understand the scope of your organisation’s activities and be able to advise you on appropriate insurance cover.

What are your top ten legal tips for not-for-profits?

1. Read your constituent documents thoroughly to make sure you are not acting outside the scope.
2. Make sure all directors or trustees know what their duties are under the relevant Associations Act, the Corporations Act or the Trustee Act, and refer to the website of the relevant regulator for more information.
3. Check whether you are entitled to any tax concessions – or more tax concessions.
4. If you currently claim tax concessions, undertake an annual review to assess your continuing eligibility. The Australian Taxation Office provides self-assessment forms.
5. Make sure you obtain fundraising licenses if you intend to publicly fundraise. This is an onerous job but the penalties for failure to do so are prohibitive.
6. Make sure you have appropriate protection for your valuable intellectual property – your good name and brand.
7. Review your contracts to make sure they reflect your legal position and your practice.
8. Seek advice if you’re unsure.
9. Subscribe to newsletters to make sure you stay up-to-date. The Australian Taxation Office Non-Profit news, Moores Legal Not-for-profit Briefing and Third Sector’s free e-news are great resources.
10. Most importantly, don’t let the legal red tape distract you from your ultimate purpose.

Would a national body be potentially liable for meeting the financial commitments of a branch which went into significant debt (for instance if one of their events went badly wrong)?

Jesse Shore, Australian Science Communicators

The answer depends on the legal structure of the organisation. Are the branches subunits of the one legal entity or are they separate legal entities?

Generally where organisations are separate entities (such as parent and subsidiary) each entity is responsible for its own debts. However in certain circumstances, a parent company can be liable under the Corporations Act 2001 (Cth) for the debts of subsidiaries (Section 588V). Even if the parent is not liable, it may choose to bail out its branch for reputational reasons.

On the other hand, if the branches are part of the same legal entity, which is more common, the national body (being in law the same body as the branch) is likely to be liable for the debts of the branch.

Review the rules of the organisation and any policy documents to determine whether there are any arrangements regarding financial responsibilities. Although policy documents may not be binding, they provide internal guidance.

Ideally, if the national body is legally responsible for the debts of its branches it should develop a policy, for example that branches must not incur debt over a certain threshold without the consent of the Board.

What are the penalties for Board members who breach their role and responsibilities?

Gregory Bondar, Association Management Institute

The applicable penalties depend on the legal structure of the not-for-profit:

  • An incorporated association is governed by the State or Territory associations legislation and regulated by the State or Territory regulator, such as Consumer Affairs Victoria
    • A charitable trust is governed by the State or Territory Trustee Acts and the common law, and regulated by the State Attorney-General
      A company limited by guarantee is governed by the Corporations Act 2001 (Cth) and regulated by ASIC.

You will need to refer to the relevant Act for the applicable penalties. The website of the relevant regulator will also have further information.

Under the Victorian Associations Incorporation Act 1981 the penalties for Board members who breach their role and responsibilities are wide ranging. A Board member who makes improper use of information to benefit themselves or another person, or to cause detriment to the association could face a penalty of up to $7,328.40. A Board member who has a financial interest in a contract with the association that they fail to disclose may be liable to pay up to $1,221.40.

It is possible to obtain coverage for civil penalties by taking out Directors’ and Officers’ insurance, but this will not cover you for criminal offences.

What are the key legal issues that not-for-profits should be aware of?

There have been a lot of significant changes in the not-for-profit sector:

  • The Australian Charities and Not-for-profits Commission is due to commence operations on 1 July 2012. It will take over from the Australian Taxation Office in determining the legal status of charities and public benevolent institutions, amongst others. It is to implement a ‘report once, use often’ reporting framework for charities, provide education and support to the sector on technical matters, and establish a public information portal by 1 July 2013.
  • The Federal Government has announced that any unrelated commercial activities of not-for-profits will be subject to income tax. This applies to activities commenced after 10 May 2011 and the tax applies from 1 July 2011. The details are yet to be released.
  • The Federal Government intends to introduce a statutory definition of ‘charity’ from 1 July 2013. At present the law of charity is derived from case law dating back to the 1600s.
  • The Federal Government has recently announced changes to the ‘in Australia’ rules that will apply to not-for-profits with income tax concessions and deductible gift recipient status.

Each reform has generated a wave of public consultation. Be involved in the discussion to make sure your views are heard and watch this space.

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