Changes to an organisation's constitution or rules

What is a constitution?

Every community organisation needs to have a constitution. This is the document that contains the rules of the organisation, and describes its basic structure and processes. Usually the constitution will specify:

• the aims of the organisation;
• how the members of the organisation are admitted;
• the rights and obligations of members;
• how the office-bearers and members of the governing body are elected or appointed;
• how general meetings of members and meetings of the governing body are convened and conducted;
• how the organisation is managed, especially its finances; and
• what is to happen to the organisation's assets when it is wound up.

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Why would we need to change our constitution?

It is important that the constitution accurately reflects how your organisation operates in practice. It’s no use having a constitution that no one looks at or follows. Problems will invariably result. So you may need to change your constitution to bring it up-to-date.

You may also need to change your constitution to implement a new structure or to alter the way in which the organisation operates. This may occur because the organisation’s circumstances have changed or it is taking on new activities.

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Our organisation has ‘rules’ or ‘articles’ - is this the same as a constitution?

The terminology in relation to constitutions varies, according to whether your organisation is an incorporated association, a company limited by guarantee or a co-operative.

An incorporated association registered under the Victorian Associations Incorporation Act 1981 is required by that Act to have a 'statement of purposes' and 'rules'. Together, these make up the constitution of the incorporated association. They can be two separate documents, or can be combined into one. The aims of an incorporated association are expressed through the 'purposes' contained in its statement of purposes.

A company limited by guarantee registered under the Commonwealth Corporations Act 2001will have either a single constitution (for newer organisations) or two separate documents: a 'memorandum of association' and 'articles of association' (for older organisations that have not updated their constitution). The aims of a company are expressed through the 'objects' contained in its constitution or memorandum of association.

A co-operative registered under the Victorian Co-operatives Act 1996 must have a set of 'rules' that make up its constitution.  Usually the aims of a co-operative are expressed by specifying its “primary activity” in the rules. The rules may also include objects.

You can usually tell from an organisation’s name whether it is an incorporated association, a company limited by guarantee or a co-operative. All incorporated associations are required to have 'Incorporated' or 'Inc' at the end of their names (for example, PILCH (Vic) Inc.). Most companies limited by guarantee have 'Limited' or 'Ltd' at the end of their names (although some have an exemption from this requirement). All co-operatives must have “Co-operative”, 'Cooperative' or 'Co-op' in their names, and 'Limited' or 'Ltd' at the end. 

To confirm what sort of organisation yours or another is, you can search its name on the Australian Business number website or the Australian Securities and Investments Commission website (for companies) or the Consumer Affairs Victoria website (for incorporated associations and co-operatives). We have included the links to these databases in the Related Resources section below.

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What is the legal process for making changes to our constitution?

Whether your organisation is an incorporated association, a company limited by guarantee or a co-operative, it can only change its constitution by passing a 'special resolution'. It is important that the statutory (legal) requirements for a special resolution are complied with, otherwise the resolution will be invalid and the desired changes will not take effect.

As well as the statutory requirements, you also need to comply with any extra requirements in your own constitution. For example, the rules of a state organisation may require the approval of the national body before changes to the state organisation's rules are effective.

Incorporated associations and companies

The following are the statutory requirements for a valid special resolution for both incorporated associations and companies:

• A special resolution can only be passed at a general meeting of members. This can either be the annual general meeting (AGM) or a special general meeting. A special resolution cannot be passed at a committee or board meeting, or by a resolution without meeting (except in the rare case of companies with only 1 member);
• At least 21 days notice of the general meeting must be given to all members (and, for companies, to they auditor and to any directors who are not also members);
• The notice should state the text of the proposed special resolution;
• The notice must specify the intention to propose the resolution as a special resolution. Preferably, use words along the following lines:
  • It is intended that the following resolution be proposed as a special resolution; or
  • The following resolution will be proposed as a special resolution
• However, provided the notice makes it clear that the proposed resolution is a special resolution, this requirement will be met; and
• The special resolution will only be passed at the general meeting if at least 75% of those members who vote on the resolution, vote in favour. This includes members who are not actually present themselves but whose 'proxies' (see below) cast votes on their behalf. It excludes those members who abstain from voting.

Proxies
A proxy is a person you authorise to vote on your behalf if you cannot attend the meeting yourself. The appointment of a proxy is usually required to be in writing using a specified form. Often the proxy form will need to be lodged at the office of the organisation at least 48 hours before the meeting in order to be valid. Proxy voting is permitted for all companies limited by guarantee, but may be excluded by the rules of an incorporated association.

Co-operatives

For co-operatives, the statutory requirements are similar to those set out above, except that:

• The proposed alteration of the rules must be submitted to the Registrar of Co-operatives at Consumer Affairs Victoria for approval at least 28 days before notice is given. The requisite form is available on the Consumer Affairs Victoria website and we have included a link to it in the Related Resources section below;
• The notice must also specify the reasons for the proposed special resolution, and the effect of it being passed;
• At a general meeting, the special resolution only requires a 66% majority of those present and voting (including by proxy);
• Special resolutions may also be passed by a two-thirds majority of those members voting in a postal ballot in accordance with Schedule 3 of the Co-operatives Regulations 1997 (Vic), but only if this is expressly permitted under the rules of the particular co-operative - check the rules; and
• The rules of a co-operative may also be altered by a resolution passed by the co-operative's board, but only if the alteration does no more than to give effect to a requirement of the Co-operatives Act.

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How do we lodge and get approval of changes to constitution?

Incorporated associations and co-operatives 

For incorporated associations and co-operatives, a special resolution to change the constitution will only take effect once it has been approved by the Registrar of Incorporated Associations or the Registrar of Co-Operatives. A form must be lodged with Consumer Affairs Victoria (CAV) within 28 days.

Your organisation should be aware that until the form is lodged and the changes have been approved by CAV, the constitution remains as it was before the changes were made.  We have included a link to it in the Related Resources section below.

For co-operatives, CAV will send you a form when they approve the proposed alteration before notice is given.

Companies limited by guarantee 

For companies, a special resolution to change the constitution takes effect without external approval by a government regulator. However, a copy of the special resolution and the changes to the constitution must be lodged with Australian Securities and Investments Commission (ASIC) within 14 days.

Updated copies 

Make sure you give copies of the consolidated constitution (that is, the constitution with all amendments made) to each committee member or director so that they can familiarise themselves with it. You should also have copies of the constitution available for any member who requests one. Any member is legally entitled to a copy of the constitution (although for companies and co-operatives there may be a small fee).

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What issues should we look out for before we change our constitution?

Schedule requirements

For incorporated associations, check that the rules as amended provide for each of the 17 matters specified in the Schedule to the Associations Incorporation Act, otherwise CAV will reject the amendments and holding the members meeting will have been a waste of time and money. 

It’s a good idea to prepare a list or table, cross-referencing each of the items in the Schedule with the rules as they will be once the amendments are approved. Just write the applicable rule numbers against each of the matters required to be included. That way you can see if anything has accidentally been left out. 

Rights and liabilities of members

Any changes to the constitution that affect the existing rights of members or that may increase their potential financial liability need to be approached with particular care. In such cases, unless the changes are completely uncontroversial, it will be prudent to seek legal advice.

Transitional arrangements

Be careful when changing your constitution, (especially if you replace the whole constitution), that the members under the old constitution remain members under the new constitution. This may seem an odd point to make but problems can arise when the categories of membership or the eligibility for membership change.

Similarly, you may need to make it clear that, despite the changes to the constitution, the members of the governing body under the old constitution continue in office under the new constitution. Alternatively, there may need to be an extraordinary election for the new governing body, or the membership of the new governing body may need to be specified in the new constitution, with effect from a given date.  If unsure, seek legal advice. 

Tax status

If your organisation has been endorsed by the Australian Taxation Office as a Deductible Gift Recipient (DGR) or is exempt from income tax, whether as a Tax Concession Charity (TCC) or otherwise, you also need to make sure that any changes to the constitution will not jeopardise your tax status. In particular, any changes to the purposes of an incorporated association, the objects of a company limited by guarantee or the activities of a co-operative, and to the winding up provisions of these organisations should be approached with care. If unsure, seek legal advice. 

Funding agreements

If you receive funding from an outside body (for example, a government department or philanthropic trust), check that the proposed changes do not conflict with anything in the relevant funding agreement or terms and conditions of the grant. Also, once any changes have been made, you may be required by the funding documents to send a copy of the new constitution to the funding body.

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Related Resources

Related legislation

Related links - Consumer Affairs Victoria (CAV) resources

Incorporated associations

Co-operatives

Related links - Australian Securities and Investments Commission (ASIC) resources

Companies limited by guarantee 

Related links - Commonwealth Government Resources

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