The Australian Securities and Investments Commission regulator (ASIC) has made a number of announcements recently which impact whistleblower compliance requirements for not for profit and charitable organisations in Australia.
Not for profit and charitable organisations need to understand their organisations’ legal entity status incorporated under the Corporations Act, to understand what impacts the changes to the large proprietary (private) company definition and new guidance regarding exemptions to whistleblowing policy requirements.
Firstly, on July 1, 2019 ASIC changed the definition of a large proprietary (private) company. This change means less companies will now meet this threshold definition. Private not for profit and charitable organisations in Australia which do not meet this definition of “large” are not required to have a whistleblower policy in place for their organisation. From financial years commencing on or after 1 July 2019, a proprietary company is defined as ‘large’ for a financial year if it satisfies at least two of the below criteria:
- the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more
- the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more, and
- the company and any entities it controls have 100 or more employees at the end of the financial year.
Secondly, ASIC recently released guidance in August of this year asking for public comment as to whether public companies that are small not-for-profits or charities should be exempted from the requirement to have a whistleblower policy, and the most appropriate size threshold that should apply to exempt them if that is appropriate. 18 September is the due date to ASIC for submissions and then ASIC will publicly provide their decision in October as to whether exemptions may apply. ASIC has asked for public responses to the question:
- “do you consider that the requirement for public companies to have a whistleblower policy would impose a disproportionate regulatory burden on public companies that are small not-for-profits or charities, such that the benefits would be outweighed by the costs that these companies would incur to establish, implement and maintain a whistleblower policy?”
ASIC’s guidance in August also detailed requirements for:
- Compulsory inclusion in the whistleblower policy (for organisations not exempt); and
- Ongoing education and training on the whistleblower policy for all staff.
ASIC’s Executive Director of Assessment and Intelligence, Warren Day said at the National Whistleblowing Conference in Brisbane in August that ASIC is beginning audits on whistleblower policy compliance beginning 1 January 2020. Mr Day said ASIC is looking “for more than just tick the box compliance. It is looking for processes and training embedded in the organisation.” Mr Day also noted that evidence of processes and training can be used as part of a legal defence in criminal prosecutions.
Irrespective of whether the large private company definition applies and additionally whether public not for profit and charitable organisations in Australia may be excluded in October by ASIC from requiring a whistleblower policy, all public and private not for profit and charitable organisations incorporated under the Corporations Act still need to comply with the new whistleblower protections laws which mark a significant step change from earlier requirements. All not for profit and charitable organisations, and also all corporations in Australia incorporated under the Corporations Act need to be closely examining and addressing their compliance with the whistleblower protections now in the lead up to Christmas before compliance checks begin in early 2020.
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