Amending legislation that came into effect on 1 July 2019 saw Part 9.4AAA of the Corporations Act expanded to provide greater protections for whistleblowers who reported misconduct. As part of this suite of whistleblower reforms, public companies (including charities registered with the Australian Charities and Not-for-profits Commission (ACNC)), large proprietary companies and proprietary companies that are trustees of registrable superannuation entities are required by law to implement a whistleblower policy and to make that policy available to their officers and employees. Effective from 1 January 2020, it is an offence of strict liability for these organisations to not publish a whistleblower policy.
2. Whistleblower Policy Requirement
Amongst other things, the Corporations Act requires a whistleblower policy to include information about the legal protections available to whistleblowers, how and to whom the whistleblower may make the disclosure, and how a company will investigate disclosures and protect whistleblowers from detriment.1
There was a swift response to this new policy requirement. Numerous submissions were made to the Australian Securities & Investments Commission (ASIC) concerning the unreasonable regulatory burden and onerous requirements that compliance with a mandated whistleblower policy would place upon charities and not-for-profit organisations. The Law Council of Australia made a submission to ASIC seeking an exemption for all companies limited by guarantee registered as charities with the ACNC.2
3. Exemptions to the Whistleblower Policy Mandate
ASIC subsequently quelled concerns and provided an exemption under the ASIC Corporations (Whistleblower Policies) Instrument 2019/1146 on 13 November 2019. Under the instrument, charities and not-for-profits are exempt from publishing a whistleblower policy if their annual consolidated revenue is less than $1 million and they are not trading or financial corporations.
Whether or not charities and not-for-profits fall within the definition of a trading or financial corporation can sometimes be unclear and is dependent upon the organisation’s activities.
Whilst the exemption lessens the administrative burden for smaller charitable and not-for-profit companies, it does not exempt eligible entities from complying with the general application of the whistleblower protection regime.
4. Failure to have a compliant whistleblower policy
There are penalties for failing to comply with the requirement to have a whistleblower policy. Whilst there are no pecuniary penalties available, there are criminal penalties as follows:
- For an individual: 60 penalty units ($12,600)3
- For a body corporate: 600 penalty units ($126,000)4
5. Conclusion
If an organisation falls within the exemption to need to have a formal whistleblower policy, there may still be benefits from ensuring, in line with legislative requirement, that there is clear documentation on strategies for dealing with whistleblower reports. In fact, the ACNC recommends that all charities – especially those with complex operating environments, high volunteer numbers or those with third party arrangements – consider producing a whistleblower policy even if they fall within the exemption.
Article written by Mills Oakley
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1 Corporations Act 2001 (Cth) s 1317AI(5) (‘Corporations Act’).
2 Law Council of Australia, Whistleblower Policies (Consultation Paper 321, 18 September 2019) 4.
3 Corporations Act (n 1) sch 3.
4 Corporations Act (n 1) s 1311C.
