Is It Time For My Organisation Update Our Constitution / Governing Rules?
Whether you refer to them as Governing Rules or a Constitution, you should regularly be considering whether an update is needed. However, knowing when to actually ‘pull the trigger’ on conducting a full review and update (or whether you just need a small internal policy change) is the tricky part, and as is the classic legal response, it ‘will depend’ on a number of factors.
It is absolutely a case-by-case basis, but to help your organisation make that call, we have identified the following key factors to assist:
- when the Constitution was last updated;
- the structure of your organisation;
- the industry in which your organisation operates; and
- ‘who’ prepared the latest version of the Constitution.
When Was The Constitution Last Updated?
There is no hard and fast rule as to timing, and there is no time limit on how long a Constitution will be effective for. But, the law is constantly evolving and changing and any legal document (or any part of it) could quickly become ‘outdated’. A Constitution holds such significant bearing on how an organisation operates, so it is a document any organisation should at least consider updating every couple of years, to ensure it remains relevant in the context of changes in the law. There may also have been significant changes in the structure or policies of the organisation during that time, so there may be some practical changes to implement.
What Is The Structure Of Your Organisation?
A corporate entity with a Sole Director and Shareholder probably doesn’t need regular updates to their Constitution, but a non-profit who reports to members and stakeholders should frequently ensure the organisation keeps their Constitution up-to-date, as that ensures good governance measures are followed and any legislation changes are accounted for. For example, if there have been major changes to a Board of Directors then there are likely going to be significant changes to the way the organisation operates, so a great starting point would be updating the Constitution to ensure the new Board is on the same page with the direction the organisation is going to move to.
Specifically for any Incorporated Associations in Queensland, there have been significant changes to the governing legislation (the Incorporated Associations Act 1981 (Qld)) which have been implemented in stages over the last few years. This means that right now is a great time for any Incorporated Association to review their Constitution.
Industry Changes
Depending on the industry in which your organisation operates, there may be more frequent industry changes which ‘force’ an organisation to reconsider various governance measures. For example, an organisation that operates in the technology space is likely going to have more frequent reason to update their Constitution, than an organisation which operates in the retail or hospitality industry, which are much more ‘established’ industries.
Who Prepared the Current Constitution?
If your organisation is using a template-style document that has been ‘borrowed’ or is adopting any legislative model rules, they won’t be drafted in a way that accounts for things such as industry changes, specific organisational policies and procedures, nor recent or incoming legal changes. However if you engaged a lawyer to prepare your Constitution and your organisation took the time to carefully consider the impacts it would have on governance, it won’t need to be updated as regularly.
What’s Next?
Our expert Business & Property Team has extensive experience in corporate governance, structuring matters with a particular expertise in assisting non-profits, charities and sporting organisations.
If your organisation is considering updating their Constitution, get in touch with our team today and we can help you with updating your Constitution and structuring advice: