Establishing the CRC
Once you are notified you have been awarded the grant from the CRC Program you can commence establishing the CRC Entity and organisation.
It is important that you read the Grant Opportunity Guidelines, and any other information provided by the CRC Program Team, as these documents will outline the obligations that must be followed when you establish and run the CRC.
The key legals steps in establishing a CRC include the formation of the CRC Entity and entering into the requisite legal agreements, namely the Commonwealth Grant Agreement and Partner Agreement(s).
There are two phases to the establishment of the CRC; the ‘interim’ phase of the organisation - whilst the CRC is being set-up - followed by the formal establishment and full operation of the CRC – commencing once the inaugural AGM has been held and the CRC Board has been appointed by resolution of the CRC members.
AnA establishmentCRC planEstablishment templateTemplate and establishmentCRC taskEstablishment listActivity List have been provided for your use.
Contact the Co-operative Research Australia (CRA)
Contact CRA and notify them that you have been awarded the CRC grant. You can commence membership application to join CRA which will give you access to resources and information that can assist you in the establishment phase.
Appoint a legal team to assist in establishing the CRC.
The CRC will need to appoint a legal practitioner to undertake the establishment process and assist with the formalisation of agreements.
The CRA can provide recommendations to legal practitioners who have experience in establishing CRCs.
Corporate Structure
The CRC will be registered as an unlisted public company, limited by guarantee (as required by the CRC guidelines) with a not for profit status with the ATO.
Companies limited by guarantee have members with voting rights, as opposed to shareholders.
The minimum requirements to establish the CRC Company are:
· One (1) x initial member (can be a Partner, Director or other),
· Three (3) x Directors,
· One (1) x secretary,
· Constitution.
To ensure the CRC Entity can be established to secure initial grant funding as soon as possible, it is recommended that the CRC be established in an ‘interim’ state with one initial member, for example the interim Chairperson. A companyCompany Secretary will need to be appointed also – this can be the interim Chairperson or another suitably qualified person.
Please refer to guidance from AICD on appointment of Directors. Directors must provide a “consent to act” which needs to be lodged with ASIC withwithin 28 days of appointment. All DreictorsDirectors must be registered with Australian Business Registry Services and have a Directors ID Number.
The CRC Entity will be managed by a board of directors, as determined by its members. It is common for a CRC to appoint an initial small ‘interim’ Board, made up of the Chair and any Directors as named in the Grant application. The interim board will be able to undertake all the necessary steps for the establishment of the CRC to the point of operational state.
The CRC Entity will need an interim company constitution. There are standard form constitutions adopted by CRC’s that can be utilised for this purpose that provide for limited operation of the CRC under an interim board arrangement. Your legal advisor should provide you with a constitution template. The Constitution states the primary objectives of the CRC and defines the rules related to corporate governance, business activities, behaviours of directors and members and rights and obligations of its directors and members.
During the interim phasephase, the CRC undertakes key activities to enable the CRC to become fully constituted; these are finalising and signing the member or partner agreements, finalising the Commonwealth Grant Agreement including naming the core or essential partners, undertaking selection of the board of directors, and updating the Constitution (if needed) which will need to be accepted by members via resolution at the AGM.
Required business registrations
You can use the Business Registration Service via(see <regIster.business.gov.au>here) to assist you in identifying and then setting up the required registrations for the company structure.
At a minimum you will need the following registrations that can be applied for via the Australian Business Register <https://www.abr.gov.au/business-super-funds-charities/applying-abn>(see here).
Australian Company Number (ACN) and Australian Business Number (ABN) - all businesses require an ABN and all companies require an ACN. The ACN is a 9 digit number that will form part of your ABN.
Tax File Number (TFN) - The TFN is issued by the Australian Tax Office (ATO). You can apply for this as part of the ABN application process.
Pay as You Go (PAYG) withholding – You need to register for PAYG withholding if you hire employees.
Goods and Services Tax (GST) - CRCs will be required to charge GST. Register for GST via https://register.business.gov.au/through the Business Registration Service (see here).
Fringe Benefits Tax (FBT) - FBT will be payable on some kinds of benefits paid to employees. You will need to register viathrough the Business Registration Service (https://register.business.gov.au/see here.)
Not for Profit versus Charity Status
CRCs are Not for Profit Organisations (NFPs). NFP status provides access to a number of tax benefits available via the ATO and the CRC can undertake an annual self-assessment review required by the ATO in order to access relevant NFP tax benefits.
It has become common practice for CRCs to register as Deductible Gift Recipients (DGRs). Organisations that are endorsed as deductible gift recipients (DGRs)DGRs are entitled to receive donations that are deductible from the donor's income tax. The amount of the claim will depend on the type of gift or contribution they make.
All non-government DGRs are required to register as a charity (except where the DGR is listed in tax law). Therefore, every DGR will need to register as a charity, which may place some constraints on benefits members derive from their organisations.
The Australian Charity and Not-for-profits Commission (ACNC) is responsible for registering organisations as charities, and the Australian Taxation Office (ATO) is responsible for endorsing organisations as DGRs.
CRC’s receive contributions from their members (not donations). Careful consideration should be undertaken by the CRC’s Board on whether applying for DGR status and registering as a charity is appropriate for the CRC and when it would be appropriate to do so in the life of the CRC. It is recommended to seek legal and tax advice on this decision.
There are potential differentials in tax treatment between an NFP and DGR that may impact the operation of the CRC as it matures such as dividends being achieved and the ability to recover franking credits from subsidiaries of the CRC or in the event that third parties want to contribute to the CRC via a tax-deductible donation.
If the CRC is registering with ACNC to become an income tax exempt entity then the organisation might also choose to apply for payroll tax exemptions, stamp duty exemption for insurance, and FBT relatable employer endorsement.
If the organisation does not register with ACNC the organisation can still apply to be an income tax exempt entity by meeting the ATO self-assessment tests as “Scientific Organisation”. The ATO self-assessment can be complicated and requires annual review.
The ACNC registration is the preferred path for most of CRCs.
When applying for Charity Status the ACNC have been particularly interested in how the organisation manages the following matters;
· Private benefitsBenefits and Intellectual Property Rights – how will the CRC manage IP rights associated with the research it produces and what and how benefits accrue to members (either through IP or other benefits);
· Managing conflicts of interest for the CRC including Responsible Persons, employees, volunteers and third parties outside of Australia;
· Management of overseas interests or conducting business overseas and complying with Australian Laws such as AML/CTF, sexual offences against children, modern slavery, people smuggling and trafficking, international sanctions and taxation, fraud, corruption and bribery, working with vulnerable people.
The CRC should ensure it has relevant policies in place that can be provided to ACNC.