In this topic, we discuss why rules and developing a constitution are important for effective governance. We talk about keeping cultural legitimacy at the heart of your rules. We explain when you need to write your rules down and how this strengthens your group’s governance.

The importance of rules or a constitution

Having rules or a constitution is critical to effective governance.

Rules set out the agreed ways people should behave towards each other. They tell people what to do (and what not to do) in a specific situation. A ‘constitution’ is a set of rules that are written down.

Like playing the game of football, knowing the rules of the game is essential for success. Everyone needs to know the rules, including the teams, captains, coaching staff, the club and its members.

Rules for your governance set out:

• who has the authority to make decisions, and about what
• how decisions are made
• who can talk on behalf of others
• how people are to behave, interact and negotiate with others
• who is accountable for what
• who the members of your group are
• what obligations there are between leaders and their members.

“When we talk about governance, we’re talking about people deciding how to work together to do the things they need to get done. How do we make decisions? Who has the authority to act for us?
 
How do we resolve disputes among us? How do we get community business done? Good governance means having good rules for those sorts of things, rules that are effective and that have the support of the people.”
– Stephen Cornell, ‘Starting and sustaining strong Indigenous governance’, Presentation at the Building Effective Indigenous Governance Conference, Jabiru, Northern Territory, 5 November 2003.

Cultural legitimacy as the foundation of your rules

Aboriginal and Torres Strait Islander peoples have long placed culture at the heart of governance. Different types of organisations, communities and nations have their own governance histories and arrangements that have developed over time. Groups need to, and have the right to, develop their own rules around their culture.

Effective governance rules are culturally legitimate as well as practical. They should align with your group’s values, laws and systems of authority, and meet current governance needs. Striking this balance can be challenging, and may require people to rethink their ideas on how to govern.

“We Yawuru people, and all Aboriginal people, have always had our own cultural governance.
 
Our stories and philosophy comes from the Bugarrigarra, the time before time, putting the languages in the country for the people and creating laws. So now our role as law bosses on the board of the PBC is to maintain our traditions and to ensure they are part of the decision making process that the Yawuru group goes through.”
– Thomas ‘Unda’ Edgar, Chairperson of the Yawuru PBC

Rules don’t have to be written down to be legitimate. Aboriginal and Torres Strait Islander societies have sophisticated systems of law that have worked effectively without being written down. Cultural laws have existed since time immemorial, and provide rules on how to interact with Country, kinship and community.

When we speak of cultural law, we mean things like:

• shared cultural understandings within a group about how authority should be organised and used
• people’s shared values, beliefs and customs
• behavioural standards and taboos
• gender norms
• moral stories, kinship rules and ceremonial rules.

When developing new or more effective rules, it’s important that cultural law is respected. This doesn’t mean doing things exactly as they were done in the past. It means designing rules that are both practical and culturally legitimate.

The process of strengthening cultural legitimacy involves building on the internal strengths and traditions of your people. It takes time, courage and experimentation to work out what suits. Don’t rush it.

It’s not surprising that many Aboriginal and Torres Strait Islander groups stress the cultural importance of broad community consultation. Especially when developing new rules.

For all these reasons, don’t set your new rules in legal concrete too quickly. Allow time to test them with your members and flexibility to refine them over time.

“…Native nations should have the freedom to exercise governing power, not necessarily in western ways, but in ways of their own choosing. This means lifting the yoke of colonial control, ending the insistence that Indigenous governance looks like U.S. or Canadian governance, and accepting the fact that the solutions those nations develop will be diverse. Some will have traditional roots; some will not. But once that freedom is achieved, once those nations have put in place the governance solutions they want and have tested those solutions against the realities of their current situations, once they have the freedom to make mistakes and learn from them and make the adjustments they decide they need to make, then we believe they will be in a stronger position to develop the kinds of economies and communities they envision.
 
This is what self-determination really means.”
– Professor Stephen Cornell, University of Arizona

Key topics to cover in your rules

There are key topics to consider when developing your rules, especially if you plan to incorporate your organisation.

There are a lot of requirements for organisations to follow. It can sometimes be very confusing for new organisations to be sure everything is covered.

Purpose and objectives

Understanding your group’s purpose and objectives is critical to developing your rules.

Purpose refers to the practical result that you want to achieve. It’s about your intention. To identify your purpose, see Assess your purpose and vision.

Objectives are the activities that your organisation will do to achieve your purpose. Your objectives should be broad enough to cover all activities that your organisation and its members may want to undertake.¹Office of the Registrar of Indigenous Corporations, ‘A guide to writing good governance rules for prescribed bodies corporate and registered native title bodies corporate,’ Commonwealth of Australia, published 2008, [link]

Consider your objectives carefully, especially if you’re planning to incorporate. Some types of corporations, like charities and native title corporations, have legal requirements. Seek advice (from a lawyer or accountant, for example) to make sure your objectives comply.

Membership

Membership is about who’s involved in your group.

When developing your rules, consider who can be a member. Your group can choose to allow non-Indigenous people to be members or directors. It’s not compulsory but having the option gives the group more flexibility. Either way, Aboriginal and Torres Strait Islander people must always be in the majority – so they’re always in control.

Once you’ve identified who’s eligible, think about the application process to become a member, and who’s responsible for approving them. Some groups have a fee for processing applications.

It’s important to establish processes for resolving disputes about membership and cancelling or ending a membership.

Your rules should also outline what powers your members have. What those rules are depends on what your organisation is incorporated under. For information on the role of members in incorporated companies, see ASIC’s guide to Company shareholders. For CATSI Act corporations, see Members.

Members’ liability

This refers to the amount of money members must pay if the group winds up. This liability depends on whether your group is incorporated or not.

Unincorporated

A member’s liability is determined by the group’s internal rules and agreements. There’s no specific legislation in Australia that applies to the liability of members in unincorporated organisations. Each member may have unlimited liability for the debts of the group if it winds up.

Incorporated

Groups that are incorporated can limit their members’ liability. For example, companies limited by guarantee limit their member’s liability to a predetermined, fixed amount known as a ‘guarantee’. This amount is generally laid out in the company’s constitution. Members don’t pay more than this amount if the company winds up, even if its debts are greater than the total of the member’s guarantees. See the relevant regulator website for more information (for example, ORIC or ASIC).

Meetings

There are 3 main types of meetings to consider:

Directors’ meetings

Most organisations have a board of directors who provide direction to the organisation. Decisions by the board are made collectively and usually at meetings. Consider:

• number of meetings your organisation will hold each year
• how meetings will be convened
• how board directors will be notified about meetings
• number of board directors that must be at a meeting for valid decisions to be made – this is called a ‘quorum’
• process for voting on decisions in meetings
• process for taking notes (or ‘minutes’) at meetings
• processes by which decisions can be made if a meeting cannot be held – for example, ‘flying minutes,’ a method to record decisions made outside of formal meetings, for example by email.

Members’ meetings (‘Special General Meetings’)

Incorporated organisations also have meetings with their members to discuss specific matters.

These meetings need separate rules. Consider:

• number of meetings that need to be held each year
• how members will be notified about meetings, and how much notice is needed as minimum
• number of members that must be at a meeting for valid decisions to be made
• process for voting on decisions in meetings
• process for taking notes (or ‘minutes’) at meetings
• whether you have sub-committees responsible for certain areas of decision-making. What processes apply to those committees?

Incorporated organisations must follow the process for making decisions at meetings outlined in their rules or constitution. If not followed, decisions can be challenged and may not count. For more information about the legal requirements, see Meetings held by incorporated organisations.

Annual General Meetings (AGMs)

Incorporated organisations must hold at least one members’ meeting per year. This is called the Annual General Meeting or AGM.

Consider the same points for AGMs as for Members’ meetings.

Finances

When drafting your rules, think about how you plan to finance your organisation.

• How much will it cost to start up your organisation? What about ongoing costs?
• What sources of income do you have, or plan to access? For example, sale of goods and services, applying for funding grants, donations, investors.
• Is your organisation for-profit or not-for-profit? Will you apply for tax concessions?
• How is your organisation’s money managed? Are there delegations (individuals with authority to approve spending and sign contracts)? Are there checks and balances to make sure those people make good decisions?
• What happens if your organisation needs to close down or ‘wind up’. How will the money and assets of the organisation be dealt with if that happens?

Records and access

Incorporated organisations must keep certain records. Members are entitled to inspect some of those records.²“Documents, records and requests for access,” Justice Connect, updated April 2022, [link]

Consider:

• what records your organisation needs to keep
• where they’re stored
• who can access them, and how.

Internal conflict and dispute resolution

Consider the process to be followed if:

• a dispute arises between members, board or staff. Look at different methods for resolving disputes, for example, external mediation.
• a member of the organisation doesn’t follow the rules. When would disciplinary action be needed?

For more information on developing culturally legitimate conflict and dispute resolution processes, see Implement peacemaking processes.

Making changes or ending your organisation

Your rules (or constitution) should be seen as a living document. Your governance will change and evolve over time. So, your rules should be regularly updated (with caution) to reflect your organisation in practice.

If your organisation is incorporated, there are rules that you must comply with about how to change your rules or constitution. This is usually done by what is called a ‘special resolution’ at a general meeting of members. A ‘special resolution’ can only be passed if 75 per cent of the members who vote agree on the decision.

Your rules or constitution should also set out the process to formally end your organisation. This process should consider how the money and assets of the organisation are dealt with if the organisation ends.

Documenting and enforcing your rules

It’s helpful to keep a written document that records how you govern your organisation. This document should be accessible to all management and staff.

This document can go by many different names. Some common terms are:

• rules
• rule book
• charter
• articles of association
• constitution

Written documents aren’t the only way to record rules. You could record your rules in a painting, a video or a diagram.

Rules need to be plainly set out so they cannot be misinterpreted or used for the wrong reasons. Translate your rules into other languages if people are more comfortable speaking in their own language. Some groups may choose to hire someone to help document or record the rules in different ways.

How you document your rules depends on whether your group is incorporated or not.

Incorporated organisations

Keeping rules in a written document is a legal requirement for incorporated organisations. Some rules come from government and legislation, such as holding Annual General Meetings (AGMs) and providing reports to the regulator.

This written document is called a constitution or rule book, depending on how your organisation is incorporated. It’s the set of rules that guides an organisation, community or nation on how things work. It explains how the group is to be governed. The group must follow the rules.

For organisations incorporated under the CATSI Act, see rule books on ORIC’s website.

Unincorporated organisations

Keeping rules in a written document is not legally required for unincorporated (more informal) organisations. However, it can be good practice to have at least some basic rules written down about how your organization operates.³‘How to set up your organization,’ Not-for-profit Law, updated April 2022, [link]

The cultural rules that guide your group are often passed on from one generation to the next. However, even though many people in the community know these rules, it’s still a good idea to document them if they’re important to your organisation. This can help to keep your culture at the heart of your organisation and maintain cultural legitimacy. It can also help external stakeholders and new staff understand the cultural protocols important to your organisation.

Once the rules of an organisation are formally adopted, they’re binding on boards, managers and staff. But there’s no point having binding rules or policies if they’re not enforced.

Everyone should be clear about the rules. It’s the board and management’s job to make sure that the organisation’s rulebook, constitution, or charter are widely understood and fairly enforced. At meetings of the board, it’s the chairperson’s role to enforce rules relating to meetings.

Creating and enforcing effective rules can present challenges for leaders, but there are always solutions. For example, some leaders try to manage complex organisations without knowing the rules. Talk to them to help them understand the rules of your group, so they can lead effectively.

Some leaders can be too by-the-book running meetings and making decisions. This can intimidate, confuse and frustrate board directors. Let your leaders know the bigger picture for your group, so they don’t just focus on the small details. Build trust with them. Help them be confident to let board directors guide meetings and decision-making.

Language barriers or literacy levels can impact understanding of rules. Record your rules in different ways so all members of your group can understand them. For example, record them in a painting, in language or using video.

It can be difficult to understand the rules related to technical and financial requirements. It may be hard to keep up with changing government rules and regulations. Use consultants like accountants and lawyers or regulators (ORIC or ASIC) to understand how to comply.

Enforcing rules is not an easy thing to do. It takes skill, confidence and authority.

Leaders can build confidence through governance training. Governance training explores ways of putting rules into practice and applying them in the cultural contexts in which they operate. Training may be offered internally by your own organisation. There’s also external training available, for example:

• AIGI tailored professional development
• ORIC corporate governance workshops