Proposed structure: the Hub

Thanks Richard.

That makes sense to me. The conversation at Membership Vision Session 2 did go towards getting legal clarification regarding the single member conversation.

With what you've said here the bit where I personally don't have clarity is how that would effect future orgs that are created. We've agreed there will be a process (yet to be decided) to create new orgs. It feels that having the same Boards for every future org would be an issue

To be honest I'm not paying much attention to possibility of creating multiple future orgs, beyond a Broad Based Membership Cultural organisation Holding company and its Subsidurary Production company.

In reality it's an enormous challenge just creating one, yet alone two entities that function in a workable compliant manner.

Also, there would need to be clear benefit for creating future orgs.

At this stage, I can't see what orgs would need to be created and what real benefit they would provide.

With that said, I note that accommodating for future orgs has been mentioned, though its not something that I'm fixated with, nor wishing to be too distracted on.

If the Holding Entity & Subsidurary Production Company has a well defined committee section, like in the Committee Guidelines, it will be able to undertake a very wide range of project activities if need be, without the need to creating an org for this or an org for that, in the immediate term.

In relation to your question about the same directors required on the Boards of any other Subsidurary 'special project' companys that are established, that would need to be looked at on a case by case basis, where without knowing what the company is being established to do, I'm unable to give an answer of what the composition of the Board would be.

I agree Richard - and now think I might have added more chaos to this process than needed by referring to the possibility of other Projects in future. We should remain on-scope in order to make sure we don't inadvertently draft ourselves into a corner.

To that end I recommend that we attempt to place constitutional limits only where they provide structural integrity, and avoid building in mechanisms that may place limits we don't manage to identify now but which may cause problems in future. I can't imagine any specific examples right now, but I guess that's the point.

In any case, I agree that coming back to our remit of transferring Burning Seed to a community-centric structure is a helpful reminder.

I think it's good to have brought it up. I really like it as a concept. I'm pretty sure @Phil Smart was keen to see to orgs being able to be created by the Cultural org. But agree it could be too much for a first go. As long as there isn't anything stopping the cultural org putting something like this into place then, I'm all for streamlining to get things moving forward as well

Thank you for this clarification @'King' Richard Martin . I suppose calling it a "wholly owned subsidiary" makes it far more clear than a "one member organisation" as the terminology is more familiar.

I fail to see how such a direct relationship of ownership and decision making responsibility can protect the assets in the case of an issue. If the Boards are the same then all roads lead to Rome in terms of liability.

While it's necessary to question this, at the last Vision session, I went a long way to explain the legal separation of Holding and Wholly Owned Subsidurary Company, which I sense legal advice would reiterate.

Although, I would never want to stand fully by this, as legal advice may shed a different light.

Though, in addressing your stated position, withough being able to discuss a specific liability example, it's difficult to explain or examine how potential scenarios might play out, in this dual entity structure, where it's also noted that this is flagged for legal advice.

Without pre-empting where the advice is sought, personally, this is an area I'd like Tony Lang's opinion to be sought.

One thing to remember, is that regardless of whatever model is in place, directors can not run away from being personally liable, in certain financial scenarios, so they are never entirely protected under the corporate veil, as they might think they are, for situations where financial liabilities are involved, as they can be personally pursued if the entity is in place or not.

This emphasises, even more, the necessity for the board of the Holding company and the Wholly owned Subsidurary to be the same, so they are able to watch over the lay of the land like hawks and act decisively when matters of financial liability and solvency present.

As far as other matters of liability and protection of assets, the model I have been presenting may well be seen to endure, although as consensus has formed around getting advice, any presumptions here may be challenged where the best legal advice we can find is required.

I had some insightful conversations today that have convinced me that the cultural needs to be much more than a passive Hub.

A hub is a thing that sits on my desk that lots of things plug into and it provides them with power and connectivity. That much I like and support.

But the Hub that has been described here will not qualify for ROCO or ACNC registration unless it can demonstrate that it is actively Advancing Culture.

With a good, well written set of purposes for the Broad Based Member Cultural Organisation (AKA Hub), that are crafted to tick all the checkboxes required, firstly for ACNC charity registration and later on for possibly ROCO registration, there should be no problems with either registration.

The art is drafting these purposes to fulfil such criteria.

Rather than just saying what's there won't meet the criteria, there is a collective responsibility, by all of us, to start adding additional purposes that will satisfy such requirements.

Here is the Guide to ROCO file:///C:/Users/madeline/Downloads/register-of-cultural-organisations-guide_1.pdf

Excerpts:
Page 8-9
Principal purpose
Subsection 30-300(2) of the Act:

Its principal purpose must be the promotion of literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, arts or languages of *Indigenous persons or movable cultural heritage.

To be eligible for entry on the ROCO, your organisation must show that its principal (i.e. first, most important) purpose is the promotion of one or more of the specified cultural forms listed in the Act, which are:
• arts or languages of Indigenous persons
• community arts
• crafts
• design
• film
• literature
• movable cultural heritage
• music
• performing arts
• radio
• television
• video
• visual arts.
These are referred to throughout this Guide as the ‘specified cultural forms’. The Act does not allow organisations with any other principal purpose—including the promotion of other matters that may be considered ‘cultural’ in other contexts, such as traditions, norms, languages and religions—to be entered on the ROCO.

The term ‘promotion’ is not defined in the Act. Organisations on the ROCO may promote the specified cultural forms in a wide variety of ways, including (but not limited to):
• directly creating or producing art and culture for a public audience
• presenting or exhibiting art, culture and movable cultural heritage created or produced by others • educating the public about a specified cultural form, including through research and publishing
• providing training in an art, craft or cultural form, and
• preserving works of art or items of movable cultural heritage.

Taken together, your organisation’s ROCO application and supporting material should clearly explain what its principal purpose is, indicate which specified cultural form/s it promotes, and show how the specified cultural form/s are promoted through its objects and activities. Both the stated objects in your organisation’s governing document and your organisation’s current or planned activities are relevant to the Minister’s decision on whether your organisation meets the principal purpose requirement.

So I guess I am wondering if merely engaging a production company to execute the promotion of the art is enough @'King' Richard Martin ?

This provides a clue that you may be correct:
Excerpt page 10
"It is possible that your organisation’s governing document may not include clauses establishing its objects or purposes (e.g. because it has a separate or associated statement of purposes adopted or ratified by its members). If this is the case, you will need to provide copies of any other document setting out your organisation’s purposes and explain what status this document has in your organisation’s governance arrangements (e.g. that it was adopted by members at an Annual General Meeting, now forms part of the organisation’s decision-making processes, and may only be changed through a further vote by members).

While most organisations pursue their principal purpose directly through their own activities, it is also possible for an organisation to be entered on the ROCO where it pursues its objects indirectly—i.e. through other individuals or organisations—provided its governing document enables it to do so. Such activities include providing financial support to organisations and individuals through grants, awards, scholarships, prizes or direct partnership and the creation of assets that will be transferred to or owned by another entity. The Minister’s decision on your organisation’s principal purpose will consider whether your organisation’s governing document enables it to undertake these activities. For further information on indirect pursuit of an organisation’s principal purpose see chapter 3 of this Guide"

Here is Chapter 3
3. Indirect pursuit of your organisation’s principal purpose

Organisations entered on the ROCO use their resources, including gifts and contributions made to their public funds, to pursue their principal purpose through a variety of ways. For many organisations this includes paying staff wages and/or procuring goods and services from businesses, suppliers and contractors. However, sometimes organisations applying for, or entered on the ROCO want to use their resources—including gifts and contributions made to their public funds—to pursue their respective principal purposes indirectly rather than directly, i.e. by providing financial support to other individuals or organisations to undertake cultural activities, rather than, or as well as, by undertaking cultural activities themselves. This support might take forms such as:
• awards, scholarships and prizes to individual artists or practitioners
• making grants to other organisations
• auspicing philanthropic grants on behalf of an individual artist or other organisation, or
• funding the purchase or creation of an asset that will be owned by or transferred to another entity.

While these or other indirect mechanisms can be effective ways of pursuing an organisation’s principal purpose, they pose certain risks. This is because while an organisation on the ROCO has been subjected to considerable scrutiny to ensure that tax deductible donations it receives will be used consistently with the requirements of tax law, other individuals or organisations to which it may wish to pass on donated moneys (or assets acquired with donated moneys) have not necessarily been subject to the same level of scrutiny.

A high degree of transparency about these arrangements is therefore required to enable the Minister to make a fully informed decision on whether an organisation meets the following legislative eligibility criteria for the ROCO:
• Principal purpose criterion: any provision of financial support to other individuals or organisations must be consistent with a principal purpose of promoting one or more specified cultural forms.
• Public fund criterion: any financial support for another individual or organisation to be provided from the applicant’s public fund must be clearly enabled through the objects of the public fund (as expressed in the applicant’s governing document) and consistent with ATO’s guidance on public funds and result in the promotion of the specified cultural form(s) that it is the principal purpose of the applicant.
• Not-for-profit criterion: any money or assets to be transferred from the applicant to another person or organisation (except as payment for goods or services received) must not constitute the payment of profits/surplus, or the transfer of property, to the applicant’s members/beneficiaries/controllers or owners.

If your organisation intends to pursue its principal purpose indirectly, either wholly or in part, your application and supporting material will need to clearly explain how your organisation decides which organisations or individuals it will support and the arrangements in place to ensure that those organisations or individuals will only use any money or property transferred from the public fund in ways that advance your organisation’s principal purpose.

Broadly speaking, financial support may be provided to individuals and organisations in one of two ways: via an open application and assessment process, or through direct partnership. The types of evidence required to demonstrate whether your organisation meets the above criteria will depend on the method it uses to distribute funds to others.

Thanks I didn't realise until reading this the importance of purposes like this

Updated diagram to remove relationship type (which is not yet determined) and to make it look less hierarchical. Also I've labelled some relationships to help structure future conversations on relationships.

Great work thank you, Sam.

Really happy to see the diagram looking less hierarchal. Nice work.

I think it makes sense to have a name of the proposal. Just if it was to move forward, perhaps it doesn't need a name as it's just a function of the Cultural org? Just saying that in regards to some of the consfusion about names in the past

Isn't it called the Hub model?