General principles for developing a winding up provision

This Guidance was initially developed by NSW as a result of a campaign by the NSW Registrar of Community Housing to assess registered Community Housing Providers (CHPs) (with a primary jurisdiction of NSW) compliance with section 15(2)(c)  of the National Law.  It has been adapted for use in a National context.

The NRSCH was introduced through an applied law scheme which involved each participating jurisdiction (except for Queensland) adopting the Community Housing Providers National Law. Queensland instead amended their Housing Act 2003 to include provisions which mirror the National Law. This means there may be slight variations in the constitutional requirements for CHPs with a primary jurisdiction in Queensland and the sections referenced to the National Law differ to the Queensland Housing Act. If you require further guidance please contact the Registrar in the applicable jurisdiction.

Key considerations

The conditions of registration for a CHP are set out in section 15(2)(c) of the Community Housing Providers National Law (NSW) (National Law); which is the appendix to the Community Housing Providers (Adoption of National Law) Act 2012 (NSW) (Act).

Section 15(2)(c) states:

“the provider must have provision in its constitution for all its remaining community housing  assets in a participating jurisdiction on its winding up to be transferred to another registered  community housing provider or to a Housing Agency in the jurisdiction in which the asset is located

The winding up provision in a CHP’s constitution should meet the following requirements with regards to “community housing assets”:

1. On winding up, all remaining community housing assets must be transferred to another registered CHP or a Housing Agency in the jurisdiction in which the assets are located.
2. CHP Members, Board/Management or the appointed Administrator can select the receiving   registered CHP or Housing Agency, provided they operate in the jurisdiction in which the assets are located.
   
3. The winding up provision must be clear and not open to interpretation as to where the assets can be transferred to and who has the decision-making power.
   
4. There should be no qualification which undermines the ability of the assets to be transferred to another registered CHP or the relevant Housing Agency. For example, in NSW, section 8 (c) of the Act declares the NSW Land and Housing Corporation as the one and only Housing Agency for the purpose of section 15(2)(c) of the National Law. Nevertheless, the expression contained in the National Law, “or to a Housing Agency in the jurisdiction in which the asset is located” is the appropriate expression to be used in a constitution.
5. Ideally, the relevant terms, such as “community housing assets”, should be defined in the constitution or at the very least incorporated by reference in the constitution to the definitions in the National Law.

The key elements of this clause are:

1. The phrase “Notwithstanding any other provision in this constitution…” creates a priority over any other provisions or clauses in the document that may, on face value, contradict the winding up provision concerning community housing assets.
2. The words “…all remaining…” are preferable so as to be consistent with the National Law.
3. The words “community housing assets” as referenced and defined in the National Law.
4. The words “Housing Agency” as referenced and defined in the National Law. 

If in doubt, CHPs are encouraged to contact the regulatory team in your jurisdiction, who may obtain advice on the validity of a winding up provision.

General principles

On winding up, section 15(2)(c) of the National Law requires that all CHPs must have provision in    their constitution for their remaining community housing assets to be transferred to another registered community housing provider or to a Housing Agency in the jurisdiction in which the assets are located.

The National Law defines key terms such as “community housing asset”, “Housing Agency” and “participating jurisdiction”. It is best practice for CHPs to use the words of the legislation which applies to their primary jurisdiction. CHPs should also define key terms with reference to the legislation that applies to their primary jurisdiction.

CHPs are encouraged to adopt a pragmatic approach by defining key terms in accordance with the National Law, so as to be free from doubt. However, where a constitution is silent as to the definition of a key term, the Registrar is of the view that the natural and ordinary meaning of the term will prevail at common law. Where there is no natural or ordinary meaning to a key term, it follows that a court would consider the CHP's commercial intent and look to the legal meaning in the relevant statute, adopting the legal definition contained therein.¹

Below is an example of a validly worded winding up clause:

“Notwithstanding any other provision in this constitution, on winding up all remaining community housing assets in a participating jurisdiction are to be transferred to another registered community housing provider or to a Housing Agency in the jurisdiction in which   the  asset is located.

The terms “community housing assets”, “Housing Agency” and “participating jurisdiction” have the same meaning given to those terms in the Appendix to Community Housing Providers (Adoption  of National Law) Act 2012 (NSW), as amended or replaced.”

Community Housing Assets

As each state or territory’s legislation may have a slightly different definition of what a “community housing asset” is, the National Regulatory System for Community Housing provides guidance in the Community Housing Assets Calculations, published May 2020.

It is important to note that this document does not provide a legal definition of “community housing asset”. It is merely a categorisation of different types of assets and does not reflect whether, at law, a “community housing asset” is legally defined.

A CHP’s constitution should not include qualifiers which narrow or expand the definition of a “community housing asset” from the legislative definition in section 4(1) of the National Law.

If a property or asset meets the definition of a community housing asset then there should not be anything in the constitution that stops it being transferred to a registered community housing provider or the relevant Housing Agency on winding up.

Registered community housing provider or Housing Agency

A CHP’s constitution should generally not have any restrictions on which registered community housing provider or Housing Agency may receive a transfer of community housing assets on its winding up. It may, however, state an intention for an organisation with similar objects using language such as “if possible”. An example includes the transfer of community housing assets from  one youth focussed CHP to another. This is not likely to be accepted. Why? Because it may not be practical to transfer any “remaining community housing assets” to another such youth focussed provider. It may be geographically awkward or the class of such providers may be unreasonably small.

A restriction of any kind will be looked at very carefully. It is essential that the category of recipients   is as broad as possible. It should not be assumed that the Registrar will accept clauses which restrict the class of eligible transferees.

CHPs must not include qualifiers such as “if at the time of winding up the organisation is a registered community housing provider…”

The key issue is that a CHP possesses community housing assets that need to be transferred irrespective of whether they are registered as a CHP at the time   of winding up. The assets remain “community housing assets”, whether or not the entity is registered at the time of winding up. A CHP may include, “if, at the time of winding up the organisation has any remaining community housing assets…” followed by the winding up provisions.

Further Considerations

The Registrar may allow a CHP to have a mechanism for its members, directors or management to elect a registered CHP to transfer its community housing assets to.

The inclusion of words such as “after satisfaction of all debts and liabilities of the Company”, or similar, in a CHP’s constitution is not considered inconsistent with the requirements of section 15(2)(c) of the National Law. However, please have any such constitutions checked by the regulatory team or the Registrar in your jurisdiction.

Relevant Information

Guidelines for allowable exceptions

NRSCH process for review