Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p60
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 154885–157771

assess whether their rights (and rights held by others) are protective or substantive rights.
IG17 In addition to the examples in paragraph B28, examples of protective rights in relation to not-for-profit entities include:
(a) the right of a regulator to curtail or close the operations of entities that are not complying with regulations or other requirements.  For example, a pollution control authority may be able to close down an entity's activities that breach environmental regulations.
(b) the right to remove members of the governing body of another entity under certain restricted circumstances.  For example, for reasons relating to a lack of probity, a State government may be able to remove or suspend the councillors of a local government and appoint an administrator who is not directed by the State government in carrying out the functions of the local government.
(c) the right to appoint additional members to the governing body of another entity under certain restricted circumstances.  For example, when the entity has failed to comply with performance standards, a regulator may be able to appoint appropriately qualified members who are in the same position as other members – they do not report to and are not directed by the regulator.
(d) the right of the government to remove tax deductibility for contributions to a not-for-profit entity if the entity significantly changes its objectives or activities.
(e) a philanthropic trust providing resources to a charity on condition that the net assets of the charity would be distributed to a similar organisation undertaking similar activities if the charity is liquidated.

Returns

Exposure, or rights, to variable returns from an investee
IG18 One of the criteria set out in paragraph 7 for control of an investee is that the investor has exposure, or rights, to variable returns from its involvement with the investee.  The examples of returns in paragraph B57, particularly those in paragraph B57(c), indicate that the scope of the nature of returns is broad.  In application to not-for-profit entities, the broad scope of the nature of returns encompasses financial, non-financial, direct and indirect benefits, whether positive or negative, including the achievement or furtherance of the investor's objectives.
IG19 An investor's exposure, or rights, to variable returns from its involvement with an investee may give rise to indirect, non-financial returns, such as when achieving or furthering the objectives of the investee contributes to the objectives of the investor.  For example, the provision of goods and services by the investee to its beneficiaries may affect the extent to which the investor's social policy objectives are furthered.  These returns to the investor would reflect factors such as the efficiency and effectiveness of delivery of the goods and services and changes in the outcomes