Associations Incorporation Reform Act 2012
Presentation to CCAV by Wisewould Mahony Lawyers November 2012
- Preliminary Matters
I am assuming that you are registered currently under the existing Associations Incorporation Act legislation. The purpose of this paper will be to deal with the proposed changes to be made by the Associations Incorporation Reform Act 2012 but before doing so there are some housekeeping matters which may be of assistance to you.
Section 23 requires the name and number of the associated incorporation to appear on business documents;
Business documents include a business letter, statement of account invoice, cheque, receipt or other business documents issued, signed or endorsed on behalf of the association.
If an association changes its name it retains the same legal entity (S.26)
An incorporated association must have a registered address and if it changes must notify the Registrar within 14 days of the date of change (S.28)
An incorporated association is a body corporation (S.29)
The general powers of an incorporated association are:-
(a)Invest and deal with money;
(b)Raise and borrow money;
(c)Secure the repayment of money;
(d)Do anything that is incidental or conducive to the attainment of the purposes and the exercise of the powers of the association (S.30)
Under Section 33 an incorporated association mustnot secure pecuniary profit for its members.
A member of an incorporated association must not:-
(a)Aid, abet, counsel or procure; or
(b)by act or omission direct or indirectly assist the commission of an offence by the association against this Section.
A member who commits an offence under this Sectionis jointly and severally liable to any creditor of the association for all debts and liabilities incurred by the association or in consequence of securing pecuniary benefit for its member (S.33)
Certain transactions are prohibited under Sections 34, 35 and 36.
These include:-
(a)An incorporated association must not exercise any powers prohibited or restricted by its rules.
(b)Incorporated associations must only undertake acts within the scope of the purposes of the association. (S.34)
(c)A lack of capacity or power may be asserted and relied upon in proceedings against the association or against a member of the association. (S.35)
(d)A court may set aside a contract which exists or is being performed pursuant to an unauthorised act (S.36)
Documents may be signed under the common seal of the association or by signature of the secretary or by two members of the committee or a member of the committee and the secretary (S.37 and 38).
An incorporated association may in writing appoint a person as its attorney to execute document (S.39).
- Rules and Alteration of Rules (Part 5)
Rules of an incorporation association are taken to constitute the terms of a contract between the association and its member.
The Rules of an association must specify the name and the purpose of the association and make provision for the matters specified in Schedule 1 which I will discuss further.
Model Rules
Alternatively, an association may adopt the Model rules.
A rule or purpose of an incorporated association that is inconsistent with the law or legislation has no effect.
Legislation provides for a set of model rules.
No Liability
Except as otherwise provided by the law or by the rules a member of the committee, secretary or a member of the association is not merely by being such, liable to contribute towards the payment of:-
(a)Debts and liabilities of the association; or
(b)The costs, charges and expense of winding up the association.
No Rights to Property
Unless expressed and provided by the Act or the rules membership of an association does not confer any right, title or interest in the property of the association to a member (S.52). A member has the right to inspect the rules and minutes of the association. (S.53)
Disciplinary Action
An incorporated association may take disciplinary action against a member. (S.54) However the member is to be informed of the grounds upon which the disciplinary action is proposed to be taken and to be given an opportunity to be heard in relation to that matter.
Furthermore a decision has to be made by an unbiased decision matter.
The rules must set out a grievance procedure for dealing with disputes between a member and another member or a member and the association. (S.55)
However in a grievance procedure the association must ensure that each party has been given an opportunity to be heard and the outcome is determined by an unbiased decision-maker. (S.55)
Register of Members
An association must keep a register of members with the persons name, address, class of membership and the date on which the person became a member of the association. (S.56)
The register of members is available for inspection by the members. (S.57)
Rule Changes
Any change of the rules must be approved by the Registrar.
- Meetings
A general meeting must not be held, unless notice of the meeting setting out the date, time and place is provided to each member entitled to vote and if proxies are allowed a form of proxy. (S.60)
Members are entitled to attend annual meetings. (S.61)
An association may use technology that allows members clearly and simultaneously communicate with each other. (S.62)
An annual general meeting must be held in each calendar year. (S.63)
An incorporated association may pass a special resolution which requires three quarters of the members to vote by proxy or in person (S.64).
- Management
The association must appoint a secretary and must advise the Registrar of the name and address of the secretary. The secretary fulfils the requirement under the old Act to have a public officer.
The committee may use technology which allows members clearly and simultaneously communicate with each other. (S.79)
- Material and personal interest
A member of a committee who has a material personal interest in a matter being considered by the committee must disclose the nature and extent of that interest to the committee. (S.80)
This does not apply if the member is an employee of the association or if the material personal interest of the member is in common with all or a substantial portion of the members of the association.
Similarly a member of the committee must disclose material personal interest in a contract or proposed contract with the association.
The disclosure must give details of the nature and extent of the interest and the relation of the interest to the activities of the association. These details must be recorded by the committee.
A member who has a personal interest must not be present when the matter is being considered by the meeting or vote on the matter.
If, because of conflict there are not enough committee members to form a quorum, one committee member may call a general meeting and the general meeting may pass a resolution to deal with the matter. (S.81)
- Office Holders
These are defined as a member of the committee, the secretary the person who participates in making decisions affecting the whole or a substantial part of the operations of the association, a person who has the capacity to significantly affect the association’s financial standing or a person in accordancewith whose instructions or wishes the committee are accustomed to act (S.82).
- Improper use of information or position
An office holder or former office holder must not make improper use of information acquired by virtue of holding that office:-
(a)to gain advantage for himself or herself or any other person; or
(b)to cause detriment to the association (S.83)
- Duty of care and diligence
(S.84) An office holder must exercise his or her powers or discharge his or her duties with the degree of care and diligence that a reasonable person would if that person:-
(a)Were an office holder of an association in the circumstances applying at the time of the exercise of the power or discharge to the duty; and
(b)Occupied the office held by and had the same responsibilities within the association as the office holder.
There is a penalty up to $20,000.00
- Business Judgement Rule
An office holder of an incorporated association who makes a business judgement is taken to meet the requirements of Section 84 if the office holder:-
(a)makes the judgement in good faith for a proper purpose; and
(b)does not have material personal interest in the subject matter of the judgement; and
(c)informs himself or herself about the subject matter of the judgement to the extent that he or she reasonably believes to be appropriate; and
(d)rationally believes that the judgement is in the best interest of the association.
For this purpose, a business judgement means any decision to take or not take action in respect of a matter.An office holder who hasbelief that a business judgement is in the best interest of the association is a reasonable belief unless the belief is one that no other reasonable person in the position of the office holder would hold (S.84).
- Duty of good faith and proper purpose
An office holder must exercise his or her powers of discharge his or her duties in:-
(a)In good faith and in the best interest of the association; and
(b)For a proper purpose (S.85)
- Reliance and information or advice
An office holder may rely upon information or advice given to the office holder that such information advice is reasonable if was prepared by:-
(a)an employee of the association and the office holder reasonably believes to be reliable and competent in relation to the matters confirmed; or
(b)a professional advisor or expert in relation to the matters and the office holder reasonably believed to be within that person’s professional or expert competence; or
(c)another office holder in relation to the matters with the other office holders authority; or
(d)a subcommittee of the incorporated association which the office holder was not a member in relation to matters within the subcommittee’s authority:
and
the reliance was made:-
(a)in good faith
(b)after making an independent assessment of the information and advice having regard to the office holders knowledge of the incorporated association and the complexity and the structure of the incorporated association. (S.86)
- Indemnity of office holders
An incorporated association must indemnify each of its office holder against any liability incurred in good faith by the office holder in the course or confirming his or her duties as an office holder (S.87)
- Financial reporting
Incorporated associations must keep financial records that correctly record and explain its transactions and financial position in order to enable true and fair financial statements to be prepared.
Those records must be retained for 7 years (S.89)
- Tier one, tier two and tier three associations
Tier one association has a total revenue of less than $250,000.00.
Tier two association has revenue between $250,000 and $1 million.
Tier three association has revenue more than $1 million.
Tier one association. Such association must prepare a financial statement which gives a true and fair view of its financial position and performance of the association. This financial statement must be viewed if the members vote to do so.
Tier two associations. Each year the committee must prepare financial statements in accordance with Australian accounting standards.
These financial statements must be reviewed by an independent person who is a CPA Australia or a member of the Institute of Chartered Accountants in Australia or a member of the Institute of Public Accountants.
The review must be in accordance with auditing standards on review engagements and provide the association with a report.
The report must be prepared in accordance with auditing standards or review engagements and the financial statements in accordance with Australian accounting standards.
The financial statements must be submitted to members; they must give a true and fair view of the financial position and performance of the association and be signed by two members of the committee and must be accompanied by the report.
Following the annual general meeting a committee member must certify that the committee member attended the meeting, that the financial statement was submitted to the meeting and the minutes of the meeting must include a copy of the financial statement, certificate and report of the review and to those statements.
Tier three association. The committee must prepare a financial statement in accordance with Australian accounting standards.
Before the statements are submitted the statements be must be audited by a registered company auditor or a firm of registered company auditors or a member of CPA Australia or a member of the Institute of Chartered Accountants in Australia or a member of the Institute of Public Accountants (S.89 & S.99).
The auditor must conduct the audit in accordance with Australian accounting standards and provide the association with a written report of the audit.
The committee must submit to the members the financial statements and they must give a true and fair review of the financial position and performance of the association during the financial year and there must be attached to them, the certificate to members of the committee certifying this is the case and be accompanied by the report of the auditor.
Following the annual general meeting a committee member must certify that he/she attended the annual meeting and the financial statements were submitted and the minutes must include a copy of the financial statements, certificate and the report (S.100)
- Content of financial statements
Financial statements must include:-
(a)The income and expenditure for the association during the financial year;
(b)The assets and liabilities of the association;
(c)Any mortgages, charges and securities affecting the association and the same material for any trust which the association holds (S.101).
- Lodging of financial statements with Registrar
Financial statements are to be lodged within 1 month to the Registrar and in the case of a tier two association, a copy of the report of the review of the financial statement and in the case of a tier three association, a copy of the auditors report.
Any further resolutions passed of a meeting must be filed with the Registrar (S.102)
- Retention of financial statements and other documents
Financial statements must be kept for 7 years (S.105).
- Removal of auditor by resolution
An auditor may be removed at an annual general meeting (S106).
- Model Rules
These are set out as an appendix prepared by my colleague John Nolan to this paper.
- Review of your Rules
Wisewould Mahony Lawyers can carry out an audit of your Rules and suggest any changes required to comply at a fixed fee for CCAV members.
I have not dealt with other matters referred to in the legislation as it seems to me that these are the matters most likely to affect the members.
Please contact Tony Joyce, John Nolan, Melissa Strain or Michael Cochrane with any queries.
Wisewould Mahony Lawyers
Level 8, 419 Collins Street
Melbourne Vic 3000
Facsimile: 9629 4035
Tony Joyce
Ph: 9612 7348
Email:
John Nolan
Ph: 9612 7347
Email:
Melissa Strain
Ph: 9612 7350
Email:
Michael Cochrane
Ph: 9612 7260
Email:
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