Incorporated Associations and Regulation – what to be aware of
So… you are either considering incorporation, or have already incorporated – but would like to know exactly what legal requirements apply to incorporated associations? And how can your association fulfil those obligations with confidence?
In Victoria, your governing legislation is the Associations Incorporation Reform Act 2012 (the Act) and its associated regulations, which came into effect in 2012. Consumer Affairs Victoria (“CAV”) ensures associations comply with these requirements.
Statement of Purposes and Rules
Incorporated associations must have rules – a written document that guide the way your association operates. These rules are a contract between the association and its members. They set out the associations purposes and list the rights and responsibilities of members and office holders.
To save time and expense you may wish to use the model rules provided by CAV as a basis and amend as required. If you wish to formulate your own rules there are 18 mandatory matters and 5 optional matters – if the 18 mandatory matters are not adequately addressed CAV may contact you and require amendment.
As a general guide, your rules must include:
- Your associations name and purposes;
- The rights, obligations and liabilities of members;
- Procedures for resignation and cessation of membership;
- Process for appointment and termination of secretary;
- Procedures for preparing and keeping minutes at the AGM;
- Provision for members to access minutes of GM’s and financial statements;
- Right of access for members to minutes of committee meetings (if any); and
- Disposition of any surplus assets on winding up or dissolution of association.
Office holders:
Office holders include committee members, the secretary, someone who takes part in important decision-making, a management person who can affect the organisations financial standing, and a person who instructs the committee.
There are certain duties on office holders – they must:
- Carry out duties with care and diligence;
- Act in good faith with the best interests of association, and with proper purpose in mind;
- Make decisions in best interest of association; and
- Not have personal financial interest.
Office holders also have legal duties to:
- Maintain the associations financial viability;
- Ensure the associations purposes are being achieved;
- Make sure the association is meeting its legal requirements;
- Sign contracts on behalf of the association;
- Ensure the AGM is held within 5 months after the end of the associations financial year;
- Submit financial statements covering the full financial year – giving a true and fair view of associations financial affairs to members at the AGM;
- Oversee financial affairs – and ensure the association is not operating if insolvent;
- Appoint a new secretary if necessary; and
- Disclose any material personal interest to committee.
Protection for office holders:
Incorporated associations now must indemnify office holders for liabilities incurred in good faith whilst performing duties. That means the association is liable – consider insurance if applicable to your situation.
Meetings:
General meetings must take place in accordance with your associations’ rules and you must notify each member entitled to vote of date, time and place. Meetings may be held using technology that allows participants to clearly and simultaneously communicate with each other.
AGM’s are quite strictly regulated…
- You must hold an AGM once each year with notice to members;
- Within 18 months of becoming incorporated you must have an AGM; and then again five months after end of associations financial year;
- You must present financial statements; and
- Only in exceptional circumstances you can apply for extension of time beyond requisite 5 months.
Special general meetings:
- Special general meetings are for special resolutions – business that cannot wait for AGM;
- Committee members may be chosen to make decisions on specific matters;
- Less formal notice is required (but you still must comply with rules of association); and
- Special resolutions are required to change associations name or rules, amalgamate with another association, or voluntarily wind up association.
Your Secretary:
- Must have an online CAV account;
- Must lodge your annual statement a month after the AGM with CAV;
- Must notify CAV of changes to the association;
- Is responsible for adding or removing delegates from the association; and
- Is responsible for record-keeping.
The role of your secretary may differ according to your individual association rules, and the secretary may hold any other position of office within your association if desired.
Annual financial reporting:
As an incorporated association you are required to:
- Prepare financial statements prior to the annual general meeting (“AGM”);
- Present these financial statements to members, certify by a committee member; and then
- Lodge the annual statements with CAV.
There are three levels of review applied to the financial statements of incorporated organisations depending on their annual income:
- If your total revenue is less than $250,000; there is no need to have financial statements audited or reviewed (however members may vote to do so);
- If revenue is between $250,000-$1M; financial statements must be reviewed by an independent accountant (but – again, members may vote to have statements audited); or
- If income is more than 1$M – statements must be audited
If there are special circumstances, an association may apply to CAV for an exemption from the requirement to lodge financial statements (either generally, or for a specified year).
There are also financial reporting exemptions for associations which are also registered charities.
Trading Activities
If your organisation engages in trading activities, your trading activities must be in line with your statement of purposes (see below), and your organisation must not trade in order to distribute profit to members. Associations are not permitted to distribute surplus income or assets to members.
Disciplinary proceedings and grievance procedures:
Your association rules must set out grievance procedure for resolving disputes between members.
Contracts and other documents:
Your association may authenticate documents under common seal or with the secretary’s signature; and
Subject to your rules, your association may execute contracts or other documents if signed by two committee members or a committee member and secretary.
If you would like specific legal advice about whether you should incorporate, the process for incorporating your association, amending current rules, or finding out more about what the regulations mean for you, don’t hesitate to contact the team at Sinclair + May. We would love to hear from you.
This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation.
Published Sep 19, 2018
Go back