Chapter 7 Associations 1 7 1 Unincorporated Associations

Chapter 7 Associations 1

7. 1 Unincorporated Associations A not-for-profit association does not have to be formally incorporated under any legislation. It can exist as the combination of people who demonstrate a common interest and purpose through: • organisation • continuity • clear criteria or method to identify members such as a name or title • a written constitution or rules • some form of contract between the members • the existence of a committee and a bank account. 2

Advantages / Disadvantages • The advantage of operating as an unincorporated association is that no formalities are involved in its formation or in the conduct of its affairs. • The lack of separate legal status of an unincorporated association can be a substantial disadvantage. 3

Advantages / Disadvantages An unincorporated not-for-profit association cannot: • buy, lease or own property; • enter into a contract or be liable in tort; • sue or be sued; or • receive a gift, be the beneficiary of a trust or be left property by will. 4

Advantages / Disadvantages • • • An unincorporated association can only act through its members The members of an unincorporated association may sue and be sued in their own names, and do not enjoy limited legal liability. The committee members may also be liable in negligence if the negligence was suffered by the third party as a result of one of the activities of the association Courts are reluctant to intervene in the internal affairs of an unincorporated association such as disputes between or as to the rights of members unless it involves exceptional circumstances Some unincorporated associations may only be active for a short time and quickly cease to exist 5

7. 2 Incorporated Associations A not-for-profit association may incorporate by: • registering under the applicable state or territory legislation. • registering as a company limited by guarantee under the Corporations Act 2001 (Cwlth). • being the subject of a Royal Charter or • by being the subject of a special statute. 6

Four Incorporation Methodologies 1. Not-for-profit association incorporated under the Associations Incorporations Act 1985 (SA) – Community Bridging Services Inc 2. Company limited by guarantee – BRINK theatre company 3. Royal Charter – Chartered Institute of Company Secretaries in Australia Ltd 4. Special legislation setting up the body corporate – The Royal Society for the Blind – The Royal Institution for the Blind Act 1934 (SA) 7

Incorporated Associations Legislation • • Associations Incorporations Act 2009 (NSW) Associations Incorporations Act 1985 (SA) Associations Incorporations Act 1987 (WA) Associations Incorporations Act 1981 (Vic) and Associations Incorporation Amendment Act 2010 (Vic) Associations Incorporations Act 1981 (QLD) Associations Incorporation Act 1964 (Tas) Associations Incorporation Act 1991 (Act) Associations Act 2003 (NT) 8

Eligibility An incorporated association must be not-forprofit and formed for a lawful purpose. It must have the minimum number of members – five to seven depending on the legislation. 9

Powers of an Incorporated Association • acquire, hold, deal with, and dispose of, any real or personal property; and • administer any property on trust; and • open and operate banks accounts; and • invest its moneys in any security in which trust monies may, by Act of Parliament be invested or in any other manner authorised by the rules of the association; and • borrow money upon such terms and conditions as the association thinks fit; and • give such security for the discharge of liabilities incurred by the association as the association thinks fit; and • appoint agents to transact any business of the association on its behalf; and • enter into any other contract it considers necessary or desirable. 10

Meaning of ‘not-for-profit’ ‘Not-for-profit’ refers to the membership, purpose and activity of the association. Any profits must be used to further the objects of the association and cannot be distributed to the members. 11

Not-for-profit legislation • any trading, either with members or the public, must be secondary to the main purpose of the association; and • trading with the public must not be substantial in volume in relation to the other activities of the association. 12

7. 3 Controlling & Operating the Incorporated Association The Rules or Constitution of the Association should: • explain the nature of the association • the purpose and objects of the association • how the association will operate • how membership will be awarded • how membership may be lost • how to deal with internal disputes • how finances will be arranged • how to wind up the association at the end of its life. 13

Public Officer and Committee An incorporated association must appoint a person to be the public officer to provide a point of contact for the association and they are also the responsible person for lodging documents with the relevant state or territory government authority. 14

Formalities • Incorporated associations must keep proper accounting records • Record keeping • An incorporated association must hold an Annual General Meeting at least once a year • some incorporated associations must have their accounts audited by a registered company auditor • Admitting and expelling members 15

Winding Up an Incorporated Association When an incorporated association dissolves, any surplus on distribution must go either to an incorporated association with similar purposes or to charity, none of the surplus can be distributed to members. 16

Advantages of Incorporation • • • accept gifts and bequests in wills; borrow money; buy, sell and own property in its corporate name; continue regardless of changes in membership because it has perpetual succession; enter into contracts in its corporate name; make a profit as long as the profit is put back into the association; operate a bank account in its own name; sue and be sued in its corporate name; appear in court; utilise the statutory power to invest and to deal with monies not immediately required; perhaps obtain government funding where relevant for various purposes because it is an entity with a stable and settled structure 17

Disadvantages of Incorporation • expenses – application fees and the fees from the annual audit and lodging annual financial returns; • formalities – an incorporated association must comply with the relevant state or territory associations’ incorporation legislation regarding the operation of the association; • the incorporated association should take out public liability insurance in case it is in breach of any of its obligations; • as the incorporated association is a separate legal entity, the assets, rights and liabilities of the individuals who incorporate as an incorporated association become the assets, rights and liabilities of the incorporated association 18