Incorporated associations have obligations to the Registrar of Associations. A secretary must be appointed and the Registrar notified. The Registrar must also receive the annual statement. The purpose of the association must be set out in the rules. Business activity may be conducted but generating profit for members is forbidden. An AGM must be held. Minutes of meetings must be kept and financial reporting is mandatory. The Associations Act has codified the duties of office holders and committee members.
Features of incorporated associations
Purpose and membership
An association, as defined by the Associations Incorporation Reform Act 2012 (Vic) (“Associations Act”), is any society, club, institution or body formed or carried on for a lawful purpose. The minimum membership of an association is five people.
An incorporated association has a legal identity separate from that of its members. Normally, an individual can enter into formal agreements, sue (or be sued), buy property and so on, because a person has a legal identity. When a group of people incorporate, that body of people has a collective legal identity. For example, if 10 people form the Buffalo Tom Appreciation Society (BTAS) and incorporate BTAS, it may sue or be sued, purchase property, enter into agreements and so on, in its own name.
Flowing from the legal status of the incorporated association is an important feature: that the members’ liability is limited to the annual subscription fee and any other money due under the associations’ rules.
An association must not have, in CAV’s opinion, an undesirable name. While “undesirable” is not defined in the Associations Act, common sense dictates against obviously offensive names.
An association’s name and registered number must appear on all business documents including letterheads, notices, advertisements and publications. Once an association is incorporated, it must add the word “Incorporated” or “Inc.” to its name.
An association can change its name by special resolution and by seeking CAV’s approval. The change of name does not change the legal identity of the association, nor does it alter its legal rights and obligations.
An incorporated association must have a registered address.
All incorporated associations must have a secretary. The secretary is the conduit between the association and those people and organisations that the association deals with. Holding the office of secretary does not mean you cannot hold another office in the association. The secretary must be at least 18 years old and an Australian resident. The secretary has a number of obligations to Consumer Affairs Victoria (CAV); generally, the secretary must keep CAV informed of certain events and assist CAV in its functions. In particular, the registrar (i.e. CAV) must be:
•notified of the appointment of the secretary (within 14 days);
•notified of any change to the association’s rules (within 28 days) – CAV must approve any changes;
•notified of any change to the association’s name (within one month) – CAV must approve any changes;
•sent the annual statement and other required financial information within one month of the association’s annual general meeting;
•assisted with the inspection of the association’s books (e.g. accounting records);
•informed of any motion to winding-up the association and disposing of its assets (within 28 days of the motion);
•informed of a changed address (within 14 days).
Not-for-profit Law’s “Secretary’s Satchel” (at www.nfplaw.org.au/secretaryguide) includes comprehensive information about running an incorporated association (including sample agendas, meeting minutes, tips and checklists).
An association’s purpose must be set out in the association’s rules. This “charter” or “mission” sets out what the association is aiming to achieve, how it intends to do so and the collective “beliefs” of the association. Most groups simply need to write down answers to the questions that they discussed when they decided to form an association, including: Why do we want to form an association? What do we want to achieve? How are we going to achieve our aims?
However, note that professional advice may be needed in drafting an association’s purposes if the association wants to fall within a particular category of charity to obtain charitable taxation concessions (see “Tax concessions”).
The rules of an association govern the rights and responsibilities of the members, and govern how the association operates. The rules are a contract between the incorporated association and its members.
An association has a choice to adopt one of the following approaches:
1 Completely adopt the model rules provided in the Associations Incorporation Reform Regulations 2012 (Vic). A copy of these rules can be found on CAV’s website (www.consumer.vic.gov.au).
2 Partially adopt the model rules. An association can legitimately amend the model rules to suit its purposes. Before amending the model rules, consider: what is intended to be achieved by the amendment or new clause? When amending the model rules, it is important to use simple and clear language. This will assist to avoid later disputes about what was intended by the rules.
3 Draft its own rules, which must contain the matters specified in schedule 1 of the Associations Act (listed on CAV’s website at www.consumer.vic.gov.au).
As an alternative to the model rules, Not-for-profit Law has prepared “simple rules” to assist small, start-up Victorian incorporated associations to draft their own rules. These can be accessed at www.nfplaw.org.au/constitution.
An incorporated association cannot be formed with the intention of making a profit for its members. In this way it is different from business organisations (e.g. partnerships).
Community organisations can, with certain limitations, participate in a number of activities typically associated with businesses. An association can carry out the following activities, which are deemed by the Associations Act not to be activities with a view to making a profit:
•make a profit itself, so long as that profit is not divided among the members;
•buy and sell goods and services, where doing so is ancillary to the principal purpose of the association, provided that the transactions are:
– with members of the public, and
– not substantial in value (unless they are for admission fees, fees to displays, exhibitions, contests, sporting fixtures or other occasions that are organised for the promotion of the association’s purposes);
•protect or regulate a trade, business, industry or calling so long as the association does not engage or take part in that trade, business, industry or calling;
•divide the assets among the members on dissolution of the association;
•pay its members a salary;
•provide members with a monetary benefit if they would be entitled to it notwithstanding their membership of the association;
•compete for trophies or prizes in contests related to the association’s purposes.
Despite these provisions, only non-commercial non-trading organisations are suited to using (or would wish to use) the incorporated association structure.
Incorporated associations must hold annual general meetings (AGMs). An association’s first AGM must be held within 18 months of incorporation. Subsequent AGMs must be held within five months after the end of the financial year. An association may apply to CAV for an extension for holding an AGM.
Regardless of the formality or content of an AGM, the following information must be submitted to the members:
•the income and expenditure of the association during the previous financial year;
•the assets and liabilities of the association at the end of the previous financial year;
•details of any mortgages, charges or securities affecting property owned by the association, as at the end of the previous financial year;
•details of the above information concerning any trusts of which the association was the trustee during the previous financial year.
Details of an AGM must be lodged by the secretary with CAV within one month of the date of the AGM. CAV must be told when the AGM was held, details of the compulsory financial information (set out above), certification that they were presented to the AGM, the resolutions relating to the financial statements and the lodgment fee.
Incorporated associations must prepare and keep accurate minutes of all meetings (including general meetings and committee meetings). The minutes should be confirmed by members in attendance as an accurate record of the meeting.
For more information about the legal requirements applicable to AGMs (and other meetings, such as management, sub-committees and special general meetings), see www.nfplaw.org.au/meetings.
New financial reporting requirements for associations were introduced in 2012.
The committee must ensure that financial statements are prepared at the end of each financial year. The committee must be satisfied that the financial statements give a “true and fair” view of the association’s financial position and performance.
Depending on an association’s total revenue (from all its activities during the last financial year), additional financial reporting requirements may also apply. The Associations Act establishes a three-tiered reporting framework, based on associations’ revenue:
•tier one: annual revenue of less than $250,000;
•tier two: annual revenue of $250,000–$1,000,000;
•tier three: annual revenue of more than $1,000,000.
Tier one associations do not have any additional reporting requirements. They do not need to have their financial statements externally reviewed or audited unless:
•required by the rules of the association;
•a majority of members vote to do so at a general meeting; or
•they are directed to do so by CAV.
Tier two associations must have their accounts reviewed by an independent accountant. The accountant’s report must be presented to members at the AGM. Tier two associations do not have to audit their accounts unless required by the rules of the association.
Tier three associations must have their accounts audited by an independent auditor. The audit report must be presented to members at the AGM. The auditor must be appropriately qualified and must be:
•a registered company auditor or firm;
•a member (holding a public practice certificate) of CPA Australia or the Institute of Chartered Accountants in Australia; or
•someone approved by CAV.
The auditor must also be independent, so the auditor must not be:
•a member of a committee of the association;
•an employer or employee of a committee member;
•a member of the same partnership as a committee member; or
•an employee of the association.
An incorporated association may only remove its auditor by resolution passed at a general meeting. Two months advance notice of the proposed resolution must be provided to all members, the auditor and CAV.
Committee members, especially the secretary, should be aware that the Associations Act prescribes various penalties for non-performance of the Act’s requirements. Officers should make themselves aware of their responsibilities and ensure that they are carried out; this satisfies the officers’ duties to the association and the law.
Making an application
To incorporate an association, apply to CAV using the relevant form on CAV’s website (www.consumer.vic.gov.au). The form must be accompanied by:
•a declaration that the applicant is authorised to make the application;
•a copy of the association’s rules; and
•any trust deed relating to the association.
The cost of applying for incorporation depends on whether the model rules are adopted and whether the entity is a company, co-operative or society. CAV may refuse to incorporate an association when the type of group is not an appropriate association.
When an application to incorporate an association is accepted, a certificate of incorporation showing the organisation’s name, registration number and date of incorporation, and a receipt of payment, is emailed to the secretary and the person lodging the application.
Amalgamating incorporated associations
Two or more associations may amalgamate to form one association. To do this, each of the associations wishing to amalgamate must pass a special resolution approving the terms of the amalgamation and the statement of purposes and rules of the proposed amalgamated association. In addition, the associations must lodge the relevant form with CAV (available on CAV’s website at www.consumer.vic.gov.au). When considering an amalgamation, committee members must remember to act in the best interests of their organisation. For more information about the process of amalgamating incorporated associations, see CAV’s website.
An association can apply to CAV for voluntary cancellation if it has assets under $10,000. The association can apply for voluntary cancellation if it has ceased to operate, has no outstanding debts or liabilities, has lodged all its annual statements and paid all the required fees, and there are no current or proposed legal proceedings against it.
An organisation that wishes to end, but does not meet the criteria for cancellation, must be wound-up voluntarily by special resolution. This option is available to any incorporated association in Victoria, regardless of its annual revenue.
Associations may be compulsorily ended by order of the Victorian Supreme Court where:
•the association has, by special resolution, resolved that it be wound-up by the court;
•the association suspends its operations for a year;
•the association is unable to pay its debts;
•the association (or the association as trustee) has traded or divided profits among its members (subject to exceptions contained in the Associations Act);
•the association has acted outside its purpose as stated in its rules; or
•the court believes it is just or equitable to do so.
An application for winding-up can be made by the association, by CAV, or by a member or creditor of the association. The provisions (in the Corporations Act 2001 (Cth)) relating to corporations winding-up voluntarily or involuntarily also apply to associations.
For further information about ending an association, visit Not-for-profit Law’s Information Hub at www.nfplaw.org.au/windingup.