The Associations
Incorporations Amendment Bill 2010 passed by Parliament
This has made significant changes to the law that regulates
associations and after receiving assent will commence in 2011. It is complex
reform but the changes can be broken down into five categories.
1. New company law-like duties on "office holders", the
definition of which is expanded to cover not just committee members etc but
also employees who affect significant decisions. Most of these new duties are
in sections 29AB-AD and they introduce civil penalties on office holders of up
to $20,000. They are:
·
Duty of care and diligence - this adopts
the "business judgement rule" which requires that the decision is
made in good faith, not made in self interest, is made after ensuring you are
reasonably informed, and that the office holder rationally believes the
decision is in the best interest of the association
·
Duty of good faith and proper purpose -
office holders must exercise power in best interests of, and for the purposes
of, the association
·
Duty to avoid trading while insolvent -
inserted into section 37AH. This is a complex duty modelled on section 558 G of
the Corporations Act. It applies where the decision to take on a debt makes the
association insolvent, or where the association is already insolvent when
taking on the debt, and the decision maker suspected this. As a breach of this
section can constitute an offense depending on circumstances, Volunteering
Victoria will publish further detailed information on this.
In addition there are new provisions that make office holders, or former office holders, liable for civil
penalties where it is found they used information gained by their office to
gain personal advantage or to cause detriment to the association. Penalties
also apply if a current office
holder uses that position to gain advantage for themselves or to cause
detriment to the association. (Section 29A)
2. Removal of requirement to have a separate statement of purpose.
Purposes will be incorporated into the association's rules with
transitional provisions to ensure current associations' arrangements are
valid. Note that the model rules have been significantly reformed: Volunteering
Victoria was involved in that review and we will publish detailed analysis of
these practical rule changes.
3. Changes to the association "tiering" which reduces
financial reporting requirements for small associations.
·
Tier one associations: total revenue allowed
lifted to $250,000 p.a. - no change to reporting
·
Tier two now $250,000-$1 million revenue p.a.
- no longer required to have an audit, though a review by an independent
accountant will be required (this is the major change)
·
Tier three: $1 million plus - still need
audit
4. Removal of restriction on associations trading in support of their
purposes. This somewhat artificial provision has never fit the actual work done
by associations in delivering services under contract from government or
others. The prohibition on profit remains.
5. Changes to members' rights, discipline and grievances regimes.
This gives members greater access to documentation, and more strongly states
the natural justice requirements in dealing with discipline and grievance
procedures (section 14). The clarity is welcome.
There are a range of other important changes, including a requirement
to replace a secretary within 14 days, and changes to meeting requirements.
Volunteering