The Associations Incorporation Bill was introduced into the Legislative Assembly on 11 September 2014. Its purpose is to provide a robust framework to regulate not-for-profit organisations in Western Australia, whilst maintaining an emphasis on self-management and self-reporting. It will repeal and replace the Associations Incorporation Act 1987 (WA) (Current Act).
At this stage, no Regulations or Model Rules have been released. The draft Model Rules released in late 2007 (as part of public consultation on the Associations Incorporation Bill 2006, which was the proposed “Green Bill” as it was then known) will be updated and finalised after the Bill’s passage through Parliament. We understand that associations will be given the opportunity to provide feedback on them as part of the consultation process.
The Bill departs significantly from the Green Bill that was released in 2006, and makes substantial changes to the Current Act. Some of the key features of the Bill are set out below:
Financial records, reporting and accountability
The Bill introduces minimum financial reporting requirements, modelled on the three-tiered structure used in the Australian Charities and Not-for-profits Commission Act 2012 (Cth). Under this system, smaller organisations are subject to less onerous reporting and accountability requirements compared to larger organisations. It has been reported that over 90% of Western Australia’s associations have an annual revenue of less than $250,000.
Associations will continue to report to members rather than lodge financial statements with the Commissioner. The Commissioner is empowered to intervene in exceptional circumstances.
The following table provides a summary of the requirements for each tier, regardless of which tier an associations falls into, it must retain its financial records for at least 7 years:
Click here to view table.
Management Committee requirements
Under the Current Act there are no eligibility requirements or exclusions relating to persons who may serve on the management committee of an association. The Bill specifically prescribes that certain persons are not to be members of a management committee of an association. The persons prohibited from being members of a management committee of an association are persons who:
- are bankrupt or persons whose affairs are under insolvency laws;
- have been convicted, within or outside the State, of:
- an indictable offence in relation to the promotion, formation or management of a body corporate; or
- an offence involving fraud or dishonesty punishable by imprisonment for a period of not less than 3 months; or
- an offence in relation to duties of officers (under Part 4, Division 3 of the new Act) or an offence relating to the duties of management committee members with respect to incurring debt (section 127 of the new Act).
A penalty of $10,000 applies where a member accepts an appointment or acts as a member of an incorporated association where that person is prohibited from being a member (unless leave of the Commissioner has been obtained).
The Bill introduces fiduciary duties owed to the association by its ‘officers’ in line with the duties required at general law and imposed on officers of companies incorporated under theCorporations Act 2001 (Cth). ‘Officers’ is broadly defined in the Bill to include members of the management committee, an employee who makes decisions that affect a substantial part of the operations of the association and ‘a person who has the capacity to significantly affect the association’s financial standing’.
Officers owe the following fiduciary duties:
- the duty of care and due diligence – officers must exercise their powers and duties with the degree of care and due diligence that a reasonable person would exercise if they were an officer holding the same position and responsibilities in an association in the same circumstances as their association;
- the duty of good faith and proper purpose – an officer must exercise their powers and discharge their duties in good faith in the best interests of the association and for a proper purpose;
- the duty to avoid conflicts of interest by not improperly using their position – an officer must not improperly use their position to gain an advantage for themselves or another person or to cause detriment to the association; and
- the duty to avoid conflicts of interest by not improperly using information – an officer must not use information gained in their capacity as an officer to gain an advantage for themselves or another person or to cause detriment to the association. A breach of any of these fiduciary duties carries a penalty of $10,000.
Member details and privacy
The Bill proposes a number of amendments to the requirements of maintaining a register of members which enhance the privacy of members. Currently, an incorporated association must keep a register of members which must be made available to members that wish to inspect the register. That register must include a member's name and their residential or postal address. The Bill no longer requires that a member's residential or postal address be recorded in the register of members. Instead, a member may provide their email address as a way in which they can be contacted by the association.
The Bill also introduces restrictions on the purposes for which information within the register can be used. Information within a register of members can only be used for purposes ‘directly connected with the affairs of the association’ or ‘related to the administration of the Act’ and an association may require a member who inspects the register to make a statutory declaration that they will only use the information within the register for these purposes. Use of information within the register for other purposes carries a penalty of $10,000.
Rules of associations and transitional provisions
New requirements for Rules
All associations (unless the Commissioner grants an exemption), even those associations that are exempt from complying with the requirements of the Current Act, will be required to ensure that their rules are compliant with the new Act and contain those matters to be addressed as set out in section 22 and Schedule 1 of the Bill (New Requirements).
The New Requirements capture many of the existing requirements of the Current Act as well as incorporating additional matters. These additional matters include, amongst other things, providing for circumstances in which payment may be made to a committee member, setting out the number of members that may request that a general meeting be convened and providing for a procedure for dealing with disputes. The Bill also provides specific particulars in relation to some of these matters.
Existing associations will have 3 years after the commencement day of the new Act to comply with the New Requirements (unless the Commissioner approves a longer period on application made by the association). Those associations that had applied for incorporation under the Current Act before the commencement day, but are only incorporated after the commencement day (Newly Incorporated Associations), will need to comply with the New Requirements upon the later of the expiry of 3 years after the incorporation of the association or the commencement of section 22 of the new Act, which sets out the New Requirements (unless the Commissioner approves a longer period on application made by the association).
The Bill provides that the management committee may, by resolution made not later than 3 years after the commencement day of the new Act, make any alteration to the rules of the association to ensure compliance with the New Requirements. No approval for the alteration is needed from the members. All that is required is the provision of notice to members upon approval by the Commissioner of an alteration to the rules.
If an association’s rules do not comply with the New Requirements at the end of the 3-year period, the Model Rules will apply to the association.
Other relevant transitional provisions
Under the Bill, certain matters that were commenced under the Current Act will be continued under the provisions of the Current Act, for example, applications for incorporation made before the commencement date; applications for alteration of the rules, name or objects of the association; voluntary winding up and cancellation of incorporation.
The New Act provides that an association must hold its annual general meeting within 6 months of the end of its financial year. This applies to existing associations – extending the time for holding of an annual general meeting from 4 months under the Current Act to 6 months in cases where the 4 months period under the Current Act has begun to run.
The new accounting and reporting requirements (being those requirements set out in Part 5) apply in respect of each financial year of an existing incorporated association that commences on or after 1 July 2016. In respect of a financial year of an existing incorporated association commencing before 1 July 2016, the provisions relating to accounting records and annual accounts under the Current Act (section 25 and 26) will apply to the association as if they had not been repealed. Clauses under the new Act that relate to obligations to obtain an audit on direction and general obligations of an association with regard to its auditor, will apply to existing associations from the commencement day of the new Act. A person who was the auditor of an existing incorporated association on the commencement day is regarded as having been appointed under the new Act.
Internal dispute resolution
One of the matters that must be contained in all associations constitutions, is an internal dispute resolution procedure. If a dispute is unable to be resolved by that procedure, then the association or a member involved in the dispute may apply to the State Administrative Tribunal for the dispute to be determined.
Other key changes
There are a number of other key changes contained in the Bill, including the appointment of a statutory manager, administration and winding up provisions, administration of the Act by the Commissioner, amalgamation of associations and the governance of the management committee. These will be discussed in further alerts. As will the overall compliance with the Bill, as the penalties for non-compliance have all substantially increased from what is contained in the current Act.
The changes introduced by the Bill are substantial. Not only will the new Act require significant amendments to many associations’ rules but it will also result in a major change to associations’ current practices and procedures.