The Associations Incorporation Act – South Australia 1985 is an act of the parliament of South Australia to make provision for the incorporation, administration and control of associations; and for other purposes. Under the Act, an incorporated association has power to acquire, hold, deal with, and dispose of any real or personal property; administer any property on trust; open and operate bank accounts; invest money in any form of investment; borrow money; give security for the discharge of liabilities incurred by the association; appoint agents; and enter into any other contract it considers necessary or desirable.
The Office of Consumer & Business Affairs undertakes the administration of the Associations Incorporation Act 1985 on behalf of the Corporate Affairs Commission.
To be incorporated an association is eligible for incorporation when formed for:
- A religious, educational, charitable or benevolent purpose
- The purpose of promoting or encouraging literature, science or the arts
- The purpose of providing medical treatment or attention or promoting the interests of persons who suffer from a physical, mental or intellectual disability
- The purpose of sport, recreation or amusement
- The purpose of establishing, carrying on or improving a community centre or promoting the interests of a local community or section of the local community
- Conserving resources or promoting the interests of students or staff of an educational institution
- Political purposes
- The purpose of administering a scheme or fund for the payment of superannuation or retiring benefits to the members of an organisation or employees of a body corporate, firm or person
- The purpose of promoting the common interests of persons engaged in or interested in a business, trade or industry
- Any purpose approved by the Minister of Corporate Affairs. The Minister’s approval is also required for the incorporation of an association that has a main object of making a profit for its members or to engage in trade or commerce. However many non-profit associations engage in trade for ancillary fundraising purposes, and approval is not required for this.
Why become Incorporated?
If you are part of a club or considering establishing a club, you need to know about incorporation. Incorporation is a voluntary, simple and inexpensive means of establishing a legal entity. Incorporated Associations:
- Have their own “corporate identity”
- Can sue and be sued
- Can enter into contracts
- Usually have committees to run affairs
- Have documents lodged on a public register
- Are often eligible to apply for grants In considering whether or not to incorporate you may wish to consider obtaining legal advice. A solicitor will be able to assist in preparing rules, completing forms and provide you with advice on these issues.
Please note Associations Incorporations legislation is governed at the state rather than federal level, therefore requirements vary between states. Office of Consumer & Business Affairs is the organisation responsible for incorporated associations in South Australia. The Office of Consumer & Business Affairs website has an excellent range of fact sheets and other information to assist groups with incorporation issues. For further information regarding requirements of, and applications for incorporation, contact:
Office of Consumer & Business Affairs P: 131 882 W: www.ocba.sa.gov.au
Why you wouldn’t become Incorporated?
Local sporting clubs run on a voluntary basis and member based where the additional reporting responsibilities and compliance costs are too great. Other factors such as incorporation cost, accounting and auditing fees and ongoing statutory fees also have an impact.
Some advantages of being an unincorporated association are:
- You don’t have to pay the costs associated with incorporation
- You don’t have to comply with many of the legal or financial requirements of corporations or associations
- Enjoy greater freedom of operation
The benefits of incorporating your club include:
- Simplifies and clarifies the management and ownership of the money and other assets of the club. Bank accounts are held in the name of the club. Assets are purchased and owned by the club. The club can enter into contracts.
- Provides some legal and financial protection for the management committee of the club who otherwise might be liable for damages arising from the activities of the club. Without incorporation, a group has no separate legal existence. Incorporation protects committee members from most personal liability but leaves them with the responsibility to act honestly and prudently.
- Clarifies and formalises the objectives of the club. To become incorporated, clubs need to state clearly the purposes for which they are being formed. The purposes, frequently known as the objects of the club, are fixed in the rules of the club (also known as the constitution). The regulating body must be advised of any changes.
- Sets out regulations about how the club shall operate. These regulations are designed to ensure that the club operates fairly, responsibly and accountably to its members. They also protect against dishonesty and manage matters such as conflict of interest.
Being incorporated also requires that some information is regularly made available to the regulating body and to the public about the affairs and operations of the club.
- Allows clubs to apply for a much wider range of public and private funding. Many government and philanthropic organisations make it a basic requirement that applicants for funding are incorporated.
- Allows some incorporated bodies to enjoy tax advantages. Considering the benefits incorporation provides within this Act, the cost for incorporation is a worthwhile investment.
Once incorporated, there are some regular compliance tasks required such as the keeping of records, holding of elections and submitting of returns.
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Like any major change, incorporation would pose some transitional change issues. For a sporting club, this would include transfers of contracts and property, dealing with bank accounts, and coming to terms with new systems and processes applicable to an incorporated entity. This is less an issue for an incorporated association where the legislation provides for property of the association to vest in the new entity on incorporation.
However, given the change would be permanent, the transitional issues would be once off and would be unlikely to cause ongoing problems. Transitional change can be managed by careful forward planning and establishing a timeframe that allows each step to be contemplated, discussed and implemented in due course.
Roles and Responsibilities for club
- Management Committee
The Management Committee is the governing body responsible for ensuring the long-term health and success of the club.The Management Committee acts on behalf of the members to ensure that the club remains viable and effective both in the present and for the future.The Management Committee has the ultimate authority for financial operations and budgeting to ensure the achievement of strategic objectives.It also has the responsibility of ensuring that the various activities of the club are in compliance with the law and expectations of stakeholders and that risks are managed.The Management Committee’s key governance responsibilities include:
• Strategic Planning – set and review the short, medium and long term goals of the club in consultation with key stakeholders
• Financial Oversight – approve budgets; monitor business performance – approve large investments and any major financial decisions – ensure there is accurate financial reporting
• Oversight of Chief Executive Officer – appointment, performance management and review, providing advice and guidance and rewarding the CEO
• Policy Formulation – establish a Management Committee level policy framework for governing the club within which all operational plans and actions are developed
• Legal Compliance – ensure that the club complies with all aspects of the law, including legislation covering such areas as employment, trading, occupational health and safety
• Risk – ensure major risks are identified and managed, ensure a risk management plan is established and monitored to ensure compliance and effectiveness
• Club Performance – monitor management and club performance
• Succession Planning – for the Management Committee and oversight of staff and management
• Stakeholder Relations – identify key stakeholders, build relationships, communicate and seek stakeholder views on strategic direction
• Promotion of the club – positive ambassadors externally and role modelling internally
• Reporting to members and other stakeholders at the annual general meetingIf the club does not have a Chief Executive or equivalent and its operational activities are carried out by Management Committee members, it is important for the Management Committee to distinguish between the operational roles and governance roles in their meetings and to ensure that both roles are attended to.As Committee Members are appointed to act on behalf of the club, a high level of trust is placed in them to act appropriately. Under the law, Directors have fiduciary duties to the organisation. This means that Committee Members are required to act with a high degree of trust, honesty, care and diligence and to act in the best interests of the club at all times.The detailed duties come from the legislation under which the club is incorporated under the Associations Incorporation Act 1985.In summary the duties are:
• To act with good faith and honesty in the best interests of the club
• To act with reasonable care and diligence
- Disclosure of interest
A committee member with a direct or indirect financial interest, no matter how small, in any contract or proposed contract with the club must disclose that interest to the committee as soon as possible, and to the next annual general meeting of the club. An example of a financial interest is where a committee member is involved in a business which can offer goods or services to the club (such as maintenance jobs, insurance, equipment, computer software). While a member may offer the best deal for the club, it is essential that the member does not receive any secret profit. A person failing to disclose a financial interest may be fined up to $5000.Voting on a contract in which a committee member has an interest
A committee member who has a direct or indirect financial interest in any contract or proposed contract with the club can take part in discussion about the contract but may not vote on the matter or take part in any decision about the contract. To avoid allegations of impropriety, the committee should conduct the final discussions and voting without the member concerned being present. This allows the committee to decide what is in the club’s best interests free from the influence of that person. A breach of this section may lead to a fine of up to $5000.
Where a financial interest exists only because the committee member is a person for whose benefit the club is formed or because the interest is held in common with most other members of the club, the committee member does not have to disclose the interest and can both discuss and vote on the matter.
Similarly, it is not necessary to disclose an interest that exists only because the person is an employee of the club. However, the Associations Incorporation Act 1985 allows an employee to discuss the matter but not to vote on it. The committee must feel able to ask the employee to leave the room so that it can discuss the matter freely. This will help protect the committee from any suggestion of undue influence and reduce the risk of negligence.
Under the Associations Incorporation Act 1985, the officers of a club include the committee members and also include any person:
• Acting as a committee member
• Occupying or acting in the position of secretary, treasurer, or public officer
• Concerned in or taking part in the management of the club
• Holding any other office mentioned in the rules, except positions that have no management rights, like a patron
• From whom the committee is accustomed to take directions or instructionsUnder this definition, it is likely that a coordinator of a community organisation could be considered an ‘officer’ of the club. Intent to deceive or defraud
It is an offence punishable by up to four years gaol or $20,000 fine for an officer exercising her or his powers or duties to commit an act with intent to deceive or defraud the club, its members or creditors (including employees), creditors of any other person or for any fraudulent purpose.
- Improper use of information or position
An officer or employee must not make improper use of information acquired by virtue of her or his position in the club, so as to gain an advantage or to cause detriment to the club. An officer or employee must not make improper use of her or his position in the club so as to gain an advantage or to cause detriment to the club. The advantage includes any sort of advantage either for that person or anyone else. These provisions also apply to former officers and employees and carry a maximum penalty of four years gaol or a fine up to $20,000.A person who makes improper use of information or position is liable for any damage suffered by the association and must also pay the club any profit made.
Securing compliance with the Associations Incorporation Act
Officers of a club must take all reasonable steps to ensure the club complies with the Act. Failure to do so is an offence with a fine of up to $1250.
Falsification of Records
It is an offence for an officer, former officer, member or former member to falsify the books or records, including records in illegible form, of the club. ‘Falsify’ in this section has a broad meaning. The maximum penalty is $5000 or one year imprisonment.
- Public Officer
Every club must appoint a public officer, who must be a South Australian resident aged 18 years or over (Associations Incorporation Act 1985 s 56). The public officer receives letters and notices sent by the Corporate Affairs Commission and must file returns and notices of rule and name changes with the Commission.The public officer has no power over the management of the club simply because she or he is the public officer. However, the public officer must fulfil the duties applying to officers.The public officer does not have to be a committee member. However, the rules of the club may include the public officer as a member of the committee, or the committee may appoint one of its members to be the public officer.Subject to the rules of the club, the public officer does not have to be elected. The committee may simply appoint a public officer.If a public officer changes address or is replaced, the club must give details to the commission, or may be fined up to $1250.A club who does not have a public officer for more than one month may also be fined up to $1250.
- Annual General Meetings
Under the Associations Incorporation Act 1985, clubs must hold annual general meetings, unless the club’s rules do not provide for membership [s 39], or unless exempted by the Corporate Affairs Commission. A prescribed club’s first annual general meeting must be within eighteen months of incorporation and from then on within five months of the end of the club’s financial year.While the Act only makes annual general meetings compulsory for prescribed clubs with membership provisions, the rules of most incorporated associations require the club to hold an annual general meeting. Meetings must be held as stated in the club’s rules.
Minutes of meetings
- Minutes of all proceedings of general meetings and committee meetings must be entered in books kept for that purpose. The minutes must be confirmed at a subsequent meeting and signed by the member who presided at that meeting or by the member presiding at the subsequent meeting (Associations Incorporation Act 1985 s 51). Where a prescribed club fails to keep or confirm minutes, both the club and the member responsible can be fined up to $2500.Minutes that have been properly entered in the minute book, confirmed and signed are proof (unless it can be proved otherwise) that the meeting was held, that the proceedings recorded did occur and that all appointments of officers or auditors recorded were validly made.Depending on the club’s rules or a resolution of the committee, all minute books must be kept at the club’s office or in the custody of an officer of the club. Members must be able to inspect the minutes of general meetings free of charge. A club or an officer of a club who does not comply with these requirements can be fined up to $2500 (for a prescribed club) or $1250 (for any other club).There is nothing in the Act to say that members have the right to inspect minutes of meetings other than general meetings, such as committee meetings. If there is a dispute about whether minutes should be shown to members, the rules of natural justice must be observed and if a refusal is oppressive, unreasonable, unfairly prejudicial or discriminatory, court action may be taken. However, mediation may be a much more efficient alternative.
- Financial Records
All clubs must take reasonable steps to keep accounting records that record and explain the transactions and financial position of the club. A club and any officer of a club who fails to do this can each be fined up to $2500 in the case of a prescribed club, and in other cases $1250 (Associations Incorporation Act 1985 s 39C).Clubs should keep a receipt book, a deposit book, correctly filled in cheque butts, bank statements and a general ledger. The records must be kept at the club’s office or in the custody of an officer of the club, whichever the rules or a resolution of the committee allow.Under the association’s constitution, a member may have the right to see the financial records of a club. If not, or if the request is refused, the member may apply to the District Court for an order that the financial records be inspected and copied by a lawyer or a person authorised to audit the accounts of a prescribed club. Before the court will make an order it must be satisfied that the member is acting in good faith and that the inspection is for a proper purpose.Common mistakes made by clubs when managing their records are:
• Mixing together the petty cash float (which is for expenses) and cash income (for example, membership fees, donations)
• Not including comments on the balance sheet at the end of the financial year indicating possible future liabilities for employee entitlements or contractual payments due in the future
• Not showing that a loss has been avoided only because of a one-off or unusual income item
• Where a club has considerable assets, not preparing an assets and liabilities statement every financial year
The rules of natural justice must be observed when a committee of a club adjudicates any dispute between the members of the club or between the committee itself and any member of the club (Associations Incorporation Act 1985 s.40).Examples of the rules of natural justice which are often relevant to members of community clubs are the right to:
• Know there is a matter proceeding that concerns you
• Adequate notice that a matter is under discussion, or that a decision is to be made, including notice of any allegations against you
• Know the procedures that the committee intends to follow in making any decision;
• Be aware of the evidence put in support of any allegations
• Have an opportunity to present a case before a decision is made
• A fair hearing
• An unbiased hearing
• Be given reasons for a decision
• Challenge or appeal a decision
If any member of a club disagrees with the way the affairs of the club are being conducted, then negotiation, mediation, conciliation or arbitration are all possible ways of attempting to resolve the problem.
Provisions in the Rules
The rules of a club will often provide ways for addressing issues that arise within the club. For example, there may be provision for a special general meeting where members can have a particular issue voted on. Special general meetings can usually only be called if a certain number of members indicate they want this.If the club’s rules allow, a general meeting of the members can take away the powers of the committee and may decide the affairs of the club.
Vote of no confidence
It is possible to put a motion that there be a vote of no confidence in a particular committee member or the committee as a whole, even if the rules do not state this (they often don’t). As a matter of convention, when there is a vote of no confidence in a person, the person usually stands aside from their position. However, they do not have to do so. They may continue in their position (knowing there is ‘no confidence’ in them) until removed from it under the rules.
Breaches of the law
Where the club or a member breaches a provision of the Associations Incorporation Act, the Corporate Affairs Commission may be prepared to investigate the matter.
A club or a member that breaches any other law may be sued or prosecuted.
- Prescribed Clubs
A prescribed club is one with gross receipts (other than money received as subscriptions, gifts under a will or the sale of assets not originally bought for resale) greater than $500,000 per year (Associations Incorporation Regulations 2008 reg 4). Strict controls apply to prescribed clubs. A prescribed club may apply to the Corporate Affairs Commission for exemption from any of the requirements of the Associations Incorporation Act 1985 that apply to prescribed clubs.
A prescribed club must keep accounting records that will enable accounts to be prepared periodically, that present fairly the results of its operations and that will allow the accounts to be conveniently and properly audited. A club that fails to keep adequate records can be fined up to $5,000. Clubs that keep separate accounts for separate projects must produce consolidated accounts for the financial affairs of the club as a whole.
- Preparation and Auditing of Accounts
Every financial year a prescribed club must prepare financial statements and have them audited by a registered company auditor, a Certified Practicing Accountant, a Chartered Accountant or some other person approved by the Corporate Affairs Commission. The auditor cannot be an officer of the club, partner, employer or employee of an officer; an employee of the club; or a partner or employee of an employee of the club.Before giving the accounts to the auditor, the club must attach a statement resolved by the committee and signed by two or more committee members saying:
• That the accounts present fairly the results of the years operations and the state of affairs of the club at the end of the financial year
• The committee reasonably believes that all debts will be paid when they fall due
• The details of any subsidiary incorporated body and of any trust of which the club is trustee. The accounts must be given to the auditor in sufficient time so that they can be audited and a report prepared before the club’s annual general meeting or, if no meeting is to be held, within five months of the end of the financial year. A prescribed club that breaches any of these auditing requirements can be fined up to $5,000.
Every year a prescribed club must lodge a periodic return with the Corporate Affairs Commission. The club must attach copies of the club’s accounts, the committee’s statement (attached to the accounts prior to auditing), the auditor’s report, and the report of the committee required by s 35. The penalty for not lodging a periodic return is a fine of up to $5,000.
Role of the Auditor
The Associations Incorporation Act 1985 s 37(1) states that an auditor of a prescribed club ‘has a right of access at all reasonable times to the accounting records and other records of the club and is entitled to require from any officer of the club such information and explanations as he or she desires for the purposes of an audit.’
The auditor must provide the committee with a report in time for the committee to present it to the members of the club at the annual general meeting or, if there is no annual general meeting, within five months of the end of the financial year (Associations Incorporation Act 1985 s 37(3)).
Auditors who are satisfied that there is a deficiency in the accounts or information about the activities of a club, must bring the matter before the committee if they believe the committee will adequately deal with the matter. If an auditor believes a committee will not deal with the matter or that it is likely that the club has contravened or failed to comply with the Act or a rule of the club, the auditor must make a written report on the matter to the Corporate Affairs Commission. An auditor who is removed or dismissed as auditor must also notify the commission in writing, giving details of the circumstances.
Duties of Officers of Prescribed Club
• An officer of a prescribed club who does not act with reasonable care and diligence at all times may be fined up to $1250 [Associations Incorporation Act 1985 s 39A(4)]. In addition, the officer must pay the club any profit made and any damage suffered by the club as a consequence.
• An officer of a prescribed club faces a fine up to $1250 [Associations Incorporation Act 1985 s 37(2)] if she or he, without lawful excuse: – refuses or fails to allow an auditor access to the club’s records in the officer’s custody or control – refuses or fails to give any information or explanation when required by the auditor – otherwise hinders, obstructs or delays an auditor