Community organisations

Purpose and membership An association, as defined by the Associations Act, means an association, society, club, institution or body formed or carried on for any lawful purpose and that has no fewer than five members. An incorporated association cannot be carried on for the purpose of making a profit for any of its members. Legal status An incorporated association has a legal identity that is separate from that of its members. This means that the association can enter into agreements and contracts, sue or be sued, raise and borrow money, and buy property – all in the association’s name. Liability of members Flowing from the legal status of the incorporated association is an important feature: that the association’s members are protected against personal responsibility for any debts or liabilities incurred by the association. Their liability is limited to money due under the association’s rules. Naming and identifying an association An association must not have a name that, in the opinion of the Registrar, is undesirable. While ‘undesirable’ is not defined in the Associations Act, common sense dictates against obviously offensive names.

The association’s proposed name must not be identical or similar to the name of a company registered with ASIC. The association’s name must not be the same as the name of another incorporated association. Once an association is incorporated, it must add the word ‘Incorporated’, ‘Inc.’ or ‘Inc” to its name.

An association’s name and registration number must appear on all business documents including letters, statements of account, invoices or orders for goods or services, cheques, receipts, letters of credit, notices, advertisements and official publications.

An association can change its name by passing a special resolution for the change of its name. The secretary of the association may then apply to the Registrar to change the name of the association and seek CAV’s approval. The ACNC must also be updated if the association is a registered charity. The change of name does not create a new legal entity, prejudice or affect the identity of the association, or affect the rights and obligations of the association. An incorporated association must have a registered address where official documents, communications and notices can be sent or left (the address cannot be a PO Box). Secretary All incorporated associations must have a secretary. The secretary liaises between the association and the people and organisations that the association deals with. Holding the office of secretary does not mean you cannot hold another office in the association (in smaller associations it is common for office holders to have multiple roles). The secretary must be at least 18 years old and be an Australian resident.

The secretary has a number of obligations to the Registrar. Generally, the secretary must keep the Registrar informed of certain events, and in particular:

• must give written notice to the Registrar of the appointment of the secretary (within 14 days);
• must make an application for the approval by the Registrar of an alteration to the rules of an association (within 28 days);
• must apply to the Registrar for a change to the name of the association (within 28 days);
• must give written notice to the Registrar of any change of address or email address of the Secretary (within 14 days);
• must lodge with the Registrar an annual statement and other financial information (as required) within one month after the date of the association’s annual general meeting, unless the association is registered as a charity with the ACNC (see ‘Financial reporting’, below); and
• must notify the Registrar of a change to the registered address (within 14 days). Associations that are also registered as charities should view the ‘Notifying the ACNC’ webpage on the ACNC website (www.acnc.gov.au); this outlines what to notify the ACNC about. Not-for-profit Law’s Guide to running an incorporated association in Victoria (at www.nfplaw. org.au/free-resources/how-to-run-the-organisation/ guides-to-running-an-organisation#vic) includes comprehensive information about running an incorporated association.

  Purposes of an association

  An association’s purpose(s) must be set out in the association’s rules. The purpose(s) are what the association is aiming to achieve. 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 or to obtain charitable taxation concessions (see ‘Tax concessions’, above). An association that is already registered as a charity or has taxation concessions must be careful when it changes its purposes.

  The rules of an association

  The rules of an association govern the rights and responsibilities of the members and 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 Adopt the model rules provided in Schedule 4 of the Associations Incorporation Reform Regulations 2023 (Vic). A copy of these rules can be found on CAV’s website (www.consumer.vic.gov.au). Using the model rules can save an association time and money. 2 Partially adopt the model rules. An association can 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 in avoiding later disputes about what was intended by the rules. When amending the model rules, make sure the modified rules contain the matters specified in Schedule 1 of the Associations Act. 3 Draft its own rules, which must contain the matters specified in Schedule 1 of the Associations Act. For help developing a customised set of rules that comply with the law, see the ‘Vic Rules Tool’ (https://apps.nfplaw.org.au/vic-rules-tool).

  Activities

  An incorporated association cannot be formed with the intention of making a profit for its members. In this way, it is different from for-profit organisations. However, an association can carry out the activities listed below, which are deemed by the Associations Act to not be activities, with a view to making a profit for its members. An association can:
• make a profit itself, so long as that profit is not divided among its members;
• distribute its assets to a member or former member if the association has been wound up, where the association complies with the requirements of the Associations Act. There are limited circumstances where this can occur (e.g. where the member is a not- for-profit entity and CAV approves the distribution);
• provide its members with a 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 purpose; and
• receive benefits through the enjoyment of facilities or services provided by the association for social, recreational, educational or other similar purposes. In addition, community organisations can participate in a number of activities typically associated with business. For example, an association can buy and sell goods and services where doing so is consistent with the association’s purpose.

  Annual general meetings

  An incorporated association must hold an AGM at least once in each calendar year. 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 of time for holding an AGM. Regardless of the formality or content of an AGM, the association’s financial statements must be presented to its members at the AGM. The financial statements must include the following information:
• the income and expenditure of the association during and at the end of the last financial year;
• the assets and liabilities of the association at the end of the last financial year;
• details of any mortgages, charges and securities affecting any property owned by the association, as at the end of the last financial year; and
• details of the above information concerning any trusts of which the association was the trustee during the last financial year. For a complete list of what needs to be included in an association’s financial statements, see CAV’s webpage titled ‘Financial statements and auditing requirements for incorporated associations’ (www. consumer.vic.gov.au). At, or as soon as practicable after, the conclusion of the AGM, a committee member must certify, in the approved form, that:
• the committee member attended the AGM and the date of the AGM; and
• the financial statements were submitted to the members at the AGM. After each financial year, the secretary must lodge with the Registrar an annual statement for that year within one month after the date of the AGM. The annual statement must include the terms of any resolution passed at the AGM concerning the financial statements and the lodgement fee. In the case of a tier two association, the annual statement must also be accompanied by the financial statements of the association and either the reviewer’s report or the auditor’s report. In the case of a tier three association, the annual statement must also be accompanied by the financial statements of the association and the auditor’s report. Minutes of meetings Incorporated associations must prepare and keep accurate minutes of all meetings (including general meetings and committee meetings). Minutes are a formal written record of the matters discussed and the decisions made at a meeting. It is good practice to confirm the accuracy of the minutes at the next meeting. For more information, see www.nfplaw.org. au/free-resources/how-to-run-the-organisation/ holding-meetings. Legal requirements of meetings For more information about the legal requirements applicable to AGMs (and other meetings, such as management, sub-committees and annual and special general meetings), see www.nfplaw.org.au/free- resources/how-to-run-the-organisation/holding- meetings.

  Financial reporting

  Victorian incorporated associations that are registered as charities with the ACNC do not need to lodge an annual statement with CAV or pay the annual statement lodgement fee, provided that they continue to lodge an annual information statement with the ACNC for each financial year and follow the ACNC’s requirements. This exemption does not apply to charities that have been approved by the ACNC to withhold their financial details of finance reports from the ACNC register or that form part of an approved reporting group. If the exemption does not apply, 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. Whether additional financial reporting is required depends on an association’s total revenue from all its activities in the previous financial year. The Associations Act establishes a three-tiered reporting framework, based on associations’ total annual revenue. From 1 July 2023 to 30 June 2024, the tiers and revenue thresholds are:
• tier one: total annual revenue of less than $250,000;
• tier two: total annual revenue of between $250,000 and $1 million; and
• tier three: total annual revenue of more than $1 million. From 1 July 2024, the tiers and revenue thresholds for financial reporting will be revised to align with the ACNC’s financial reporting thresholds for small, medium and large charities. Where an association’s financial year starts on or after 1 July 2024, its tier will be determined by the new revenue thresholds. From 1 July 2024, the new tiers and revenue thresholds will be:
• tier one: total annual revenue of less than $500,000;
• tier two: total annual revenue of between $500,000 and $3 million; and
• tier three: total annual revenue of more than $3 million. Tier one associations do not have any additional reporting requirements. They do not need to have their financial statements externally reviewed or audited unless:
• it is 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 financial statements reviewed by an independent accountant. The independent accountant must be:
• a member of, and hold a current practising certificate issued by, either CPA Australia, the Institute of Public Accountants, or the Institute of Chartered Accountants in Australia; or
• any other suitably qualified person approved by CAV, such as a member of the Association of Taxation and Management Accountants holding a current practising certificate. The independent 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 financial statements audited by an independent auditor. The audit report must be presented to members at the AGM. The auditor must be:
• a member of, and hold a current practising certificate issued by, either CPA Australia, the Institute of Public Accountants, or the Institute of Chartered Accountants in Australia;
• a registered company auditor or firm; or
• any other suitably qualified person approved by CAV, such as a member of the Association of Taxation and Management Accountants holding a current practising certificate. The auditor must 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 passing a resolution at a general meeting. An incorporated association must provide at least two months’ advance notice of the proposed resolution to all members, the auditor and CAV. A resolution is not required if the association’s auditor resigns.

  Penalties

  Committee members should be aware that the Associations Act prescribes various penalties for non-performance of the Act’s requirements. Office holders should make themselves aware of their responsibilities and ensure that they are carried out; this satisfies the office holders’ duties to the association and the law.

Making an application Applications to register an incorporated association are made to CAV, using myCAV, by an authorised person (www.consumer.vic.gov.au/mycav/sign-in).

Applications for incorporation must be accompanied by:

• 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. CAV may refuse to incorporate an association if it is not an appropriate association.

  Upon incorporation

  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 association’s secretary.

Amalgamating incorporated associations Two or more incorporated associations may unite or amalgamate to form one association. When the associations amalgamate, they form a new incorporated association, and CAV will cancel the incorporation of the individual associations without winding up the associations. To do this, each of the associations wishing to amalgamate must pass a special resolution approving the terms of the amalgamation and the rules and purposes of the proposed amalgamated association. In addition, the associations must lodge the relevant form and supporting documents with CAV.

When considering an amalgamation, committee members must remember their duty to act in the best interests of their organisation.

For more information about the process of amalgamating incorporated associations, see CAV’s website (www.consumer.vic.gov.au) and Not-for-profit Law’s website (www.nfplaw.org.au/free-resources/ working-with-others/amalgamations-and-mergers). Cancelling or winding up an incorporated association Voluntary cancellation An association can apply to CAV for voluntary cancellation if it:

• has gross assets less than $50,000;
• has no outstanding debts or liabilities;
• has paid all the relevant fees and penalties to CAV and others; and
• is not involved in any legal proceedings. An application for voluntary cancellation can be made by:
• the association itself if members have passed a special resolution seeking cancellation;
• a member or a former member if the association is no longer operating;
• a statutory manager appointed under the Associations Act; or
• an administrator if the association is under voluntary administration. Voluntary winding up 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. Once the special resolution is passed, the association must appoint a registered liquidator to manage the sale of assets and the distribution of the proceeds of sale and the association’s operations must cease. Court-ordered winding up The Victorian Supreme Court may order the winding up of an association if:
• the association has resolved, by special resolution, that it be wound up by the court;
• the association suspends its operations for a whole year;
• the association is unable to pay its debts;
• the association (or the association as trustee) has secured pecuniary profits for its members (subject to the exceptions contained in the Associations Act);
• the association has engaged in activities outside the scope of its purposes; or
• the court is of the opinion that it is just and equitable that the association be wound up. An application for winding up of an association can be made by the association, by CAV, or by a member, creditor or statutory manager of the association. The provisions in the Corporations Act that relate to corporations winding up voluntarily or involuntarily also apply to associations winding up. For further information about ending an association, visit Not-for-profit Law’s Information Hub at www.nfplaw.org.au/free-resources/changing- or-ending/ending-your-organisation.