NFP Newsletter October 2009
New Associations Incorporation Act expected for NSW
Dear clients,
We send you this newsletter drawing your attention to certain upcoming changes in legislation which may affect your organisation.
Should you have further queries about these changes, you are welcome to contact the author of the newsletter, Josephine Heesh, Associate, Carroll & O’Dea Lawyers.
In brief
In late 2009 or early 2010, a new Associations Incorporation Act, 2009 is expected to commence in NSW. Significantly the new Act will introduce two different sets of formal financial reporting requirements for incorporated associations, dependent on their gross receipts or current assets. The requirements are found in Part 5 which deals with Tier 1 associations and Tier 2 associations. While the Act is not yet in force it was assented to on 7 April, 2009.
What are Tier 1 associations?
Tier 1 associations are those whose gross income for the financial year or whose current assets exceed the prescribed amount. As yet, no Regulations have been passed to set the prescribed amount but the quantum may be relatively low.
Section 45 obliges the Public Officer of a Tier 1 association to lodge the following documents with the Director-General:
(a) A summary in the approved form of the association’s financial affairs for the previous financial year.
(b) The association’s financial statements for that year.
(c) The auditor’s report for those statements.
(d) A document setting out the terms of any resolutions passed at the association’s annual general meeting in connection with the financial statements or the auditor’s report.
What are Tier 2 associations?
All associations which are not Tier 1 will be characterised as Tier 2.
Tier 2 associations are obliged to lodge a summary in the approved form of the association’s financial affairs for the previous financial year. (section 49)
Exemptions and additional audits
The Director-General can declare any association not Tier 1, and may do this, for example, if its gross income for the financial year is negligible but its assets would have categorised it as a Tier 1 association. (section 42)
The Director-General of Consumer Affairs can direct an association to cause the whole of its financial records to be audited, even if they have been audited in previous financial years. (section 51)
The Director-General has power to grant an exemption to any association from compliance with the financial reporting obligations. (section 53)
What else will change?
Other provisions of the new Act 2009
require
(a) The association’s public officer and at least 3 committee members to be resident in Australia (section 28);
(b) Outgoing committee members to hand over documents on their departure (section 28);
(c) Every committee member to disclose their pecuniary interest in any matter to be discussed at committee meetings (section 31);
and permit
(a) Use of postal voting by members (sections 38 and 39); and
(b) Execution of documents other than under seal (section 22).
Offences new and unchanged
Offences remain for committee members who permit insolvent trading.
However, the new Act introduces provisions for new offences, including fraudulent behaviour and misuse of confidential information by committee members (sections 32 & 33). As well, the association’s name must appear on all its correspondence (section 41). The association cannot use an unacceptable name which is defined in section 18 as one that:
(a) does not include “Incorporate” or “Inc”
(b) contains foreign language characters
(c) includes “police” or “sheriff” without appropriate consents
(d) is the same or similar to another registered or reserved name and that is likely to mislead the public
(e) suggests a connection with the Crown; or
(f) is declared to be unacceptable under the Regulations.
Alignment with the Corporations Act 2001
Further changes introduced by the Act will align associations more closely with regimes that apply to companies under the Corporations Act 2001. These include assumptions that can be made by others dealing with an incorporated association (sections 23 & 24).
Corporations Act provisions for administration and winding up of incorporated associations will continue to apply with more clarification for appointment of administrators where an association is not insolvent (section 54); and the appointment of liquidators where an association is to be wound up (section 64).
What do you need to do?
To ensure that your association meets the new regulatory and reporting requirements from their implementation, speak to Josephine Heesh.
About the Author
Josephine is an accomplished property/commercial lawyer and a highly valued member of the Property and Business Services Divisions at Carroll & O'Dea Lawyers. She brings her extensive property law/business services expertise to her main area of work with our clients in the not-for-profit sector. During her 30 years of experience she has exercised her legal skills advising on property, commercial, corporate, financial and not-for-profit issues.
She has acted for a diverse range of clients throughout her career including property developers in the industrial, residential and aged/health care sectors, and for both landlords and tenants. When working with not-for-profit clients, the major areas of her practice have related to incorporation, management and tax exempt issues for charitable institutions. Josephine is a member of the Council of Sancta Sophia College, a Catholic residential college at University of Sydney having recently retired as its Chair. Josephine has worked in private practice and in-house at one of Australia's leading banks. Josephine has undergraduate degrees in Arts and Law, as well as a postgraduate degree in Law, from the University of Sydney. She joined the firm in 2009.
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