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Major Reforms for Victorian Incorporated Associations

On 26 November 2012, the Associations Incorporation Reform Act 2012 (Vic) (the Act) (and associated Regulations) will take effect.

If an association is incorporated under the Victorian Associations Incorporation Act 1981, it will be required to comply with this new legislation effective 26 November 2012.

The goal of the reforms includes increased protection of rights and interests of Members, funding bodies and the community. The new regime also provides the minimum necessary administrative obligations to enable effective regulatory oversight of an incorporated association.

It is important to note that the new legislation raises the corporate governance bar and management standards required of all incorporated associations and its officers. No officer of an association should underestimate the importance of these reforms.

We have provided a brief overview of the key changes and what the likely impact of the change might be for an association:

1. Annual financial reporting provisions

The legislation introduces a three-tiered reporting framework to replace the current ‘prescribed’ and ‘non-prescribed’ reporting requirements.

The tiers are based on an association’s total revenue:

Tier - One

Total Revenue - less than $250,000

Financial reporting - Financial statements do not need to be reviewed. However, a majority of Members present at a general meeting may vote to do so.

Tier - Two

Total Revenue - $250,000 - $1,000,000

Financial reporting - Financial statements must be reviewed by an independent accountant.

Tier - Three

Total Revenue - more than $1,000,000

Financial reporting - Financial statements must be reviewed by an independent accountant.

Trading activities - Will be required to have their financial statements audited.

An incorporated association will be able to trade if such activities relate to its purposes. However, an association will still not be able to distribute any surplus income or assets to its Members.

Statement of purposes

The purposes of an incorporated association will now incorporated into its Rules.

Rules

The new legislation provides updated Model Rules.

The topics an incorporated association’s Rules must address include:

  • an association's name and purposes;

  • Members’ rights and obligations;

  • procedures for resignation and cessation of Membership;

  • the process for appointment and termination of the secretary;

  • preparing and keeping minutes of general meetings;

  • provision for Members to access minutes of general meetings, including financial statements submitted at a general meeting; and

  • right of access (if any) by Members to minutes of committee meetings.

An ‘office holder’ and their duties

One of the most significant parts of the Act relates to the duties of an association’s officers.

Under the new regime, the definition and duties of an office holder and their duties will now align with the Corporations Act. The definition of “office holder” has been expanded, new duties introduced and it is important for all officers of associations to note that penalties may apply for breaches of duties under the Act.

The term ‘office holder’ includes:

  • a Member of the committee;

  • the secretary;

  • a person, including an employee of the association, who makes or helps make decisions that affect the association’s operations (eg CEO);

  • a person with the capacity to significantly affect the association's financial standing; and

  • a person whose instructions or wishes the committee is used to following (excludes a person providing professional advice to the association).

An office holder must:

  • act in the association’s interests and in accordance with its purposes;

  • act with due care and diligence;

  • act in good faith and for a proper purpose; and

  • ensure the association does not trade while insolvent- ie that the association must not incur debts it cannot repay.

An office holder must not:

  • improperly use their position or information obtained through their position; or

  • participate in voting on matters where they have an interest.

Indemnity/Protection for office holders

Under the new Act, an incorporated association must indemnify its office holders so that the officer is protected from liability for activities undertaken in good faith on behalf of the association.

The association is also required to provide the indemnity from its assets. If an association does not have insurance cover, the indemnity is only available to the extent of its assets.

Minimum rights of Members

The Act provides that Members have the right:

  • to inspect and obtain a copy of the Rules;

  • to inspect and obtain copies of minutes of general meetings (including the financial statements tendered at the annual general meeting);

  • if the Member has voting rights, to be notified of the date, time and place of all general meetings and to be provided with a proxy form (if the association uses a standard proxy form);

  • to attend and, if entitled under the association's Rules, vote at general meetings;

  • to inspect the register of Members of their association; and

  • to a fair and reasonable grievance procedure.

Meetings

Associations will be able to use technology (for example, web-conferencing or teleconferences) to hold general or committee meetings in two or more venues at the same time.

Secretary

The term ‘public officer’ will be replaced by the term ‘secretary’. The secretary does not have to live in Victoria or be an association Member, but must live in Australia.

Disciplinary proceedings and grievance procedures

The new laws clarify what an association must do to ensure that parties to a grievance are treated fairly and that when an association has a disciplinary procedure in its Rules, it must be applied fairly.

In applying a grievance procedure, the association must ensure that each party to a dispute has a chance to be heard and that the dispute must be resolved by unbiased decision making.

If a Member is facing disciplinary action, they must also be told why, and be given an opportunity to be heard.

Register of Members and personal information

Under the new Act an association will be required to maintain a Register of Members, which must include:

  • each Member’s name and address;

  • the date they became a Member;

  • the Member’s class of Membership (if applicable); and

  • the date they stopped being a Member (if applicable).

Where a Member has a legitimate reason for not wanting their personal information to be available the Act provides that the association’s secretary may restrict access to the personal information on the Register of Members.

Contracts and other documents

The new laws simplify the process for executing contracts or documents. However, if an association’s Rules provide for more restrictive arrangements, those Rules take precedence over the process outlined in the legislation.

The Victorian Government will notify all associations directly that the new laws will come into effect in late November 2012. Consumer is holding information sessions for association Members.

5 November 2012