Associations Incorporation (Amendment) Bill

About this Item
Speakers - Pickering The Hon Edward; Dyer The Hon Ron; Sham-Ho The Hon Helen; Kirkby The Hon Elisabeth; Nile Reverend The Hon Fred
Business - Bill, Second Reading

ASSOCIATIONS INCORPORATION (AMENDMENT) BILL

Second Reading

The Hon. E. P. PICKERING (Minister for Police and Emergency Services and Vice-President of the Executive Council) [5.41]: I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The Associations Incorporation (Amendment) Bill 1992 will amend the Associations Incorporation Act 1984 to simplify the incorporation process, to remove unnecessary regulatory burdens under the Act and to rectify certain deficiencies. The Associations Incorporation Act was introduced to provide associations with a simple and inexpensive means of establishing a legal entity. The Act creates a corporate status and grants limited liability to members. In September 1990, a consultative paper reviewing the Act was widely distributed by the former Business and Consumer Affairs Agency. This bill incorporates amendments to rectify various deficiencies in the Act identified by the review. Generally, an association whose principal object is not to trade or to secure pecuniary gain for its members is eligible to apply for incorporation. These amendments address procedural and substantive problems which have emerged since the Act first came into operation.

The Associations Incorporation Act provides that members may be individuals or corporations. This has proved a problem for many groups who wanted to incorporate under the Act. Often an unincorporated body may wish to be a member of an incorporated association, but this is impossible under the present Act. Such a body must nominate an individual to be a member. This is an undesirable situation, especially for groups with a strong sense of identity, such as ethnic community groups, who wish to speak as a whole, not through an individual. The amendment enables unincorporated bodies to be members of incorporated associations. The Act provides that the Commissioner for Consumer Affairs may wind up an incorporated association. However, there is no mechanism for voluntary winding up. The bill provides this mechanism, subject to the association meeting certain requirements as to payment of debts and appropriateness of distribution of assets.

Section 72 of the Act currently allows appeals to the Supreme Court against decisions of the commissioner. Any person aggrieved by a decision, act or omission of the commissioner under the Act, may appeal. For instance, a person may appeal because he or she disagrees with the commissioner's refusal to grant a certificate of incorporation to an association under section 10, or with the commissioner's decision to cancel incorporation of an association under section 53. Obviously such a costly appeal procedure is financially impossible in many cases— effectively preventing an appeal. The Act regulates many different types of groups, rich and poor, but all share the element that the principal object of the association is not trade or to secure pecuniary gain. It is appropriate therefore to ensure that access to an appeal mechanism is as inexpensive as possible, subject to retention of proper legal procedures. Accordingly, the bill provides that appeals will be to the Local Court. This will provide a speedier, less expensive, more informal forum for appeal in place of the Supreme Court.

An area of some difficulty which has emerged since the start of the Act is that of determination of the internal disputes of an organisation. Organisations incorporated under the Act sometimes have a large number of members. For example, the Ethnic Communities Council of New South Wales—ECC—represents some 400 organisations. Obviously, in an organisation of such a size it is beneficial for the rules to stipulate some mechanism for resolution of internal disputes. In the absence of special arrangements in the association rules, the only forum currently available for the determination of association disputes is the Supreme Court of New South Wales, and it is available only in a limited range of disputes. The bill provides that the rules of an incorporated association must make provision for the resolution of internal disputes between members and between the association and its members. It is anticipated that the model rules will be altered by regulation to provide for resolution of such disputes by commercial arbitration. When the model rules are changed, an association will still be free to make its own different dispute resolution rules if it so wishes. The model rules simply provide a guide for associations which do not have the resources or desire to depart from the general formula. However, irrespective of what procedure is selected, the bill provides that all associations in the future must incorporate a dispute resolution procedure in the rules.

Under the Act, associations must inform the Commissioner for Consumer Affairs of changes in committee members. The amendments delete this requirement. Instead, the organisation is given responsibility for keeping its own records, in line with recognition of the competence and

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maturity of such organisations. The bill provides that associations under the Act must maintain a public register of committee members and must maintain proper accounting records and minutes of proceedings at meetings. There is provision for a regulation-making power to enable further stipulations as to maintenance of, and access to, these records if it is deemed necessary to do so in the future. Clause 4 of schedule 2 to the Act has been recast to ensure that there is a smooth transition of rights and obligations on incorporation. This overcomes the previous difficulty, perceived by the insurance industry, of a hiatus in liability for claims which are made after incorporation for pre-incorporation events. The redrafting simplifies the language of schedule 2 and brings the Act into line with similar provisions in later Acts such as the State Bank (Corporatisation) Act 1989.

Finally, the bill frees associations from regulatory duties under the Act which are now seen as unnecessarily burdensome. For example, the bill removes the requirement that an incorporated association must notify the Commissioner of Trusts of details on becoming a trustee. Another instance of deregulation is that the bill removes the requirement that on the winding up of an incorporated association, the surplus property of the association must be vested in a similar association. Of course, such distribution of surplus property is subject to safeguards against the members simply splitting the assets among themselves. Those safeguards include the provision that all unexpended government grants must be returned to the authority that supplied them or that authority's nominee. As well, the commissioner must approve the proposed distribution. In short, the bill contains amendments to the Associations Incorporation Act which will streamline the Act and recognise the coming of age of those associations incorporated in New South Wales.

I commend the bill to the House.

The Hon. R. D. DYER [5.41]: The Opposition supports the Associations Incorporation (Amendment) Bill. The principal Act, the Associations Incorporation Act, was introduced by the previous Labor Government in 1984 and proclaimed in 1985. It provides associations which would otherwise have been unincorporated with a simple and inexpensive means of establishing themselves as legal entities, in other words of incorporating. It should be pointed out that incorporation under the principal Act is certainly not compulsory. Associations have a choice as to whether they incorporate under the legislation or whether they remain unincorporated. This bill addresses a number of procedural and important substantive problems which have emerged since the principal Act commenced, as I said, in 1985.

The amending provisions include an expansion of the provision for membership of bodies incorporated under the Act from individuals and corporations to encompass unincorporated bodies. The legislation provides also for the simplification of winding up procedures, including the removal of requirements that surplus property must be vested in a similar organisation. It provides for utilisation of the Local Court as a forum to hear appeals from decisions of the Commissioner for Consumer Affairs. The final aspect of the bill I wish to mention is that it contains a requirement for associations to maintain proper accounting records, a register of members, and minutes of meetings. Essentially the legislation represents fine tuning of the existing legislation. The Opposition is pleased that unincorporated associations are availing themselves of the principal Act. We are pleased to indicate our support for this amending legislation, which will bring into effect improvements which have been seen to be necessary since the practical operation of the Act commenced in 1985. With those few words, the Opposition is delighted to indicate its support for the legislation.

The Hon. HELEN SHAM-HO [5.44]: I support the Associations Incorporation (Amendment) Bill, which amends the Associations Incorporation Act 1984. As the Hon. R. D. Dyer said, that Act was proclaimed in 1985. The provisions of the Act resulted from the recommendations of the New South Wales Law Reform Commission which in 1982 recommended the establishment of a scheme for incorporation of non-profit
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organisations. The Act commenced operation on 1st July, 1985, and provided a voluntary, simple and inexpensive means of establishing a legal entity for associations whose principal aim is not to trade or make a profit. Many community organisations are of such a nature and are now recognised by the law to be independent legal entities. That means they do not have to be incorporated by royal charter or an Act of Parliament such as the Companies Code, which is costly and complicated and has deterred many community groups from incorporating. The Act has been monitored during the seven years since the commencement of its operation. I have helped many community organisations to incorporate—the Australian-Chinese Forum, the Friends of Home Care Service and the Chinese Herbalist Association. Incorporation under the Act, of course, is not compulsory, as associations may choose to operate as unincorporated bodies or incorporate under some other legislation, for example, the Corporations Law or the Co-operatives Act.

As I said, the Act has been monitored and subjected to a consultative process. The Department of Business and Consumer Affairs distributed a consultative paper containing amendments designed to address procedural and substantive difficulties which became apparent from the administration of the Act. I understand that this paper was circulated to approximately 28 interested organisations and that the amendments in the bill result from responses to the consultative paper. The amendments range over the entire scope of the Act. At present the Act permits an association formed or carried on for any lawful object and consisting of not less than five members to incorporate under the Act. A member is defined as a person, that is, either a natural person or a body corporate, and therefore does not include an unincorporated organisation.

This provision prevents some bodies which have unincorporated organisations among their members from incorporating under the Act. One example of such a peak body is the Ethnic Communities Council of New South Wales, which represents approximately 400 ethnic organisations. At this point I should like to add that the Ethnic Communities Council is a good peak organisation which should be supported. A number of its members are not incorporated. At present unincorporated associations must be represented on peak bodies by a person in his or her individual capacity rather than the unincorporated association itself being able to be a member in its own right. This bill amends the Act to permit the membership of an unincorporated association to include unincorporated organisations as set out in item (1)(c) of schedule 1.

The other amendment relates to the winding up of an association. Section 53 of the Act requires surplus property to be vested in a similar organisation, whether incorporated or otherwise. Surplus property is defined in the Act as the property remaining after the satisfaction of debts incurred in the course of winding up. New South Wales is the only State which requires surplus property to be vested in a similar association. The associations incorporation legislation of the other States leaves the method of distribution largely to the discretion of the members of the association. The South Australian Act contains a specific prohibition against distribution of property to members or former members of the association. The Western Australian Act also contains a similar prohibition. This bill changes the present restriction as stated in section 53(2A). The amendment will prohibit the distribution of surplus property to members or former members, either directly or indirectly, except where the distribution is to a member or former member which is an unincorporated association having rules that prevent the distribution of assets or income to its members; allows the manner of distribution to be determined by a specific resolution of members; and requires all distribution to be approved by the Commissioner for Consumer Affairs.

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Another positive amendment relates to the appeal mechanism. Section 72 of the Act provides that a person aggrieved by the refusal of the Commissioner for Consumer Affairs to incorporate an association or to register a document, or by any other action or decision of the Commissioner for Consumer Affairs, may appeal to the Supreme Court. As has been said before, that is a very costly procedure. Internal conflicts between members of an incorporated association have to be settled in a court. Because of problems with court delays that is not altogether satisfactory. The bill now provides for Local Courts to determine appeals, thereby enhancing access to the court by providing a less expensive, speedier avenue for appeal than is provided by the current appeal to the Supreme Court. Another aspect—and although it is a housekeeping matter it is important, because it increases accountability—is the amendment that requires an incorporated association to maintain a register of members, accounting records and minutes of meetings. In short, the bill will improve the operation and administration of the Act and rectify existing problems and deficiencies. I support the bill.

The Hon. ELISABETH KIRKBY [5.52]: The Australian Democrats support most of the provisions of the Associations Incorporation (Amendment) Bill because they remove a number of deficiencies in the Associations Incorporation Act. The principle of incorporation allows groups with a set of rules, at least five members and a lawful common purpose—other than making the members wealthier—to have a corporate status. Such groups do not need to rely on individual members to do things in their own names for the groups. Furthermore, members are granted limited liability. In return for these benefits, the Associations Incorporation Act imposes certain rules of conduct. This bill seeks to address procedural and substantive problems contained in the Act. Most of these amendments are obviously beneficial, but I wish to query others. The bill will enable unincorporated bodies to be members of incorporated associations. At present, only individuals or corporations may become members. The amendment will benefit ethnic groups and other groups with a strong sense of identity. Appeals against decisions of the Commissioner for Consumer Affairs—for instance, if he refuses to grant a certificate of incorporation—will in future be referred to the Local Court rather than to the Supreme Court. Local Court proceedings are generally less expensive than Supreme Court proceedings.

Furthermore, on the winding up of an association, surplus property will no longer have to be transferred to an association with similar goals but may be distributed—subject to approval by the Commissioner for Consumer Affairs—in accordance with a special resolution of the association concerned. The bill provides also a mechanism for the voluntary winding up of associations on application to the Commissioner for Consumer Affairs. This will be subject to the association meeting requirements for the payment of debts and the appropriate distribution of assets. Surplus property will be dealt with in the same way. It will be necessary for the rules of an incorporated association to make provision for the resolution of internal disputes between members, and between the association and its members. I express some concern, however, about certain provisions in the bill which appear to reduce the accountability of incorporated associations. Associations will no longer be required to inform the Commissioner for Consumer Affairs of changes in committee membership. Associations will not be required to inform the Commissioner for Consumer Affairs on becoming a trustee. Instead, associations have only to maintain a public register of committee members, together with proper accounting records and minutes of proceedings.

Committee members are essentially the governing body of an association and it is important that they be held accountable. After all, it is the committee members who under certain conditions are held liable for debts incurred by an association. Associations
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that become trustees will surely be handling larger amounts of money and property. Therefore I believe that trustees status should not be hidden. While the bill requires proper accounting records and procedures and minutes to be maintained, it removes the automatic scrutiny of the Commissioner for Consumer of Affairs. The Government has provided a regulation-making power for further stipulation as to the maintenance of and access to the records of an association. I ask the Minister to indicate in what way notification of these changes to the Commissioner of Consumer Affairs would have constituted a great burden in the first place. I cannot understand the need for their removal. However, these are only a few concerns and they do not in any way prevent the Australian Democrats from supporting this legislation. Therefore, it is with great pleasure that I support the bill.

Reverend the Hon. F. J. NILE [5.57]: The Call to Australia group fully supports the Associations Incorporation (Amendment) Bill, which will amend the Associations Incorporation Act 1984. It is designed to simplify the incorporation process, to remove unnecessary regulatory burdens under the Act, and to rectify certain deficiencies. The original Act was introduced to provide associations with a simple and inexpensive means of establishing a legal entity. The bill creates a corporate status and grants limited liability to members. As a background to the bill, in September 1990 a consultative paper was distributed by the former Business and Consumer Affairs Agency to many groups in the community. As a result of that consultation, these amendments were proposed. An association, under the Act, must be one whose principal object is not to trade or secure pecuniary gain for its members.

It was necessary to have an inexpensive appeal mechanism whereby appeals could be heard by the Local Court, which would be a speedier, less expensive and more informal forum than the Supreme Court. Also of concern was the method of resolving internal disputes within an organisation. The bill provides that the rules of an incorporated association must make provision for the resolution of internal disputes between members and between the association and its members. It is anticipated that the rules will be altered to provide for resolution of such disputes by commercial arbitration. As part of the Government's policy of deregulation, the bill simplifies a number of areas. It will remove the requirement that an incorporated association must notify the Commissioner of Trusts of details on becoming a trustee. It will remove the requirement that on the winding up of an incorporated association, the surplus property of the association must be vested in a similar association. This will prevent members merely splitting the assets among themselves. In addition there is the safeguard that all unexpended government grants must be returned to the authority that supplied them or that authority's nominee. The commissioner must approve any proposed distribution. Given the vast number of organisations in this State that will benefit from this legislation the Call to Australia group supports the bill.

The Hon. E. P. PICKERING (Minister for Police and Emergency Services and Vice-President of the Executive Council) [6.1], in reply: I thank honourable members for their support of the legislation. In relation to the matters raised by the Hon. Elisabeth Kirkby I am advised that the only trusts allowed are those which are non-profit making. The commissioner has extensive powers of inspection of the register of members. The response to the consultative paper suggested that for basically non-profit making bodies—amateur bodies—the notification to the commissioner of changes in council membership was considered to be onerous. It was deemed not necessary to impose this burden. As a quid pro quo it should be remembered that for the first time legislation will support the duty to keep proper accounts. With those brief comments I commend the bill.

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Motion agreed to.

Bill read a second time and passed through remaining stages.

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