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Law Changes for Incorporated Associations

The Queensland Government has recently passed an act reforming certain aspects of the Associations Incorporation Act 1981 (Qld). The act is titled the Associations Incorporation and Other Legislation Amendment Act 2020 (Qld) (Act). The Act has been introduced in an attempt to reduce red tape and improve the internal governance of incorporated associations.

Who does the Act apply to?

The Act makes several substantive changes regarding the financial reporting obligations and governance of incorporated associations as well as ACNC registered charities that are listed under the Collections Act 1966 (Qld) for fundraising purposes. The Act will apply to any incorporated association that has been incorporated under the Associations Incorporation Act 1981 (Qld) and any ACNC registered charity that is listed on the Australian Charities and Not-for-profits Commission register.

When does the Act come into effect?

The Act was introduced in Queensland Parliament in December 2019. Some of the amendments made by the Act have come into effect as of the date of assent (25 June 2020) while the remainder will come into effect over the next two years via a series of Queensland Government Proclamations.

A breakdown of the amendments can be seen below along with their corresponding date of enactment.

What changes does the Act make?

Amendments regarding the following are effective from the date of assent (25 June 2020):

1. Amendment of section 56 - Use of communications technology for meetings.

Incorporated associations are now permitted to conduct general meetings via communication technologies like Zoom or Skype without the need for the use of such technologies to be specifically authorised under their rules. 

2. Amendment of section 6 - Clarifying adoption of model rules.

Incorporated associations are now able to replace their own rules with the model rules or adopt the model rules via the passing of a special resolution at a general meeting. In addition to this general meeting, the adoption or replacement needs to be registered with the Office of Fair Trading within three (3) months of the special resolution being passed.

3. Addition of section 89, Division 1, Part 10 - Introduction of voluntary administration.

If an incorporated association is experiencing financial difficulties, rather than applying to the Supreme Court for the appointment of a provisional liquidator, committee members now have the power to voluntarily appoint an administrator to place their respective organisation into voluntary administration.

4. Addition of section 92A, Part 10AA - Introduction of voluntary cancellation.

Incorporated associations can now apply to cancel their organisation, bypassing formal winding up procedures. An application for cancellation must be made to the Chief Executive of the Office of Fair Trading. An application can only be made for cancellation if the incorporated association is not party to any legal proceedings and not liable for outstanding debts, fees or other liabilities.

5. Amendment of section 35 - Vesting of property on cancellation.

Following the winding up or cancellation of an incorporated association, the Queensland Government will now be permitted to provide directions regarding how surplus assets, property and money are to be vested via gazette notices. Prior to the Act the Queensland Government was required to pass a regulation detailing how the surplus assets were to be vested. This change seeks to make the vesting process faster and less procedurally difficult.

6. Amendment of Schedule (Dictionary) - Management committee eligibility for people with convictions.

Prior to the Act, people convicted of certain offences (e.g. indicatable offences) were disbarred from sitting on management committees for a period of 10 years. Under the Act this time limit has been reduced from 10 years to 5 years.

7. Amendment of multiple sections - Increased maximum penalties.

The maximum penalty for a breach has been increased to 20 units.

Amendments regarding the following will be effective from the date of Proclamation 1 (expected by 30 June 2021):

1. Amendment of section 21 - Using a common seal.

It will no longer be a regulation for incorporated associations to execute documents with a common seal. They still have the option of using a common seal if they so choose. If they intend on abandoning the use of a common seal they should update their rules to reflect this.

2. Amendment of section 66 - Secretary must be 18 years or older.

Prior to this Act, section 66 of the Associations Incorporation Act 1981 (Qld) provided that a secretary of an incorporated association must be an “individual”. This Act will remove the wording of “individual” and replace it with “adult”, meaning that secretaries of incorporated associations will have to be 18 years or older. This amendment has been made in an attempt to improve internal governance standards.

3. Addition of section 49, Division 2, Part 9 - Reduction in duplicated annual reporting.

ACNC registered charities will no longer be required to lodge a summary of their annual financial records with the Office of Fair Trading or pay annual lodgement fees. Additionally, duplicated reporting obligations for community purpose organisations will be removed.

Non-ACNC registered charities will still be subject to their same current reporting obligations. They will still need to lodge summaries with the Office of Fair Trading and pay the corresponding lodgement fees.

4. Addition of Division 2 and Division 3, Part 7 - Internal governance.

Previously, under the Associations Incorporation Act 1981 (Qld), the duties of management committee officers were governed by common law principles. The Act will list the duties of officers in the legislation. Specifically, the following sections are intended to be added to the Associations Incorporation Act 1981 (Qld):

  1. Section 70B Disclosure of material personal interests.
    • Under this section management committee members must disclose any material personal conflicts of interest and disclose any remuneration or benefits they (or their family) receive in their role.

  2. Section 70E Duty of care and diligence.
    • Under this section, in order to meet their obligations of due care and diligence, officers must act in the same manner that a reasonable person would if that person were in the same position as the officer, in the same association and subject to the same circumstances.

  3. Section 70F Duty of good faith.
    • Under this section an officer of an incorporated association will be required to exercise their powers and discharge their duties in good faith, in the best interests of the association and for a proper purpose.

  4. Section 70G Use of position.
    • Under this section officers will be prohibited from improperly using their position to gain pecuniary benefits or material advantages for themselves or another, and/or from causing detriment to the association.

  5. Section 70H Use of information.
    • Under this section officers will be prohibited from improperly using information obtained via their position to gain pecuniary benefits or material advantages for themselves or another, and/or from causing detriment to the association.

  6. Section 70I Duty to prevent insolvent trading.
    • Under this section members of management committees must not engage in insolvent trading if they have reasonable grounds to expect that the association is insolvent or will become insolvent if it takes on the proposed debt.

Breaching any of these duties or failing to disclose conflicts and benefits will incur a penalty under the legislation administrable by the Office of Fair Trading. Importantly, there are still defences for this conduct in circumstances where an informed business judgement has been made in reliance on reasonable and informed advice.

5. Addition of section 1C - Extending the powers of Office of Fair Trading inspectors.

Under the Act, the Office of Fair Trading will be granted powers regarding entry and seizure for active investigations. Specifically, the Office of Fair Trading will be authorised to enter a place where an incorporated association keeps their records and seize those records.

Amendments regarding the following will be effective form the date of Proclamation 2 (expected by 30 June 2022):

1. Addition of section 47A, Division 1, Part 5 - Internal grievance procedure policy.

Under the Act, from 30 June 2022, incorporated associations and ACNC registered charities will be required to have a grievance procedure policy for dealing with any disputes between members, the management committee or the association itself.

Associations will be required to detail a grievance procedure policy in their internal rules that abides by the provisions of the Act. If the association’s rules do not detail such a policy, then the rules of the association will automatically be assumed to include the Act’s model rules regarding grievance procedures. Importantly, an incorporated association cannot exclude the operation of this provision.

The prescribed principles for the grievance procedure policy in the Act include:

  1. The procedure must involve a mediation;
  2. It may provide for a person to decide the outcome of the dispute (this is not mandatory);
  3. Any mediator or adjudicator used in the procedure must be unbiased;
  4. Members may appoint any person to act on their behalf;
  5. Each party to the dispute must be provided with an opportunity to contribute to discussions and respond to allegations; and
  6. The association must not take disciplinary action against any party until the grievance procedure has been completed.

Item f) will, in our view, be potentially very challenging for associations. Disciplinary action is difficult enough for most associations without adding these additional hurdles. Disciplinary actions and dispute resolution are two very difficult things.

At present, most associations will not have grievance procedure policies that cover off on all of these issues, so the model legislative procedure eventually detailed in the Act will prevail. Associations that wish to have their own grievance procedure policies will need to create rules that meet these legislative requirements.

A final version of the model grievance procedure policy has not yet been drafted but a copy will be made available closer to the date of Proclamation 2 (30 June 2022).

What does this mean for me?

All incorporated associations should familiarise themselves with this Act. In terms of practical effect, the immediate changes the Act makes will have a minimal impact on the day to day operations of incorporated associations unless they are contemplating winding up or changing their model rules. The most significant immediate change is that meetings can now be conducted using communication technologies like Skype and Zoom. 

In order to comply with the future proclamations, incorporated associations should review their internal governance procedures closer to the date of Proclamation 1 (30 June 2021) to ensure compliance.

Similarly, when the model grievance procedure policy is published closer to the date of Proclamation 2 (30 June 2022), associations should review their internal rules and consider whether they adopt the model grievance procedure policy or draft their own.

Contact Us

Please contact me on 07 3224 0210 if you would like to discuss in greater detail how your business can ensure compliance with the Associations Incorporation and Other Legislation Amendment Act 2020 (Qld).

Article written by John Mullins (Partner) and Ari Tooth (Graduate).

"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."