Personal liability for officers of incorporated associations is coming!

Background
Many community sport organisations and clubs, charitable organisations, arts and craft organisations and other bodies in Queensland are incorporated associations under the Associations Incorporation Act 1981. Each of these bodies has a management committee, oftentimes comprised of members of the association who have not had previous experience in running companies or other organisations.
 
In June 2020, the Queensland Government passed legislation to amend the Act to:                     

1. clarify the operation of the Act;
2. improve the internal governance of incorporated associations;
3. reduce the regulatory burden for incorporated associations and charitable entities; and
4. streamline, enhance or otherwise improve government processes to improve the internal governance of incorporated associations.

Some of these new amendments impose personal liability on members of the management committee, with some breaches of the Act potentially attracting fines exceeding $8,000.
 
Amendments
The substantial changes to the Act include:

• clarification of the “main purpose” of the Act as “a scheme for the incorporation of associations” and “matters including the corporate governance, financial accountability, and rules and membership, of incorporated associations”;

• express permission to adopt the model rules provided in Schedule 4 of the Associations Incorporation Regulation 1999 after they are incorporated. This assists associations who do not wish to go to the trouble and expense of drafting their own rules;

• significantly increased obligations on management committee members and officers, similar to those of company directors, which if breached may carry fines exceeding $8,000.  These additional obligations include:
  • to exercise their powers and discharge their duties with care and diligence, in good faith and for a proper purpose;not to improperly use their position to gain a pecuniary benefit for themselves or another person or to cause detriment to the association;
  • not to improperly use information obtained through their position to benefit themselves or another person;
  • the obligation to not be present or vote at a meeting of the management committee at which any matter in which the member has a material personal interest is being discussed (unless agreed otherwise by the other management committee members);
  • to disclose material personal interest and any benefits received by management committee members, staff and their relatives;
  • to disclose the details of the remuneration paid or benefits given to the members of the management committee, senior staff and their relatives at each annual general meeting of the association;
  • to ensure that the association keeps financial records that correctly record and explain its transactions and financial position and performance and enable true and fair financial statements to be prepared; and
  • to prevent insolvent trading.

• an obligation for associations to include a grievance procedure within their rules (and if one is not included, then the model rules grievance procedure shall apply);

• the removal of duplicate reporting requirements where incorporated associations and other entities who are bound by the Collections Act 1966 are also registered with the ACNC. In that case, those entities are no longer required to comply with the State-based financial reporting requirements;

• small and medium sized incorporated associations who are, on occasion, required to report as a larger association due to an abnormal non-reoccurring event may apply to be excused from the more onerous reporting obligations of larger associations;

• the ability to apply to the chief executive to cancel the association’s incorporation instead of requiring the association to undergo a formal winding up process;     

• a number of minor amendments to streamline internal processes including removing the requirement to use a common seal and allowing general meetings to be conducted using communications technology; and

• the ability to appoint a voluntary administrator. Presently, incorporated associations must apply to the Supreme Court for appointment of a provisional liquidator which is time consuming and expensive.

Timing
While some of these provisions have already commenced, many of the new provisions, including the new obligations on the management committee members, will not commence until some time in the future, currently slated to be 2021 or 2022, to allow associations to familiarise themselves with the new requirements and to make any necessary changes to their rules and operating procedures.

Take away
All incorporated associations and particularly their management committee members, should seek professional advice as to the effect of the changes on their associations and ensure that they are compliant ahead of the commencement of the new requirements.

If you have any questions about these proposed amendments or would like to discuss how your incorporated association may better improve its internal governance, please contact Amanda Tolson or any member of the Commercial + Property Law Team at Clifford Gouldson Lawyers.