Changes to associations' legislation

This article appears in the July 2009 edition of Sportshorts.

A key foundation of sport governance in NSW is about to change.

The Associations Incorporations Act 1984 will be replaced by the Associations Incorporations Act 2009 later this year, to help associations run more effectively.

The vast majority of state, regional and local sporting organisations are incorporated associations and committee members have obligations under the Associations Incorporations Act. Forthcoming changes are important for our industry to understand.

The current Associations Incorporations Act was passed in 1984. Since then, there have obviously been significant changes in the not-for-profit environment, so an overhaul of the Act was needed.

A review was initiated some years ago by the NSW Office of Fair Trading and, following extensive community consultation, a new Act drafted and passed by State Parliament recently.

It will come into affect later in 2009, when the regulations that accompany the Act are finalised.

The new Act is designed to simplify and modernise the law, as well as give associations more flexibility. It also provides for better protection of members, funding bodies and the general public.

It’s not anticipated the new Act will impact on the daily business of associations, but there are important changes to consider.

While the new Act will not force associations to change their constitutions, it is a useful catalyst for associations to review and update outdated constitutions.

Down to business: What should sporting organisations do?

It’s expected the Associations Incorporations Act 2009 and supporting regulations to come into effect towards the end of 2009. Prior to this, the NSW Office of Fair Trading will conduct a large-scale education campaign to ensure all associations are informed and have plenty of notice about the changes.

For now

• Visit the Fair Trading website www.fairtrading.nsw.gov.au and read up on the changes, so you can begin preparing (the changes are also summarised to the left)
• Register for updates from Fair Trading
• Associations should continue to follow current Act requirements for now.

Later this year (once the new Act comes into effect)

Once the Act is enacted, associations will be faced with a few key actions:

Meet new requirements in:

• Financial reporting
• Australian residency of committee members
• Specifying the association’s end of financial year in its constitution (Although you may already meet these requirements)

If desired, take advantage of new flexibility in areas like:

• Postal votes
• Meeting format
• Public officers address
• Common seals
• Annual general meetings

Be aware and understand the:

• Duties and obligations of office bearers with regards to disclosure, honesty and leaving office
• Penalty notice system for failures to comply with the Act

Update your constitution to reflect any of the above changes

The current ‘rules’ of an association will be taken to comply with the new Act until the association chooses to lodge changes. When they do this, they will need to ensure all other aspects of their constitution comply.

• However, the changes to the Act are a useful catalyst for associations to review and update outdated constitutions.

The main changes to associations’ legislation (from the NSW Office of Fair Trading fact sheet)

Constitutions

• An association’s ‘rules’ will instead be called its ‘constitution’
• Constitutions need to specify the association’s end of financial year
• A new ‘model constitution’ will be provided
• The current constitution of an existing association will be taken to comply with the new Act, until the association chooses to lodge changes.

Meetings and resolutions

• Associations can hold postal ballots to pass any kind of resolution, where this is provided for in the association’s constitution.
• An association’s constitution may permit meetings to be held at more than one venue using technology that allows members in different places to participate (e.g. via teleconferencing)

Official address

• An association’s official address may be the Association’s premises or the public officer’s residence or place of business/employment.

Common seal

• Associations will no longer need to use a common seal to execute documents. Instead they can have documents signed by two of their authorised signatories.

Annual general meetings (AGM)

• Associations will still have a financial year of 12-18 months, but will no longer be required to hold an AGM each calendar year. They will still need to hold one within six months of the end of their financial year.

Two-tired financial reporting

• Associations will be divided into two tiers for reporting purposes. Smaller (or ‘tier 2’) associations will need to lodge a summary of financial affairs. Larger (or ‘tier 1’) associations must provide an audited financial statement each year. Financial threshold will determine what tier an association is. At this stage a threshold of $200,000 in gross annual receipts is being considered.

Duties and obligations of office bearers

Committee members must:

• disclose potential conflicts of interest
• not use their position or information for dishonest purposes
• hand over any document of the association within 14 days after ceasing to hold office.

Penalty notice system

• Certain offences under the new Act can be dealt with by a penalty notice, which is a type of fine issued as an alternative option to having the matter dealt with in court.