FocusOn - Incorporated associations

Incorporated Associations are non-profit organisations such as clubs or community groups with at least 5 members that voluntarily apply to become their own legal entity through the Associations Incorporation Act 1981 (hereon referred to as the Act).

Like companies, incorporated associations are conferred the benefits of limited liability to its members, perpetual secession, ability to enter into contracts and power to acquire, hold and dispose of property.

Additional benefits of incorporation include:

	The ability to invest and borrow money.
	Greater eligibility to apply for grants.
	The ability to sue and be sued in the name of the association.
	Greater certainty and acceptability to potential contracting parties such as lenders, lessors, employees and suppliers of goods and services.
	The ability to buy and sell property in the name of the organisation.
	The ability to accept gifts or bequests.
	Protection of the members and office holders against personal liability for debts and other legal obligations of the organisation.

Furthermore, compared to a company, an incorporated association has less onerous minimal financial reporting requirements, regulatory obligations and office-holder duties and lower penalties in relation to non-compliance with the Act.

Statutory Obligations of an Incorporated Association

An incorporated association is required to ensure that its registered name and number appears in all its business documents such as notices, advertisements, publications etc. It is required to maintain adequate and accurate accounting records of its financial transactions. These records are to be kept for seven years. A copy of its rules or trust deed of any trust held on behalf of the incorporated association needs to be available for inspection by its members on request.

Furthermore, each year an incorporated association needs to:

	Hold an annual general meeting within five months after the end of the association’s financial year; and
	Lodge an Annual Statement by the public officer with the Registrar within one month after the annual general meeting.

It also has ongoing obligations to notify Registrar for the following:

	Changes of its registered address
	When it becomes a trustee of a trust
	When there are any changes to its statement of purposes or rules
	When there is a change of public officer or the address of the public officer’s
	Special resolution relating to winding up and distribution of assets

Additional Statutory Obligations for a Prescribed Association

A prescribed association have further obligations to prepare financial statements in accordance with Australian Accounting Standards and have these statements audited. It is also required to lodge copies of its cash flow statements and the auditor’s reports with its Annual Statement to the Registrar.

How does an association become incorporated?

To be incorporated, an association needs to have at least 5 members. It needs to also have a statement of purposes and a set of rules.

A meeting needs to be held to pass by majority votes the following matters:

	Approval of a proposed statement of purpose
	Approval of the proposed set of rules. The association have the choice to adopt the model rules without amendments, the model rules with amendments or draft its own set of rules which must contain matters in the Schedule of the Act.
	Authorisation of a person to incorporate the association

The person authorised to incorporate the association will then need to prepare the following documents to be lodged with the Registrar:

	Application for Association form and application fees
	A copy of the proposed statement of purpose
	A copy of proposed rules for the association. (Note: There is no need to attached copy of rule if using the model rule without any amendments)
	Copies of any trusts affecting the association.

When the application has been approved, the association will be issued with a Certificate of Incorporation bearing the name of the association, registration number and date of incorporation.

Prescribed Association

A ‘Prescribed Association’ is an incorporated association with gross annual revenue over $200,000 or assets over $500,000. Prescribed associations are larger and therefore subject to higher standards of financial reporting. Additional requirements for prescribed associations include:

	Keep all accounting records for seven years
	Have accounts audited yearly by a registered company auditor or CA / CPA
	Must prepare financial statements in accordance with Australian Accounting Standards.

Further Information

If you would like further information regarding Incorporated Associations please refer to www.consumer.vic.gov.au. Alternatively please do not hesitate to contact us. We can assist you in the following:

	Application to be an Incorporated Associations
	Assisting with the Association’s statutory obligations
	Audit of Prescribed Associations
	Other general advice and services for Incorporation Association

Published : 5 July 2007