Background
Incorporated associations in Western Australia must comply with the provisions of the Associations Incorporation Act 1987 (WA) (Act). The Department of Commerce has indicated that a review of the Act is almost complete and a Bill, that will make a number of changes to how associations are regulated, will shortly be introduced into parliament. This briefing paper identifies the key areas of change and how the reforms will affect associations.
Financial reporting
The Bill will introduce new revenue-based financial reporting requirements:
- Tier 1 associations (revenue of less than $250,000) can elect to prepare basic financial statements with no independent review or audit;
- Tier 2 associations (revenue of $250,000 - $1,000,000) must prepare financial reports that give a true and fair view of the financial position of the association in accordance with Australian Accounting Standards. Such reports must be reviewed by an accountant.
- Tier 2 associations (revenue of more than $1,000,000) must prepare financial reports that give a true and fair view of the financial position of the association in accordance with Australian Accounting Standards. Such reports must be audited by a practising accountant.
The reports will continue to be provided to members and not lodged with the Department of Commerce. However, associations will be required to lodge a basic annual statement with the Commissioner. This information can be lodged online.
Governance
The current Act does not set out the duties of directors/committee members, such as the duties:
- of care and diligence;
- to act in the best interests of the association and for a proper purpose; and
- not to misuse their position or information.
These duties exist at common law. However, the Bill will codify these duties. Importantly, these duties will also apply to senior employees (such as the CEO).
Privacy
The current Act does not place any limitations on a member's right to inspect and/or copy the register of members of an association. However, the Bill will introduce measures to better protect the privacy of association members. These will include:
- a requirement that a person must not use or disclose information in the register except for a purpose that is connected with the affairs of the association or that is related to the administration of the Act;
- a provision that the rules/constitution of an association may require a member who wishes to copy the register of members to provide a statutory declaration setting out the purpose for which the application is made; and
- a prohibition on the use of information obtained from the register for advertising purposes (unless approved by the association).
Disputes
The Bill will require associations to include in their constitutions a formal internal dispute resolution process. Unresolved disputes between members of an incorporated association and incorporated associations and the members will be heard by the State Administrative Tribunal (SAT). The SAT may refer the dispute to mediation.
Winding up
The Bill will aim to simplify the process for associations who wish to resolve their affairs or cancel their incorporation. In this regard it will enable associations to choose the process which best suits their particular circumstances. For example, an association with significant assets and/or liabilities may wish to appoint a liquidator to formally wind up the association. Other associations may wish to opt for the more simple cancellation procedure. For a winding up, the Bill will require associations to follow the structured procedure set out in the Corporations Act 2001 (Cth).
Next steps
Existing incorporated associations will need to review and update their rules/constitution to ensure compliance with the new laws. It may be prudent for an association's financial budget for the 2014/15 financial year to accommodate a legal/accounting expense in this regard.
We will provide an update to this briefing paper when the Bill is made available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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