Contributed by Environmental Defenders Office and current to June 2021.

What is incorporation?

Incorporation is a form of registration that gives a group legal advantages in return for accepting certain responsibilities. Incorporation gives a group its own formal legal identity that is separate from the legal identities of its individual members. In the ACT, groups (including environmental groups) can become incorporated associations under the Associations Incorporation Act 1991 (ACT). Becoming an incorporated association is an alternative to establishing a company under the Corporations Act 2001 (Cth), which can be more complex and costly. For this reason, the focus of this fact sheet will be on incorporated associations, rather than companies. For more information on the difference between an incorporated association and a company, please refer to this guide provided by Justice Connect. Regardless of the structure that your group choses, you should obtain independent legal advice.

Who should consider becoming incorporated?

Any group or organisation may consider incorporation, but the decision to become an incorporated association is particularly relevant for small, community-based organisations and charities. Your group’s decision to become an incorporated association might be based on the following benefits and concerns related to incorporation.

Benefits of incorporation

• can open bank accounts, enter into contracts, take out insurance and hold assets;
• individual members have limited liability for the actions of the group and limited financial liability regarding the debts of the group;
• clear aims and objectives are established;
• eligibility for certain grants from funding bodies.

Concerns of incorporation

• financial and administrative costs of creating and maintaining incorporation;
• risks that the director/office bearer of an incorporated association assumes (similar to those of a company director);
• whether the group’s activities suit a less formal organisational structure, e.g. affinity group model/empowerment model.

For more information and assistance on whether you should consider becoming incorporated, please refer to this guide provided by Justice Connect.

How do we become an incorporated association?

You can only incorporate if your group is eligible for incorporation. Section 14(1) of the Associations Incorporation Act 1991 provides that an association is eligible for incorporation if it has at least 5 members, is formed or carried on for a lawful purpose, and is not ineligible for incorporation.

Section 14(2)of the Associations Incorporation Act 1991 provides that an association is ineligible for incorporation if it:

• is formed or carried on with the object of obtaining pecuniary gain for its members; or
• is obtaining pecuniary gain for its members; or
• has capital divided into shares or stock held by its members; or
• holds property in which its members have an alienable interest, whether directly or in the form of shares or stock in its capital or otherwise; or
• is capable of applying for registration as an organisation under the Fair Work (Registered Organisations) Act 2009 (Cth).

In addition to the above requirements, you will also need the following:

• A constitution or articles of association setting out the group's aims, objectives and rules on how it will function. This includes rules on voting, quorums, timing of Annual General Meetings and other meetings (section 14 through to section 56 of the Associations Incorporation Act 1991). Refer to the model set of rules (set out in Schedule 1 of the Associations Incorporation Regulation 1991 (ACT)).
• A public officer to lodge documents at the Registrar-General's office (section 57 of the Associations Incorporation Act 1991).
• An auditor to check the financial affairs of the group annually (section 70A through to section 80 of the Associations Incorporation Act 1991).
• A committee with at least 3 members. Generally, 4 office bearers (president, vice-president, treasurer and secretary) and 3 ordinary committee members.

Do we need objectives?

Incorporated associations must include the group's objectives (purposes) in its constitution. For groups that are not incorporated, defining objectives is still beneficial and provides ground rules and a focus for members. Outlining objectives can also help to demonstrate that you have the right to take issues to a court/tribunal (known as ‘standing’).

Defining the objectives

• Use specific language to capture the aims and the vision of your group.
• Make sure the objectives of your group clearly relate to the environmental issue(s) that you are working on. Again, this will help you to demonstrate that you have legal standing to take action in relation to the environmental issue(s) that you want to protect including, for example, seeking a review of a government decision that affects the environment, or taking the issue to a court/tribunal.
• Make sure your objectives are broad enough to avoid limitations in your group’s scope.

Changing the objectives

Incorporated associations can change their objectives by a special resolution at a general meeting (section 30 of the Associations Incorporation Act 1991). If you do not follow the correct procedure, you may invalidate your new objectives. Ensure that the following steps are followed:

• Issue notice of a general meeting 21 days before the meeting (section 70 of the Associations Incorporation Act 1991). The notice must state that the resolution will be proposed as a special resolution. The notice should also state the proposed resolution in full.
• Only members who are entitled to vote and who are present at the general meeting can vote. Three quarters of the votes must be in favour of the special resolution for it to be passed.
• Once the special resolution is passed, the new objectives must be lodged with the Registrar-General within one month.

Financial requirements

You can apply for a tax file number to open a bank account. If the group is a not-for-profit, an application should be lodged for an income tax exemption so that the bank does not withhold income tax out of payments. Get an application form at the Australian Tax Office; see the ATO tax basics factsheet for not-for-profits. For tax deductibility, your organisation must meet certain criteria; refer to Division 30 of the Income Tax Assessment Act 1997 (Cth).

Continuing requirements

Incorporated associations should continue to:

• notify the Registrar-General's office of the public officer and committee members;
• maintain a publicly available register of the members and hold an annual general meeting once a year;
• have a common seal and a registered address (not just a PO Box);
• maintain financial records that are true and fair (section 70Athrough to section 80 of the Associations Incorporation Act 1991).