Community organisations

Contributed by JanineSims and WesMiller and current to 1 January 2018

Community organisations provide a vast array of services and activities within our community and can be a sporting or social club, a lobby group, a welfare organisation, a self-support group, a day care centre or any similar body. When a group of people agree to act together as a club, a lobby group or some other community organisation, they form an association.

To carry out the functions for which they are formed, associations have to have rules about how they operate. Rules can be unwritten but are usually written down formally as a constitution.

Associations can be either unincorporated or incorporated. Community organisations can discuss the pros and cons of various structures with a private solicitor, the NT Legal Aid Commission or a community legal centre (see Legal aid ).

Incorporation

Most associations prefer to incorporate so the group will be recognised as a legal entity with its own existence, separate from that of the members in the same way that a company has a legal identity separate from that of its shareholders.

There are several ways to incorporate:

• as an association
• as a company limited by shares or guarantee
• as a cooperative.

No matter what form of incorporation is used, the effects are fairly similar.

The assets of a legally incorporated body are owned in that body's own name. An incorporated body can make contracts in its own name, borrow money, hold and dispose of real property (land and personal property) and sue and be sued. Generally, if an incorporated body is sued, its members will have limited liability unless the rules of the association specifically provide otherwise.

Any group that owns or wishes to acquire substantial assets - especially an interest in land that must be registered at the Lands Titles Office - should incorporate.

Incorporated associations

Incorporation as an association is the cheapest and simplest way for an organisation to obtain limited liability for its members. Groups eligible for incorporation under the Associations Act (AA) can incorporate by completing the application forms, lodging a constitution and paying the appropriate fee.

An association, society, institution or body operating wholly or partly in the NT and formed or existing for one of the following purposes is eligible to be incorporated under the AA:

• for a religious, educational, benevolent or charitable purpose;
• to provide medical treatment or attention;
• to promote or encourage literature, science, art or a cultural activity;
• for the purpose of sport, recreation or amusement;
• to beautify or improve a community centre.

If the purpose of the Association is charitable it is advisable to contact the Autralian Charities and Not for Profit Commission (ACNC). The ACNC is the national regulator of charities. Charaties in Australia must register with the ACNC and there are some addittional requirements for charitable associations to meet. Factsheets, guides and tip can be downloaded from the ACNC website (see Contact points).

How to incorporate

The Northern Territory Department of Business (DoB) Licencing NT, administer the AA and the process of incorporation. A person authorised by the association should lodge an Application for Incorporation as an Association at a Territory Business Centre (TBC). To register as an incorporated association the association is required to lodge:

• The Application for Incorporation as an Association, which specifies the proposed name, objects and purposes of the association and includes its proposed constitution
• A Statutory Declaration which is lodged by the applicant who is deemed to be the public officer of the new association. It includes a declaration made by the public officer that the attached constitution is a true copy of the association's constitution

These forms are available to download from the website of DoB https://nt.gov.au/industry/licences/incorporated-associations. Lodgement costs $91.

Running an association

Rules of the Association: The Constitution

The association's constitution governs its activities and acts as a binding agreement between the members and the association. All members that join the association are deemed to have agreed to its constitution. The constitution authorises the management committee to administer the association's affairs. The management committee doesn't have unlimited powers; it must operate within the powers conferred upon it in the constitution. Careful effort should, therefore, be put into creating a constitution that reflect the objects and understanding of the members.

DoB has a suggested format for the constitution of an association on their website. Organisations are encouraged to use this 'pro-forma' or model constitution, as by filling in a schedule it simplifies the process of developing a constitution. The Model Constitution can be downloaded from the DoB website in a word format for ease of use or as the Associations (Model Constitution) Regulations.

The following matters should be included in a constitution:

• qualifications for membership
• membership fees or subscriptions
• the name of the association, its objects and purposes
• the composition, qualifications, powers and methods for electing the committee
• the means for filling casual vacancies on the committee
• frequency of meetings
• quorums at meetings, voting rights and whether proxy votes are acceptable
• the time within which notices of meetings, meeting proposals and proposed changes to the rules, objects or purposes of the association are to be circulated or published
• the way funds are to be managed and cheques drawn and signed
• the custody of the association's books, records and securities
• the inspection of the association's books and records
• the procedure for disciplining members
• dispute resolution procedures
• the distribution of assets upon winding up or dissolving the association.

Any changes to an association's constitution, objects or purposes are not effective until approved by DoB, and a notice of the change, together with a statutory declaration attesting it was made according to the constitution, are lodged with DoB within one month of being made (see Legal documents ).

The filing fee for an alteration notice is $17. The statutory declaration form required to accompany the notice can be downloaded from the DoB website https://nt.gov.au/law/rights/incorporated-associations

Appointing a public officer

All associations must appoint a public officer who must be a resident of the NT. The public officer doesn't have to be a committee member or manage the association. The public officer's address is used for serving documents on the association, which must then be brought to the management committee's attention. The public officer is responsible for lodging the association's annual audited financial statements and for notifying DoB of any constitutional changes. It is also through the public officer that the association is able to give a notice or make a demand. The management committee should, therefore, choose a responsible person for the position.

If the position of a public officer becomes vacant because the person dies, becomes bankrupt or of unsound mind, resigns in writing or ceases to be a NT resident, a replacement must be appointed within 14 days.

The public officer must notify DoB of their appointment or change of address in writing within 14 days. The filing fee is $17, or $40 if late. Application form for appointment of or chnages to a public officer can be downloaded from the DoB website https://nt.gov.au/law/rights/incorporated-associations

The Management committee

The association's constitution must state who has the power to administer its affairs. In the AA, this group is called the management committee. Most associations use this term but other names, such as board, management or collective, can be used.

An association's constitution will also state:

• the executive offices of the association and the procedure for filling those offices
• the composition of the management committee of the association and the powers of that committee
• the procedure for the conduct of meetings of the management committee of the association
• the duties and responsibilities of management committee members.

Employees of an association may not be management committee members, unless the association's constitution says they can.

Annual general meetings

Under the AA, an association is required to hold its annual general meeting (AGM) within five months of the end of the financial year. Usually, a constitution also contains details about how members are to be notified of an AGM, and the business to be discussed at it. Some of the usual activities conducted at an AGM include:

• the confirmation of the minutes of the previous AGM
• reports from committee members
• the appointment of an auditor
• an election of the office bearers of the association
• tabling of audited annual financial statements.

Names

An incorporated association can choose its own name but the name must not, in the opinion of the Commissioner of Consumer Affairs, be undesirable. The name and the registered number of an incorporated association must appear on all business documents, including letterheads, notices, advertisements and publications. The name of the association must not be abbreviated. Once an association is incorporated, it must add the word 'Incorporated' or 'Inc.' to the end of its name.

An incorporated association can change its name whenever the members agree. DoB issue a new certificate of incorporation after an application is made by the public officer and approved. An application for a change of name will be rejected if the name has already been reserved by another organisation or business, or is offensive or restricted (see Businesses structured for profit, this chapter). The fee for a new certificate is $28. An application for change of name can be downloaded from the DoB website https://nt.gov.au/law/rights/incorporated-associations

Common seal

An incorporated association may have a common seal, which is a rubber stamp with the full name of the association on it and the word 'common seal' in the centre. A common seal can serve as the 'signature' of the association and is required for contracts, such as land transfers or leases.

An incorporated association must use its full name on every notice, advertisement, order, invoice, receipt, or other document it gives, publishes or issues.

Keeping accounts

An incorporated association must have its financial affairs audited at least once every 12 months by a person independent of the association. The management committee must prepare financial statements in accordance with the Association Regulations - a Fact Sheet for Annual Audited Statements of Accounts, sets out these requirements in full can be downloaded from the DoB website https://nt.gov.au/law/rights/incorporated-associations

Then financial statements must be made available to members for inspection at least 14 days before the AGM. After the AGM the Financial Statements must be lodged with DoB within 28 days. The filing fee is $17 or $40 if late.

Insurance

The insurance cover an association should consider includes:

• workers' compensation insurance under the Work Health Act (if the association is an employer)
• insurance for property owned or leased by the association
• public liability and personal accident insurance for members who engage in activities for or with the association.

The cost of insurance will depend upon the company issuing the policy and their assessment of the risks involved. Shop around and compare prices (see Insurance , Employment and Superannuation).

Limited liability

Generally, the members of an unincorporated association are liable for its debts or any other liability. Members of an incorporated association, on the other hand, are not liable for its debts or any charges other than membership and other fees specified in the constitution.

However, incorporation is not a licence for management committees to spend up big and then hide behind the shield of limited liability when the bills come in. It is an offence for incorporated associations to trade while insolvent. If management committee members incur a debt where there were reasonable grounds to expect that the association would not be able to pay, the committee members who authorised the debt may be personally liable and incur penalties in the same manner as a company director.

Effects on property

Incorporation has the effect of automatically changing the ownership of all personal property, other than interests in land, held by a person on behalf of an unincorporated association to the newly incorporated association. Any interest in land, such as ownership or a lease, will need to be formally transferred from an individual to the association after incorporation. For more information on land transfers contact a community legal centre, the NT Legal Aid Commission, the Registrar-General's office or a private solicitor (see Legal aid ).

Trading outside the NT

An association that engages in business outside the NT should be aware of the legal requirements in other States or Territories and must be registered with the Australian Securities and Investments Commission (ASIC) (see Contact points ). Carrying on business includes non-profit activities. Associations should seek legal or accounting advice if in doubt about the need to be registered.

ASIC should be consulted for the current registration cost. A schedule of the current fees can be found on its website at www.asic.gov.au. Registered associations are allotted an Australian registered body number (ARBN). Even if an association doesn't wish to carry on business but issues, signs or publishes public documents or cheques outside the NT, it needs to include its ARBN on these documents. An ARBN can't be allotted until the association is registered with ASIC.

A pamphlet on registration is available from the ASIC in Darwin or from the ASIC local representative in Alice Springs (see Contact points ).

Ending an association

The procedure for dissolving an incorporated association is usually contained within the association's constitution. There are two processes by which an association can dissolve and this depends on whether the association dissolves with or without assets. Fact Sheets on dissolution can be downloaded from the Business Affairs website. No fees apply to lodgement.

If the incorporated association is in financial difficulty and unable to pay its debts, the management committee should seek professional assistance from a lawyer or accountant.

Incorporating as a company

A community group can incorporate as a company. Incorporating as a company allows a group to operate Australia wide.

There are three forms of companies:

• a company limited by shares (in which case profit is generally distributed to shareholders)
• a company limited by shares and a guarantee
• a non-profit company limited by guarantee.

These structures are often regarded as too administratively complex for most community organisations. Non-profit community groups rarely incorporate as companies limited by shares because it is far easier to become an incorporated association. If a company structure is chosen, the most appropriate form is a company limited by guarantee.

A company limited by guarantee is classified as a public company and is subject to greater control than a proprietary company. A company limited by guarantee is one where members guarantee to pay a nominal fixed amount in the event of liquidation. In other words, a member's individual liability is limited to the amount of the guarantee, which may be for a nominal sum as low as $2.

For further information on incorporating as a company limited by shares or guarantee, see Businesses, this chapter.

Incorporating as a company gives no better protection than any other form of incorporation. However, organisations that deal with large sums of money or hold substantial assets may find the company structure useful. For further details you may also contact the community legal centre, a lawyer or ASIC (see Contact points ) or visit the ASIC website - http://www.asic.gov.au/.

Incorporation as a cooperative

Incorporation as a cooperative under the Co-operatives Act 1997 is the least known and used form of incorporation for non-profit community groups. Cooperatives are voluntary organisations, open to anybody able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. Despite its name, under NT law, a cooperative society does not necessarily offer a structure that encourages members to adopt less hierarchical decision-making processes and, like other forms of business, retains a management committee or board of directors.

Like other incorporated bodies, cooperatives are guided by constitutions that impose strict membership and voting requirements. However, unlike most associations, cooperative societies are able to trade, and are therefore usually run in a formal and businesslike manner.

The democratic philosophy that underpins cooperatives and the way they combine social and business objectives set cooperatives apart from all other incorporated bodies, especially businesses.

A cooperative presents a means for ordinary people with very few resources to come together to combine and manage their resources for mutual benefit.

Cooperatives fall into one of the four following categories, depending upon who manages them:

• Worker cooperatives: allow workers to combine skills and to create jobs in a workplace managed by the workers themselves.
• Consumer cooperatives: allow people to buy food in bulk and, to some extent, control their food supply. Food cooperatives are an example. Members receive what amounts to a discount at the end of the year when profits are returned according to the number of transactions (in the case of a food cooperative, purchases) made.
• Producer cooperatives: these are almost always farming cooperatives and usually involve the sharing of machinery and the means to market their produce. Other types of producer cooperatives do exist; an artists cooperative would be an example which sees artists getting together to run a gallery so they can exhibit and sell their work without paying a gallery owner the normal commission.
• Community advancement cooperatives: these are often set up by local people who aim to provide better community services to other local residents.

Unlike incorporated associations and companies limited by guarantee, members of cooperative societies are required to own shares and fulfil active membership obligations to enjoy voting rights and participate in the society. However, in contrast to other businesses, cooperatives do not aim to create personal wealth for their shareholders, but exist for their members' mutual benefit. Thus shareholders may be entitled to only a minimal return (profit) on their shares and have only one vote in meetings irrespective of the number of shares held. Cooperatives' powerful democratic nature is particularly expressed in this practice of one vote, one value.

In the NT the law governing cooperatives is extremely complex; both accounting and legal advice should be sought before a decision is made to adopt this structure over others. Organisations interested in incorporating as a cooperative should contact DoB (see Contact points ).

Aboriginal Corporations

A group of five or more adult Aboriginal persons can incorporate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) as a not for profit corporation and must not disperse any profits to its members. The Act allows for fewer than five members in certain circumstances.

The CATSI Act allows for non-Indigenous members of a corporation however a majority of members must be Aboriginal or Torres Strait Islander people.

These corporations are registered under and administered by the Office of the Registrar of Indigenous Corporations (ORIC) in Canberra (http://oric.gov.au/)

An applicant, acting on behalf of the members, may apply to ORIC for incorporation (http://www.oric.gov.au/start-corporation/steps-register) and the application must state the following:

• the intended name, followed by 'Aboriginal Corporation', 'Torres Strait Islander Corporation', 'Aboriginal and Torres Strait Islander Corporation', 'Torres Strait Islander and Aboriginal Corporation' or 'Indigenous Corporation'.
• the size of the corporation
• the liabilities of the members to pay any debts incurred
• where the activities will be carried out
• the names and addresses of the members
• the names and addresses of each person eligible to act as a director

The application must be accompanied by a resolution that at least 75% of the members applying for registration have agreed to do so and a copy of the rule book of the proposed corporation. Guidelines for incorporation are available from ORIC and its website.

If the application is in order, ORIC may issue a certificate of incorporation. Where incorporation is refused, ORIC must supply written reasons for the refusal and invite the applicant to make changes to the application within 28 days of the notification.

When the corporation is incorporated it:

• may have a common seal which must display the name of the corporation clearly
• automatically assumes ownership of all property (other than land) previously held on its behalf as an unincorporated association; steps must be taken to transfer to its name any land previously held on its behalf (subject to any contract or right affecting the land)
• can hold property in its own name
• can raise or borrow money and give security such as a mortgage, over any of its property
• may sue and be sued in its own name.

Members' liability for debts incurred by the corporation is limited to the amount specified in the application for incorporation. In most circumstances there is no liability.

Changes to the corporation's rule book must be approved by the registrar. In certain circumstances, a court can make an order to modify or repeal a rule book.

The corporation must keep proper accounting records of its transactions and business and control of its assets and must prepare a balance sheet of assets and liabilities and income and expenditure each financial year. The accounts must be examined by a qualified person, such as an accountant, and the contact person/secretary must file a copy of the accounts with ORIC. The corporation's board of directors must hold a minimum number of meetings each year and ensure these are minuted. The corporation must hold an annual general meeting of members by a date set by ORIC.

ORIC may exempt some corporations from the requirement to keep accounts, but may require that certain records and reports be lodged. The registrar can order an audit of the corporation's accounts and records by a qualified person at any time by notifying the contact person/secretary.

A corporation may, if a creditor, member, the corporation or ORIC applies, be wound up by the Supreme Court. The corporation can also be voluntarily wound up by a special resolution of the members.

Unincorporated associations

An association which has not become a company or been incorporated in some other way is said to be an unincorporated association. The law does not generally recognise than an unincorporated association is anything more than a group of individuals the membership of which is frequently changing. Its constitution is no more than contract between members that sets out their agreement about how they will act together. Even with a constitution, an association does not exist in law unless it is incorporated.

Unincorporated associations don't have to have a constitution but it usually a good idea. The constitution should deal with such matters as:

• the objects of the organisation
• eligibility for membership
• signatories to bank accounts
• composition of the governing board and its method of election
• method of proceeding at meetings
• the numbers needed for a quorum (minimum number of members that are required to hold a meeting)
• the procedure for calling annual and extraordinary general meetings, ousting office bearers, amending the rules and expelling members.

An unincorporated group is not required to register its name unless it intends to carry on a business. An organisation that wishes to carry on a business must have a registered business name.

However, note that the registration or use of a business name does not create a legal entity or give the members of an organisation limited liability. This can only be done by incorporation.

Disadvantages

Unlike incorporated associations, an unincorporated association cannot sue and be sued in its own name; its individual members must sue or be sued instead. Such an exercise is both difficult and costly, so some organisations refuse to enter into contracts with unincorporated associations or may require personal guarantees from committee members. Individual members of an unincorporated body who sign a contract or are on the management committee of the body may be personally responsible for anything done or claimed under the contract. The risk is most real if the organisation defaults on a contract or is sued for an accident it is not insured for (see Insurance ).

Many community organisations rely on government funding and most, but not all, funding programs require applicants to be incorporated as non-profit bodies. For example, sporting associations applying for grants-in-aid from the NT Government must be incorporated.

As an unincorporated association is not a legally recognised entity, it is forced to appoint a trustee to own assets on its behalf. This is usually both expensive and inconvenient.

An organisation would be wise to incorporate, except where it intends to undertake a single short term project requiring little funding and is likely to disband once the project is complete. In all other instances, serious thought should be given to other types of organisational structures.