Changes for incorporated associations in Queensland: Meetings, model rules, reporting, voluntary cancellation, duties and penalties

The Associations Incorporation and Other Legislation Amendment Act 2020 (Qld) will introduce changes to incorporated associations in Queensland over the next few years.

While some provisions have already commenced, others are expected to progressively take effect. We have provided an overview of some of the key changes below.

Changes effective from 22 June 2020

Meetings using technology

Incorporated associations may hold meetings using any technology that reasonably allows members to hear and take part in discussions as they happen.

There is no longer a requirement for the use of technology to be provided for in an association’s rules.

Model rules

An express provision has been added to clarify that an association may replace its rules with the model rules at any time (including after incorporation) by special resolution.

Incorporated associations will need to notify the Office of Fair Trading (OFT) of the replacement within three months of the resolution.

As was the case previously, the replacement will not take effect until granted and registered by the OFT.

Introduction of voluntary administration

Incorporated associations may now be placed in voluntary administration if they are experiencing financial problems.

Introduction of voluntary cancellation

As an alternative to the winding up process, incorporated associations have been given the option to apply for voluntary cancellation. An application can be made by the association if it:

(a) has no outstanding debts or liabilities

(b) has paid all applicable fees and penalties under the Associations Incorporation Act 1981 (Qld), and

(c) is not a party to any legal proceedings.

The association must pass a special resolution approving the voluntary cancellation application and providing for the distribution of its surplus assets. Generally speaking, surplus assets must be distributed to another not-for-profit with similar objects and tax concessions (if relevant). An application must be made within one month of a special resolution being passed.

Administrators of incorporated associations in voluntary administration also have the option to apply for voluntary cancellation.

Changes expected by 30 June 2021

The following changes have not yet commenced and are subject to government proclamation.

Using a common seal

It will be optional for an incorporated association to have a common seal. Associations will also be able to choose whether to execute documents with or without a common seal. If associations wish to discontinue use of a common seal, they will need to amend their rules to specify this.

Reduction in annual reporting for charities

The financial reporting requirements under both the Associations Incorporation Act 1981 (Qld) and the Collections Act 1966 (Qld) will be amended to allow for entities registered with the Australian Charities and Not-for-profits Commission (ACNC) to be exempt from state-based reporting requirements.

Practically this means that registered charities will no longer be required to submit annual financial reports to both the OFT and the ACNC. Provided charities have met their financial reporting obligations to the ACNC, they will not be required to report to the OFT.

According to OFT, 3,750 Queensland incorporated association are registered as charities with the ACNC.

Duties of officers

Several new provisions have been added to clarify the duties of officers and management committee members of incorporated associations. The changes are an attempt to bring the governance obligations for incorporated associations in line with obligations that are placed on company officers.

Many of the obligations already applied to management committee members either under the ACNC regime (where applicable) or at common law.

Penalties will apply for breaches of these provisions.

Care and diligence

It will be a legislative requirement for officers of incorporated associations to exercise their powers and discharge their duties with a degree of care and diligence that a reasonable person in the same position would exercise.

An officer who makes a business judgment is considered to have acted with the required degree of care and diligence if the officer:

(a) makes the judgment in good faith for a proper purpose

(b) does not have a material personal interest in the subject matter of the judgment

(c) is informed about the subject matter of the judgment to the extent the officer reasonably believes to be appropriate, and

(d) reasonably believes the judgment is in the best interests of the association.

Good faith

Officers must also exercise their powers and discharge their duties in good faith in the best interests of the association and for a proper purpose.

Not profiting from position

Officers will not be able to use their position, or information obtained from their position, to:

(a) gain a pecuniary benefit or material advantage for themselves or another person, or

(b) cause detriment to the association.

Prevent insolvent trading

Management committee members will have a duty to prevent the incorporated association from trading while insolvent.

It will be an offence for a person who was a management committee member, or who took part in the management committee, to incur a debt if:

(a) the association was insolvent at the time the debt was incurred or becomes insolvent by incurring that debt, and

(b) immediately before the debt was incurred there were reasonable grounds to expect that:

(i) the association was insolvent, or

(ii) if the association incurred the debt, the association would become insolvent.

It is a defence if the individual proves that:

(a) the debt was incurred without their authority or consent

(b) they did not take part in the management of the incorporated association at the time the debt was incurred due to illness or some other good reason, or

(c) at the time the debt was incurred, they had reasonable grounds to expect, and did expect, that the incorporated association was solvent even if it incurred that debt and any other debts that it incurred at that time.

Matters of material personal interest and remuneration

Management committee members who have a material personal interest in a matter being considered at a management committee meeting must disclose the nature and extent of the interest:

(a) to the management committee as soon as they become aware of the interest, and

(b) at the next general meeting of the association.

If a committee member has a material personal interest being considered at a management committee meeting, the member must not be present at the meeting or vote on the matter unless permitted to do so by the management committee.

Additionally, management committee members must disclose at the annual general meeting for the association details of remuneration paid or other benefits given to management committee members, senior staff and relatives of those individuals.

Penalties apply for breaches of these provisions.

Extended powers of OFT inspectors

The Fair Trading Inspectors Act 2014 (Qld) (FTIA) has been amended to incorporate investigations under the Associations Incorporation Act 1981 (Qld).

This change gives OFT inspectors powers available under the FTIA to investigate incorporated associations including entry and seizure powers, such as the power to enter a place where an incorporated association carries out its activities, holds its meetings or keeps its records. Some powers under the FTIA will not extend to investigations of incorporated associations. For example, inspectors will not have the power to stop and move vehicles, or the power to obtain criminal history reports.

Changes expected by 30 June 2022

Internal grievance procedure

Incorporated associations will be required to have an internal grievance procedure in place. Associations have the option to include this procedure in their rules. If an association fails to implement a procedure by the required date it will be required to observe the grievance procedure in the model rules.

This change has not commenced and is subject to government proclamation.

What do officers need to do?

Incorporated associations should consider any changes that need to be made to their governing documents to ensure compliance with the new requirements as they become law. Officers of incorporated associations should also familiarise themselves with their new and potential future obligations.

Please contact our team if you would like to discuss the new legislation or any other matters affecting your incorporated association.