Honing the governance framework for Incorporated Associations: how to update the constitution of your not-for-profit organisation

An incorporated association is the legal entity for many not-for-profit organisations. The underlying legal framework legislated by the state government.

 

In New South Wales, the Associations Incorporation Act 2009 is the applicable law. According to the Associations Incorporation Act 2009, an incorporated association must have a constitution. The Constitution is basically a written contract between the association and its members, who agree to adhere to the provisions outlined in the constitution.

 

The Constitution must have the following clauses:

  1. Membership qualifications: how you can become a member and different levels of members (eg: Full members have voting rights at AGMs; Associate members have no voting rights at AGMs)

  2. Register of Members: the requirement to keep a register of members

  3. Fees and subscriptions: Any membership fees and other amounts to be paid by members. eg: annual subscription fees; voting rights are conditional that membership fees are paid.

  4. Public Officer: the appointment of a public officer who is nominated to manage registration of the association with the Department of Fair Trading.

  5. Committee: an Association must establish a committee to manage their affairs. The powers to the governing Committee and its functions and processes are outlined in the Constitution.

  6. Members’ liabilities: A member’s liability towards the debts and liabilities of the association is limited in the Constitution.

  7. Disciplining Members: outline the process for disciplining members and there is also an appeals process for members.

  8. Internal Disputes: what happens in the event that there is a dispute between members? The Constitution should outline the procedure for resolving these disputes.

  9. General Meetings: the procedures for calling and holding a general meeting.

  10. Notice of General Meetings: the process, including time requirements, for providing notice to members of a general meeting or a motion.

  11. Quorum and other processes at general meetings: the rules of conducting a general meeting, and voting procedures, should be clearly stated.

  12. Postal ballots: in some cases, resolutions may be voted on by a postal ballot.

  13. Funding sources: The Association’s income sources.

  14. Management of Funds: procedures for managing funds should be clearly stated to ensure good financial governance.

  15. Custody of books: who is responsible for the Association’s books, documents and securities?

  16. Inspection of books: the procedures and costs associated with the inspection of books and documents by members.

  17. Financial year: whether the financial year is annual or financial year based.

 

Sometimes, an incorporated association may want to change its constitution to make amendments and keep it up to date. For example, changes in the membership criteria, or quorum of the Committee or where an organisation is seeking to attain charitable funding sources.

 

To amend a Constitution, the amendments must be passed as a special resolution at the general meeting or special meeting of the Association. A special resolution is a vote which is supported by at least three quarters of the votes cast by voting members of the Association. Notice of the meeting and the resolution to be put before the meeting must be given to the members, no later than 21 days before the date on which the meeting is to be held.

 

Terri Janke and Company has acted for a number of client organisations to assist them draft the amendments to the Constitution, and to provide proper notice to its members. We have also attended AGMs and special meetings to assist members understand the changes, and to assist processes for voting.

We have also provided advice and drafted the Constitution when the association is established.

 

What we can do for incorporated associations:

We can provide the following services:

  • Advice about setting up an incorporated association;

  • Drafting of Constitution;

  • Facilitation and assistance with meetings;

  • Drafting amendments and assisting with notice and processes for AGM and special meeting;

  • Corporate governance advice and training; and

  • Mediation where disputes arise.

 

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