Associations Incorporation (Miscellaneous) Amendment Bill

Introduction and First Reading

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (17:09): Obtained leave and introduced a bill for an act to amend the Associations Incorporations Act 1985. Read a first time.

Second Reading

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (17:10): I move:

That this bill be now read a second time.

I am pleased to introduce the Associations Incorporation (Miscellaneous) Amendment Bill 2021. This bill proposes to amend the Associations Incorporation Act 1985 to improve the regulatory framework for the support, oversight and management of associations operating in South Australia.

Currently, the act provides for the incorporation, administration and control of not-for-profit associations in South Australia and only applies to associations that choose to incorporate and are legal entities with rights and obligations under law. I note that the bill contains a number of provisions that defer to the regulations to provide for further detail and compliance criteria. However, I would like to reassure members that the drafting of the regulations following passage of this bill will be an open and consultative process.

These reforms seek to renew, revitalise and modernise the not-for-profit sector in South Australia to provide greater consistency with other jurisdictions, educate and inform members of associations of their rights, responsibilities and liabilities and require minimum touchpoints with the regulator to ensure that appropriate oversight and support can be provided to the sector.

The not-for-profit sector is large and diverse. In the 2019 reporting year, the Australian Charities and Not-for-profits Commission (ACNC) estimated revenue across the sector of $166 billion, with $354 billion in assets and government funding accounted for $78.1 billion. These significant figures are concerning when considered in light of the findings of the Productivity Commission’s 2010 Research Report into the Contribution of the Not-for-Profit Sector, which found that the regulatory framework of the sector is complex, costly and lacks coherence and sufficient transparency.

In recent years, several other jurisdictions have completed reviews or introduced new legislation affecting not-for-profit associations. As the South Australian act has not been subject to a comprehensive review since 1997, it is currently deficient in provisions to appropriately support, oversee and regulate associations operating in the state.

These areas of required reform have been reinforced by recent evidence presented at the Aboriginal Lands Parliamentary Standing Committee’s inquiry into governance standards in South Australian Aboriginal Community-Controlled Organisations (the ACCO inquiry). Whilst not being issues restricted to Aboriginal-controlled organisations, the ACCO inquiry has heard evidence that affirms the need for reform of the sector to ensure that appropriate regulatory structures are in place to support accountability and transparency in the decision-making of associations and to ensure that the commission is appropriately empowered to address misconduct and investigate potential breaches of the act.

There are three key themes to this reform package: support, oversight and regulation. Paramount to this reform package is improving mechanisms to better support associations and the volunteers that establish and sustain them. The bill introduces a framework around the provision of model rules and governance principles, similar to the ACNC, which will be supported.

Incorporated associations will be able to benefit from adopting model rules, should they wish; however, that is not mandatory. Adopting model rules seeks to minimise the cost and risk to associations and provide greater consistency and structure in the management of associations across the state. The content of the model rules will be prescribed by regulation.

The reforms also seek to provide increased transparency for members of associations through introducing requirements around the recording of minutes, such as requiring minutes from meetings to be recorded within one month, where there is currently no time requirement associated with this.

Importantly, the amendments also seek to ensure that associations have clear dispute resolution processes established and that these are clear and transparent to members. It is proposed that the model rules may clarify who may rule on a dispute, what the jurisdictional body is and guidance around disputes between the association and a member. Better oversight of the sector is also proposed through amendments to provide clarity around the disclosure of a committee member's conflict of interest and the need to establish and maintain a membership register.

The bill seeks to streamline the process for members to seek an authorised inspection of records, allowing members to apply to the commission rather than the court for approval to have the association's financial records and minutes inspected on their behalf. Amendments also seek to provide greater flexibility for associations by allowing members to participate, and for voting to occur via electronic means, therefore removing the requirement to have a common seal.

The second key theme of this reform package is the provision of improved oversight of the sector. The bill seeks to require a simple regular touchpoint with the commission by incorporated associations to verify their details on the register and confirm that they are still operating and provide updated contact details. Currently, only prescribed associations—being those with gross receipts in excess of $500,000 in the last financial year—are required to lodge a periodic return with the commission, with 100 to 200 lodged each year.

With around 22,000 incorporated associations on the register, this represents more than 99 per cent that purportedly fall below the reporting threshold, and are only required to notify the commission when their details change. These changes are infrequent, and many associations fail to notify the commission when they occur.

As a result of this, the commission cannot be sure how many incorporated associations are no longer operating, including associations that may hold assets that should otherwise be used for the benefit of the members. The proposal included in the bill is to introduce a simple requirement for the incorporated association to verify their details to the commission through the completion of an annual information statement, which will ensure that the register of incorporated associations operating in the state is more accurate.

The reporting model has also been reviewed, with a proposal to replace financial audits with financial reviews, which are less burdensome and more closely aligned with the approach taken by the ACNC with respect to reporting requirements. However, it is proposed to empower the commission to still require an audit of council, where appropriate. Changes have also been proposed to membership requirements, including requiring an association to have a minimum of five members with full voting rights and committees to have a minimum of three, each of whom ordinarily reside in Australia and are aged 18 years or over.

The final theme of this reform package—regulation—is encapsulated in amendments designed to empower the commission to better address misconduct and investigate potential breaches of the act. Amendments have been included in the bill to support the commission to assist incorporated associations in resolving governance and financial issues, and appropriately address any wrongdoing.

The reforms also seek to introduce amendments to how the commission manages associations suspected of being defunct by allowing details of these associations to be published, to assist the commission with correcting the register and winding up associations that are no longer operating. The community will benefit from an accurate register of incorporated associations, with the commission being better equipped to take appropriate action in a timely manner to protect the community where necessary.

Incorporated associations will benefit from more streamlined provisions to end an association or transfer it to a registerable Australian body with the Australian Securities Investment Commission. Currently, the ending of an incorporated association relating to external administration, winding up or deregistration is burdensome and onerous on incorporated associations and the commission. This proposal aims to provide greater consistency with other jurisdictions and will assist with correcting the incorporated associations register.

Lastly, the bill also seeks to empower the commission to call general meetings in certain circumstances and issue a notice requiring action to be taken to ensure compliance with the act. The association's rules will address an irregularity in the affairs of the association. It is also proposed to empower the commission to disqualify or suspend a committee member in certain circumstances, including for existing eligibility requirements relating to certain convictions.

In supporting this vital package of reforms, parliament will be providing a clear commitment to the improved provision of appropriate support, oversight and regulation of the local not-for-profit sector. I would be surprised if there is anyone who is a member of this parliament who has not had an issue in relation to the Associations Act raised by their constituency at some stage. It might be a local sporting club, it might be a local residents' association, it may be in the not-for-profit sector or even our multicultural communities.

The whole mechanism under this act is used 22,000 times; that is the number we have now in this state. From time to time, as local members of parliament, we are asked to answer queries: have we complied with the act? How do we change some of the terms of our arrangements? Are we compliant? If there is a dispute amongst those who are in the association, attempts are sometimes made to have a breakaway group, and another association is established. This can cause a lot of hurt and frustration in our constituency.

I certainly hope that these reforms will assist members to also advise their constituents on these matters. I commend the bill to the house and seek leave to have the explanation of clauses inserted in Hansard without my reading it.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Associations Incorporation Act 1985

4—Amendment of section 3—Interpretation

This clause amends and inserts various relevant definitions.

5—Amendment of section 6—Access to information

This clause amends section 6 to remove the ability for a person to inspect a register held by the Commission and replace it with a power for the Commission to make information from a register, and other prescribed information, publicly available in any way it deems fit.

6—Insertion of section 8

This clause inserts a new section 8 as follows:

8—Annual verification statements

This section requires incorporated associations to give the Commission annual verification statements in accordance with regulations, and gives the Commission powers regarding such statements.

7—Substitution of Part 2 Division 2

This clause substitutes a new Part 2 Division 2 as follows:

Division 2—Enforcement and compliance powers

10—Powers of authorised persons

This section details the powers of authorised persons under the principal Act to require people to answer questions and produce documents.

11—Entry and inspection

This section gives authorised persons various powers of entry and inspection.

12—Use and inspection of books or documents produced or seized

This section establishes how the Commission may deal with books or documents produced to or taken by an authorised person.

13—Commission may require compliance with Act etc

This section gives the Commission the power to issue a notice requiring an incorporated association to take action in order to comply with the requirements of the Act or to remedy an irregularity.

8—Amendment of section 18—Eligibility for incorporation

This clause amends section 18 in order to require associations to have at least 5 members with voting rights in order to be eligible for incorporation under the principal Act.

9—Amendment of section 20—Incorporation of association

This clause amends section 20 such that associations will no longer automatically obtain a common seal on incorporation under the section.

10—Amendment of section 22—Amalgamation

This clause amends section 22 such that associations will no longer automatically obtain a common seal on incorporation under the section.

11—Amendment of section 23—Rules binding on association and its members

This clause amends section 23 to make clear that provisions of association rules do not apply where they are contrary to the principal Act or any other law.

12—Amendment of section 23A—Contents of rules of incorporated association

This clause amends section 23A in order to remove the requirement of a rule prescribing an auditor for prescribed associations, as well as requiring the rules to cover internal dispute resolution mechanisms. It also contemplates regulations prescribing minimum internal governance principles, and implies a requirement to comply with such principles into incorporated association's rules.

13—Insertion of sections 23B and 23C

This clause inserts sections 23B and 23C.

23B—Application of model rules

This section allows for model rules to be prescribed through regulations, either generally or for specific classes of incorporated associations. These rules may be either mandatory, replaceable or recommended. The section outlines the interaction between an incorporated association's rules and the model rules.

23C—Commission may change an incorporated association's rules on application

This section allows the Commission to make changes to an incorporated association's rules, on application by the committee, where the Commission is satisfied that the change is in the best interests of the association and is not such that a special resolution should be required.

14—Amendment of section 24—Alteration of rules

This clause amends section 24 to make it clear that a change in an incorporated association's name will not impact the identity of the association, the association's rights or obligations, or legal proceedings by or against the association.

15—Amendment of section 25—Powers of incorporated association

Section 25 is amended to clarify that the rules of an incorporated association may impose limitations on any powers specified in section 25(1) but may not further extend those powers.

16—Amendment of section 29—Management of incorporated associations

This clause amends section 29 to require that the committee of an incorporated association consist of a minimum of 3 members who are ordinarily resident in Australia, and that all committee members be over 18 years old. The Commission may however exempt an association from compliance with the new requirement.

17—Amendment of section 30—Certain persons not to be members of committee

This clause amends section 30 to prohibit a person who has been disqualified from being concerned with or taking part in the management of a body corporate in another Australian jurisdiction from being a member of the committee of an incorporated association, or from taking part or being concerned with the management of an incorporated association without the leave of the Commission.

18—Substitution of sections 31 and 32

This clause repeals section 31 and 32 and inserts new sections 30A, 31, 32 and 32A.

30A—Disqualified person declaration

This section gives the Commission power to declare, in writing that a person is disqualified from being a member of the committee of an incorporated association in certain circumstances, as well as setting out the requirements for such a declaration and allowing the Commission to temporarily suspend a person (for up to 4 months) while they are determining whether a disqualification should be imposed.

31—Disclosure of material personal interest

This section requires committee members of an incorporated association to disclose material personal interests they have in matters under consideration at committee meetings, the circumstances where declarations are not necessary, and the consequences of making such declarations.

32—Matter on which committee member has material personal interest

This section precludes committee members from voting on or being present while the committee is considering a matter in which they have a material personal interest, circumstances where this does and provides alternatives where this leads to the lack of a quorum.

32A—Duty to deliver up documents

This section imposes a duty on committee members to ensure they give the public officer any and all documents in their possession that belong to the association, for delivery to their successor.

19—Heading to Part 4 Division 2

This clause amends the heading of Part 4 Division 2 to remove the reference to audit (consequential to the changes proposed in clause 20).

20—Amendment of section 35—Accounts to be kept

This clause amends section 35 to require prescribed associations to keep accounting records in accordance with the applicable accounting standards. It requires prescribed associations, incorporated associations of a class prescribed by the regulations and incorporated associations given written notice by the Commission under the section to cause accounts to be reviewed or audited in accordance with regulations. The requirement for a prescribed association to present audited accounts at the annual general meeting is replaced by a requirement to present the documents prescribed by regulations relating to the accounts to members in accordance with requirements prescribed by the regulations.

21—Repeal of sections 37 and 37A

This clause repeals sections 37 and 37A consequentially to the amendments in clause 20.

22—Substitution of heading to Part 4 Division 3

This clause changes the heading of Part 4 Division 3 from 'Annual general meeting' to 'Meetings' to reflect changes in the content of the Division.

23—Insertion of section 39AA

This clause inserts new section 39AA as follows:

39AA—Commission may call general meeting or annual general meeting

This section gives the Commission power to convene a meeting in certain circumstances.

24—Amendment of section 39A—Duties of officers etc

This clause is consequential to the amendments in clause 20 and amends section 39A by removing subsection (4).

25—Substitution of section 39B

This clause replaces section 39B to require an incorporated association to indemnify its officers against a liability incurred in good faith in the course of performing their duties and to change references to 'auditors' to 'auditors, or other reviewers' (reflecting the amendments in clause 20).

26—Amendment of section 39D—Inspection of records

This clause amends section 39D by shifting the body responsible for authorising inspection of an incorporated association's books from the District Court to the Commission. A person may apply to the Commission (on payment of a prescribed fee) to have a person inspect an association's books on their behalf. It requires associations to take all necessary actions to facilitate the inspection and makes it an offence to fail to do so or to otherwise hinder the inspection.

27—Insertion of section 39E

This clause inserts new section 39E as follows:

39E—Membership register

This section requires incorporated associations to maintain a register of members in accordance with the regulations, which they may be required to present to an authorised person.

28—Insertion of section 40C

This clause inserts new section 40C as follows:

40C—Appointment of administrator by Commission

This section allows the Commission to appoint an administrator to an incorporated association in certain circumstances.

29—Amendment of section 41—Winding up of incorporated associations

This clause amends section 41 by allowing any interested individual to apply to the Supreme Court for the winding up of an incorporated association, as well as allowing the Commission to do so without the consent of the Minister. It allows the Supreme Court to wind up an association where an association has not performed any activity or function for more than a year. It allows the Commission to wind up an incorporated association where the association is no longer eligible to be incorporated under the Act or has not complied with a direction under section 42(3a)(b).

30—Amendment of section 42—Transfer of activities or registration

This clause amends section 42 so that notice may be given where the Commission is of the opinion that the undertakings of an incorporated association would be more appropriately be carried on by, or are being performed by another incorporated association (in addition to the existing provision about other bodies corporate). It also allows an incorporated association to apply for a transfer of registration for proposed registration as a prescribed body corporate (which is defined in the clause) if authorised by a special resolution or at the direction of the Commission.

31—Substitution of section 43

This clause substitutes a new section 43 and inserts a new section 43AA as follows:

43—Distribution of assets

This section establishes the regime by which incorporated associations may distribute their surplus assets upon winding up.

43AA—Distribution plans

This section allows certain incorporated associations to apply to the Commission for approval of a plan for the distribution of their surplus assets.

32—Amendment of section 43A—Application for deregistration

This clause amends section 43A to remove the ability to prescribe a fee for an application for deregistration, to correct a minor error in the wording of subsection (5), to require the Commission to publish notices under the section within 3 months of an application (instead of the existing 1 month) on a website of their choosing and to change the prescribed amount for the section from $5,000 to $20,000.

33—Insertion of section 43B

This clause inserts new section 43B into the principal Act.

43B—Deregistration by Commission

This section gives the Commission the power to require an incorporated association it considers to no longer be eligible for incorporation under the Act to show good cause as to why it should not be deregistered, and the power to deregister, and hence dissolve, those that do not.

34—Amendment of section 44—Defunct associations

This clause amends section 44such that the Commission is required to publish notice requiring an incorporated association to show good cause as to why it should not be dissolved on a website, as well as repealing subsection (3) which is now dealt with by new section 44AB.

35—Insertion of sections 44AA and 44AB

This clause inserts new sections 44AA and 44AB as follows:

44AA—Possible defunct associations

This section allows the Commission to publish a website listing incorporated associations they suspect may be defunct, alongside information describing how to prove to the Commission that is not the case. Should no such information be provided to the Commission, they may, by notice in the Gazette, cancel the incorporation of the incorporated association (whereupon the association is dissolved).

44AB—Reinstatement where association dissolved or deregistered in error

This section allows the Commission to restore incorporated associations that have been deregistered or dissolved in error and to return to them any property divested under section 45.

36—Substitution of section 46

This clause repeals the current section 46 and substitutes:

46—Disposal of outstanding property

This section gives the Commission the power to deal with property obtained through the action of section 45. Surplus outstanding property may be distributed to certain kinds of body corporate with similar or identical aims and objects or, if the Commission is not aware of any such bodies, may be applied by the Commission for the benefit of incorporated associations generally.

37—Insertion of sections 49B and 49C

This clause inserts new sections 49B and 49C as follows:

49B—Commission may require statutory declaration

This section allows the Commission to require a statutory declaration verifying any information or document provided to it.

49C—Secrecy

This section has been relocated from Part 2 Division 2 (which now just deals with enforcement and compliance powers) but adds an additional power for the Commission to permit an authorised person to make a record of, or divulge or make use of information where the Commission thinks this is appropriate.

38—Insertion of section 50A

This clause inserts new section 50A as follows:

50A—Meetings etc may occur remotely

This section allows for meetings to be conducted remotely through the use of audio or audio-visual communication.

39—Amendment of section 51—Minutes

This clause amends section 51 by requiring provision of minutes within 4 weeks of a meeting. It makes it an offence for any associations to fail to comply with the requirements of subsection (1) instead of just prescribed associations. It also makes a minor amendment to subsection (4)(c) that is consequential to the amendments in clause 20 and requires that minutes of general meetings be made available to members in accordance with the regulations.

40—Amendment of section 53A—Reservation of name

This clause amends section 53A by allowing for the reservation of a new name for an existing incorporated association.

41—Amendment of section 56—Public officer

This clause amends section 56 by allowing the Commission to appoint a public officer for an incorporated association in certain circumstances, as well as establishing that a public officer does not need to be a member of the committee of the association.

42—Insertion of sections 57A and 57B

This clause inserts new sections that are relocated from the current section 14 (but with an increased penalty).

43—Amendment of section 58—Falsification of books

This clause amends section 58 to create a more serious offence for conduct apparently aimed at thwarting a direction under the Act.

44—Amendment of section 67—Regulations and fee notices

This clause amends the regulation making power to make consequential amendments, to allow the regulations to refer to or incorporate, wholly or partially and with or without modification, rules, forms or any other document prepared or published by the Commission or a prescribed body, to increase the penalties that may be imposed by regulation, to make the regulation making power more consistent with recent drafting practice and to provide for fee notices (consistently with the Legislation (Fees) Act 2019).

Schedule 1—Transitional provisions

1—Principal place of operations

This clause requires associations, should they primarily or solely operate in a single jurisdiction, to notify the Commission, in a form approved by the Commission, within 6 months of the beginning of the clause's operation.

2—Requirements relating to number of members

This clause provides that an association that was incorporated before the commencement of the amendments to section 18 of the Associations Incorporation Act 1985 is not required to comply with section 18(4a) for a period of 12 months after the commencement of those amendments.

3—Requirements relating to Committee members

This clause provides that an association that was incorporated before the commencement of the amendments to section 29 of the Associations Incorporation Act 1985 is not required to comply with section 29(1a) for a period of 12 months after the commencement of those amendments.

Schedule 2—Further amendments of Associations Incorporation Act 1985

1—Amendment of penalties

This clause amends the penalty provisions in the principal Act.

Debate adjourned on motion of Mr Brown.