By its very existence a society or association of persons incurs liabilities in a variety of ways. Many of these are of minor consequence, but some, such as legal liability, public or otherwise, would require funds way beyond the means of most societies if they became liable or action was taken against them. Most, if not all, hobby/pastime societies such as family history societies, would not have the resources to meet any but the smallest claims made against them. If the liability was covered by insurance, as could be the case with many areas of risk, then the society may not incur penalties other than a policy excess or other charge. However, if the liability was not covered by insurance then the society must pay.
In the case of an incorporated society liquidation of its assets would be the extent of recovery of the liability that could be made, but, with an unincorporated society any and all of the members would be liable to make up any shortfall between assets value and the total liability.
Upon incorporation a society becomes a separate legal identity from its members and becomes capable of perpetual succession even though its membership changes. The major benefit of incorporation therefore is the limiting of members’ liability to the amount of any unpaid subscriptions.
A second significant reason for incorporation is that for an incorporated body it is usually much easier, and other organisations are much more willing, to enter into agreements, contracts, loans, etc than it is for an unincorporated body. Also, unincorporated bodies cannot hold land. As societies grow these become important factors.
Bequests to societies in the wills of members are important and are to be encouraged. However, unincorporated bodies in all States of Australia except Queensland would in all probability not benefit from same because there is not any watertight procedure available to guarantee that such a gift would not fail.
Finally, good management of an organisation requires that it has a good set of rules (a constitution) on which to base its operation. Incorporation requires a body to have such a document that conforms to the relevant State or Territory’s Associations Incorporation Act or the Incorporated Societies Act 1908 for New Zealand. Most unincorporated bodies do not have sound written constitutions, if they have one at all. Indeed, a constitution of a non-incorporated body has limited legal status and is more akin to a gentleman’s agreement!
How to Incorporate
The first step is to prepare a constitution that conforms to the relevant Act. Experienced legal advice is a great help in this process. The local office of the relevant government department may be able to assist with a copy of a model constitution and the Federation could also provide copies of approved constitutions for guidance.
The draft constitution should be approved by members at a General Meeting called specially for the purpose. Application for incorporation, with the appropriate fee, should then be made to the Department.
After completion of incorporation reprinting of stationery, publicity material, etc to add Incorporated or Inc. to the name of the Society is necessary. The society’s bank, and possibly other organisations, should be advised of the change of status.
Specific requirements for Incorporation
To achieve incorporation some societies may have to change what had been their normal practice to ensure that they conform to their (new) constitution. Mandatory requirements include an Annual General Meeting with notice to all members, annual accounts to be audited, specific provisions for cessation and suspension of membership and a Management Committee/Council elected by the members.
Cost of Incorporation
Becoming incorporated will involve costs which may include legal fees for preparation of constitution, government registration fees, stamp duty and printing. These will vary from place to place depending on how, and by whom, incorporation is arranged and they should be identified and budgeted for before commencing the incorporation procedure.
Statutory bodies involved with Incorporation
Statutory bodies involved in the incorporation procedure are:
- ACT – Registrar General’s Office – Associations
- NSW – Department of Fair Trading – Business Registration Centre
- NT – Attorney General’s Department – Office of Business Affairs
- NZ – Registrar of Companies & Incorporated Societies
- QLD – Office of Consumer Affairs – Incorporation of Associations
- SA – Office of Consumer Affairs – Business and Occupational Services
- TAS – Corporate Affairs Office, Department of Justice
- VIC – Office of Fair Trading and Business Affairs
- WA – Ministry of Fair Trading – Associations