Sometimes within all families difficult but IMPORTANT conversations need to take place.
Such a conversation about the future legal structure of needs to commence between all our members This is because currently ALL of us are affected by our current legal form and structure of our organisation.
I will have to warn you now, that this is NOT exciting reading, but it is import reading.
Please bear with me, as this “simple country boy” attempts to grapple with and explain to you, a highly complex issue as simply as I can, without “glossing over” too many of the important aspects.
Back in 1979 …
- Mike Walsh ruled Australian Midday TV.
- Channel 9 was about to commence a new 1 hour program on Sunday Night – called “60 Minutes”.
- In the second “Petrol Crisis” of the 70’s The pump price skyrocketed from $0.13.9/litre to almost $0.27.9/litre.
- Sony had just release a new “fangled” device called a “Walkman” that held up to 20 songs – (10 each side of the tape).
- Jimmy Carter was in the White House.
- Margaret Thatcher was at Number 10 Downing Street .
- Malcolm & Tammy were in the Lodge at Canberra.
- Children probably even walked by themselves to school – (some may have even ridden bicycles).
- Playground were packed with a host of lethal implements such as the dreaded “swings”, “see-saws” and of course could forget the dreaded “slippy-dip”.
So what has all this to do with the Clan Association and me?
Well without stating the obvious, it was indeed a very very different world back then. There was perception at large, that somehow we and NOT others were responsible for much of our own actions. If I got hurt from falling over at a school fete, dance or cake stall it was probably my own fault.
In general we lived in much more relaxed society and it was into this world that Clan Forsyth Society of Australia (Queensland Branch) was launched . Like most organisations formed in that time back then, our club was an unincorporated body – an just like the rest of the world, most of the world did not really care either.
BUT THEN – “THEY” arrived.
Who are they, I hear you ask? “They” of course are the people who are responsible, if manage to hurt hurt ourselves. “THEY” are the people we need to be insured against and they are the people, we should sue the “living begeeses” out of if any measure of personal responsibility, requires to be taken.
YES the world certainly has changed since back then and many new challenges have arisen to confront almost every small organisation such as ours. In particular the rise of the “No Win – No Fee” style legal action, has seen our court system now deluged with more and more litigation actions by an ever more litigious public.
We have always been an unincorporated association – what’s all the fuss now ?
In 2014, the Clan Society is still an unincorporated association. Many of you may already be unaware that as members of such an unincorporated association, that you personally are exposed to potential legal redress whenever we conduct any organised function.
I am advised by legal counsel, that despite holding Broadform Public Liability policy in the event of a large claim against the Clan that this $40,000,000 coverage that the full adequacy of policy and its coverage could only be truly tested through a court action, given that we are an unincorporated body.
To simplify this the best that I can, If such a policy is to prove to be inadequate or worst still invalid, then each and every member of our organisation exposes their own personal assets, in the event of success full action against the organisation.
This is because our association is not recognised as a separate legal entity.
Under the law we are considered to be just a group of individuals acting on a common interest. As mentioned above this means that every members of the association, (both committee members and ordinary members) are collectively liable for the association’s debts, contracts and insurance claims.
Unincorporated Associations vs Incorporated Association
The main legal difference between an incorporated (what we’d prefer to be) and a unincorporated association (what we are now), is that an Incorporated Association is a legal entity, which has a personality, rights and liabilities separate from those of its members. An incorporated association can do most things that individuals can do in it own name such as hold property, make contracts, sue and be sued.
Incorporation
Incorporation means joining the individuals into one legally recognised body. Any organisation that owns goods or land, enters into contracts, holds a liquor license, borrows money or charges fees for non-members to participate should consider becoming incorporated. The law does not recognise a club or association as having any legal existence in its own name unless it is incorporated by law
.Incorporation means that members of an organisation are NOT personally liable for its debts. Also Government and non-government grants are often excluded to un-incorporated bodies. Once incorporated, clubs need to comply with the Associations Incorporation Act
Why incorporate?
Creation of a separate legal entity for the organisation through incorporation usually protects individuals within it, provided it operates within acceptable business and community standards. With the organisation having a legal existence, it:
- exists as a separate legal entity, regardless of changes of membership
- may enter into contracts in its own right, including tenancy or lease agreements
- may own land and other property
- has the ability to sue and be sued
- may borrow money and accept gifts and bequests
Much of the above list is of little concern to small organisations like ours given the scope of our activities. However the most important aspect of incorporation is that our members and office bearers would not be personally liable for the debts of the organisation or the negligent acts or omissions of other office bearers and members.
Incorporation is often also a prerequisite for obtaining a grant from Local, State or Federal Government and some unincorporated organisations are also excluded from holding a Public Liability Cover.
No doubt many of you may have already been involved with other community and Not-For-Profit organisations, which have also faced the same dilemma. Regrettably some of these community organisations, who could not meet the criteria or expense of incorporation, owing to the potential for litigation against their members have been forced to dissolve and have now fallen by the wayside. I have no doubt that society is in general a poorer place through the loss of services and community benefit that these organisations once provide.
Government assistance with the incorporation process.
Traditionally incorporation has been thought to have been an expensive process. However the Queensland State Governments has recognized the important role and contribution made to our communities by these small organisations. In response and to assist in stemming the tide of demise of many of these organisations, the process of incorporation for Not-For-Profit organisations has been greatly simplified in recent times, along with a significant reduction in cost for filing an application.
The Cost of Incorporation in Queensland
Currently the only associated costs of incorporation in Queensland are $143.00 for the initial application fee. After that the only other cost for organisations such as our, is an annual fee of $43.00 paid at the time of the lodging of subsequent annual returns.
The two other major ongoing costs for some organisations, which are firstly the cost of public liability coverage of a minimum of $1,000,000. The Society has for some time held such coverage since it was initially required, in order t allow the Clan to conduct it’s Annual Picnic in the public park at Peak Crossing. In short we have for some have factored in this cost as aprt of our usual operational expenditure.
The second major expense some organisations being the requirement of maintaining annual audited financial accounts. The Clan Society would however be exempt from this requirement given the amount of our annual turnover and amount of assets due to a recent government relaxation of this requirement.
Annual compliance with the current Incorporations Act only require a one page annual return that updates office bearers, membership classes along with any amendments to the organisations rules. The $43.00 annual fee mentioned above simply offsets the cost of processing this annual return and updating the Governments records.
Other requirements needed for incorporation.
Most other requirement regarding incorporation in Queensland for a Not-For-Profit organisation are already met. The only exception to this being the use a standard set of organisational rule and constitution that conforms with both State and Commonwealth guidelines for Corporate Governance and the conduct of the directors of incorporated association.
The State Government supply a Model set of rules, which has been drafted to comply with these requirements and as it has been adopted by the majority of smaller organisations, it provides a common standard.
Alternately the organisation could choose to use its existing rules for the purposes of incorporation provided a declaration could be made that the existing rules and constitution met with both State and Commonwealth minimal guidelines for Corporate Governance and the conduct of Directors.
This latter approach of using our existing rules would naturally have been the preferred option for incorporating the Clan Society. However after examination by counsel, it would appear that the existing Clan Forsyth Rules 2008 that a statutory declaration regarding the current rules could NOT be made to the State Government.
This was because the existing rules were so deficient, on so many counts, when compared against the current ASIC requirements. The short coming of our existing rules in this respect are so numerous that the simplest option, was to NOT attempt to amend the current rules and to instead adopt the State Government supplied model rules.
A full copy of these model (generic) rules that have been drafted by the State Attorney Generals Office and recommended for use “Not for Profit” organisations by the Queensland Government can be downloaded for their web site at:
Where are we now and how do we move forward?
For our organisation to endure for future generations and continue to serve both its members and the community, then we as a group need to contemplate some significant structural reforms to both our corporate structure and the legal status of the Society.
I would stress that beyond identifying the magnitude and nature of our current risks, no other course of action has been embarked upon as yet. However the “Conversation” around this topic needs to commence immediately. To delay this, would only be doing a disservice and placing all members at prolonged risk.
The executive and committee needs your feedback and input so that we can find the best outcome for all. We will look forward to discussing and advising on this topic in the coming future.
Len Forsyth
