The information given below should be viewed as a guide only and should not be used as a substitute for professional legal advice.
What is incorporation?
Incorporation is a system of State Government or Territory registration that gives an association or community groups certain legal advantages in return for accepting certain legal responsibilities. An incorporated association receives recognition as a legal entity separate from its members and offers some protection for office holders from any debts or liabilities incurred by the group as long as the association doesn't make a profit for its members.
Incorporation is voluntary. Once incorporated groups have to abide by relevant legislation (Read on for details).
Not-for-profit community groups can be unregistered and unrecognised bodies acting under their own rules, or they can be formally recognised bodies with a legal personality of their own.
If you're the honorary treasurer of an unregistered non-profit organisation called Better Community, for example, and you're renting premises for your organisation, you will have to make the lease in your own name (acting as a trustee for Better Community).
If your organisation has registered itself under the Associations Act and has a legal personality, you can have the lease in the name of Better Community Inc.
There are advantages and disadvantages to each approach. The advantages of being an informal group are; that you don't have to pay the costs associated with incorporation and you don't have to comply with many of the requirements nor fill out the forms imposed on corporations.
This doesn't mean, of course, that you can deal with the business or the property of Better Communityas you like -you'll basically have the obligation to act as a trustee for the organisation's purposes - but you can be more flexible about what you do and how you do it. If you're organising a one-off or short-term activity this may be your best choice.
The disadvantage is that if anything goes wrong -if the Better Communityoffice burns down, or if people fall over the mat and injure themselves and sue - it's possible that as the lessee and as a committee member you may be held personally liable. In that case if there isn't enough money in the Better Community cashbox to cover the payout you may have to pay for it yourself.
There can also be difficulties with opening bank accounts, problems with insurance, and confusions about who owns what property. If you stop being a member of Better Communitybut your name is still on the contracts there may be difficulties transferring your responsibilities to the new Treasurer.
Furthermore, most foundations and most government departments will only fund incorporated organisations.
If you're an incorporated association then the lease can be in the name of Better Community, and as an incorporated association Better Communitywill have limited liability; that is to say, if someone falls over in the office and sues and the cashbox doesn't have enough money to pay them then you are not personally liable.
If you want legal status, you have a number of options - you can become
- a co-operative society
- a company limited by guarantee
- an incorporated association or society under the Associations Incorporation Act 1985
- an incorporated association or council under the Commonwealth Aboriginal Councils and Associations Act 1976.
Co-operative societies are suitable only for some purposes, and most community groups don't fit the profile.
Some Aboriginal associations are able to gain legal status under different rules under the Federal Government's Aboriginal Councils and Associations Act 1976. An incorporation kit and further information is available from:
Office of the Registrar of Indigenous Corporations
PO Box 2029
Woden ACT 2606
1800 622 431 (Toll Free) or
For most organisations, the choice is between company status and incorporation.
Limited companies are highly regulated; incorporated associations are lightly regulated. Setting up a company is complicated and expensive; incorporating as an association is comparatively cheap and simple. Unless your organisation is very big indeed, or has operations in several states, your best option will probably be to become an incorporated association.
Incorporating is not the same thing as registering as a charity or getting entitlement to tax exemption. That has to be done separately.
How to Incorporate in NSW
There are two ways to incorporate as an association in New South Wales - under the Parents and Citizens Act, if your organisation is a Parents and Citizens Association, or under the Associations Incorporation Act, if it isn't. For P&Cs, check out the procedures on the New South Wales P&C Federation site.
If you're not a P&C, you need to prepare:
- A name for the association
You probably already have a name, but you now have to check the name you've chosen to make sure that it hasn't already been taken by another organisation. You will need to check the public register of names held by the Department of Fair Trading. You should also check the register of names held at the Australian Securities and Investments Commission.
You can do this on-line at www.asic.gov.au
Not only can you not use a name if it's already been taken, you can't use it if it's a name that could be confused with an existing organisation. For that reason, it's sensible to have some names in reserve in case you're not allowed to use the one you want.
You then need to reserve the name with the Department of Fair Trading, on the correct form and with the correct fee (see below) - and you have to do this before you put in your application, not at the same time.
- The aims and objectives of the organisation
It's not so important for getting incorporation, but you should be aware that you may need to consider your written objectives carefully if you have any ambitions to gain tax exempt status later. An association can do almost anything, but a charity is a good deal more restrictive.
- A draft set of rules of the association (the constitution)
You may have a constitution already. Whether you do or not, you need to look at the Model Rules for Associations set out in the Act. These aren't compulsory, and you don't have to adopt them as a whole, but you need to make sure that your constitution covers all the topics that are in the Model Rules -that is to say, if the quorum for the Committee of Management in the model rules is three you can still set your own Committee's quorum at five if you want to, but you can't do without a clause saying what the quorum is.
The NSW Model Rules are available on-line at http://www.fairtrading.nsw.gov.au
Unless you have special reasons to want different procedures, it's a lot quicker and easier to adopt the Model Rules, just adding in your name and objectives.
- Public Liability Insurance
As of May 10 2002 it is no longer compulsory for an incorporated association to take out public liability insurance, although you may wish to do so. You may also wish to consider other insurance such as contents or motor vehicle policies. You do not have to provide information about insurance policies to the Department.
The removal of the requirement under the Regulation for associations to hold public liability insurance does not mean that associations are immune from public liability claims. The question of an association's potential liability and the appropriate insurance to be taken out is a matter for each association to consider.
When you have all these pieces of paper you will need to organise a meeting of the organisation to approve the Incorporation and adopt the new constitution/rules.
Before the meeting you will have to identify people interested in being members and office bearers in the new association.
Type out the formal motions -
"I move that the [name of Association] be formed, and that the [name of Association] constitution and rules be those circulated at this meeting
Moved &&&&&&&&. Seconded &&&&&&&&."
"I move that the [name of Association] incorporate as an incorporated association under the provisions of the Associations Incorporation Act."
Moved &&&&&&&&. Seconded &&&&&&&&.
"I move that the [name of the new Association] be [first preference intended name], or if that name is not approved [second preference intended name], or if that name is not approved [third preference intended name]."
Moved &&&&&&&&. Seconded &&&&&&&&.
Arrange for one person to move each motion and another to second it.
Print out copies of the Agenda, the Motions and the Constitution for as many people as you think will come.
At the meeting you must appoint your officebearers, a Public Officer (see below) and a person to make the application (this last person can be the same person as the Public Officer)
Give at least four weeks notice of the meeting by putting an advertisement in a paper circulating across your area. Say in the advertisement that you are intending to incorporate.
When a group is incorporated, one member must be appointed as Public Officer, who must be over 18 and a NSW resident. The Public Officer is responsible for lodging an Annual Statement each year and informing Fair Trading if:
- there's a change of Public Officer or a change of registered address
- there's a change of name
- the association becomes a trustee
- the association is winding up
All of these must be notified on a special form (see below) and there is a charge attached.
Making an application for incorporation
Once the meeting has passed the resolutions to incorporate and approved the rules of the association, you have to lodge your application form with the Office of Fair Trading Business Registration Branch.
Enquiries and further information can be made at:
Registry of Co-operatives & Associations.
PO Box 22
154 Russell Street
Bathurst NSW 2795
FreeCall: 1800 502 042
Telephone: (02) 6333 1400
Fax: (02) 6333 1444
Include with your application:
- Your reservation of name slip
- The names and addresses of the Committee of Management.
- The details of your public liability insurance
- A copy of the rules/constitution adopted at the meeting, with any differences between the constitution and the NSW Model Rules highlighted
- The lodgement fee.
The Department's toll free number is 133 220.
Check out the usual timeline for approval when you lodge your application, and follow up on progress if it takes any longer than anticipated.
Once your application has been approved and you have received your certificate of incorporation, there are other duties to be done.
Your new name (including the word "incorporated" or "inc") must appear on all your documents and publications.
You will need a common seal (available from any maker of rubber stamps).
You must have a registered address. This can be the address of the Public Officer.
You have to keep up your public liability insurance.
Forms and Fees
Forms are available at:www.dft.nsw.gov.au
Fees applicable to incorporated bodies are available at: www.dft.nsw.gov.au