17 Mar 2016

Changes to the laws affecting NSW incorporated associations

by David Landy, Simon Truskett

The changes affect the duties on (and liability of) committee members, and the model constitution, among other things.

Following on from the recommendations of a statutory review, the NSW Associations Incorporation Act has been amended to change the operation of the model constitution, to introduce additional duties on committee members of NSW Incorporated Associations, to clarify the liability of committee members and the liability of members of NSW Incorporated Associations and to permit electronic voting by those Associations. The commencement date of the new laws is to be announced.

Adoption of the model constitution

When an Association incorporates, it may adopt the model constitution in the Act as its constitution or it may customise its constitution.

Under the revised Act, where the association has adopted the model constitution as its constitution, it is taken to have adopted the model constitution as in force from time to time.

This will avoid the need for the association to adopt or register any changes to the model constitution and avoid the need to ascertain which version of the model constitution applies to a particular association.

Duties and liability of committee members

At common law there are duties on committee members of an Association. The Act deals with the duty to disclose conflicts of interest and the duty to not dishonestly use the committee member's position or information obtained as a committee member. In addition, a committee member commits an offence under the Act if he or she allows an Association to trade while insolvent.

The revised Act imposes two additional statutory duties on each committee member to carry out his or her functions for the benefit (so far as practical) of the Association and with due care and diligence. However, under the revised Act, the committee member (or a person acting on the direction of a committee member) will not be personally liable for matters or things done in good faith for the purpose of exercising the committee member's functions under the Act.

Liability of members

The limitation of rights and liabilities of members is a significant matter for an Association and its members. The revised Act has clarified that a member of an Association is not (merely by being a member) liable for any of Association's debts or liabilities (and not just in a winding up of the Association).

Electronic voting

Electronic voting by members of an Association on members resolutions is allowed under the revised Act, provided this is permitted by the Association’s constitution.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.