New South Wales Consolidated Acts

ASSOCIATIONS INCORPORATION ACT 1984 - SECT 38

38 Offences relating to incurring of debts or fraudulent conduct

(1) If an incorporated association incurs a debt and:

(a) immediately before the time the debt is incurred:

(i) there are reasonable grounds to expect that the association will not be able to pay all its debts as and when they become due, or

(ii) there are reasonable grounds to expect that, if the association incurs the debt, it will not be able to pay all its debts as and when they become due, and

(b) the association is, at the time the debt is incurred, or becomes at a later time, an association to which this Division applies,

any person who was a member of the committee of the association at the time the debt was incurred is guilty of an offence and liable to a penalty not exceeding 50 penalty units or imprisonment for a period not exceeding 1 year, or to both such penalty and imprisonment, and the association and that person or, if there are 2 or more such persons, those persons are jointly and severally liable for the payment of the debt.

(2) In any proceedings against a person under subsection (1), it is a defence if the defendant proves:

(a) that the debt was incurred without the defendant’s express or implied authority or consent, or

(b) that, at the time the debt was incurred, the defendant did not have reasonable cause to expect:

(i) that the association would not be able to pay all its debts as and when they became due, or

(ii) that, if the association incurred that debt, it would not be able to pay all its debts as and when they became due.

(3) Proceedings may be brought under subsection (1) for the recovery of a debt whether or not the person against whom the proceedings are brought, or any other person, has been convicted of an offence under subsection (1) in respect of the incurring of the debt.

(4) Where subsection (1) renders a person or persons liable to pay a debt incurred by an incorporated association, the payment by that person or either or any of those persons of the whole or any part of the debt does not render the association liable to the person or persons concerned in respect of the amount so paid.

(5) If:

(a) an incorporated association does any act (including the entering into of a contract or transaction) with intent to defraud creditors of the association or of any other person or for any other fraudulent purpose, and

(b) the association is at the time it does the act, or becomes at a later time, an association to which this Division applies,

any person who was knowingly concerned in the doing of the act with that intent or for that purpose is guilty of an offence and liable to a penalty not exceeding 100 penalty units or imprisonment for a period not exceeding 2 years, or to both such penalty and imprisonment.