Northern Territory Second Reading Speeches

[Index] [Search] [Bill] [Help]

ASSOCIATIONS BILL 2003

(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)

Bill presented and read a first time.

Dr TOYNE (Justice and Attorney-General): Madam Speaker, I move that the bill be now read a second time. The purpose of this bill is to provide more modern and appropriate legislation providing for the incorporation, administration and control of associations.

In particular, the bill contains modern accounting, audit and insolvency provisions, as well as more effective investigation powers for the Commissioner of Consumer Affairs should it become necessary for intervention in the affairs of an incorporated association.

The bill repeals the existing Associations Incorporation Act. There are approximately 1700 association incorporated under the current Associations Incorporation Act. Many of these associations are quite small, but a number are large and sometimes complex organisations. Some are in receipt of significant amounts of government funding. Over recent years, a number of incorporated associations have run into difficulties. There have been problems associated with poor governance, lack of accountability to members, allegations of conflict of interest and incurring debts not likely to be paid.

A number of incorporated associations have collapsed, some leaving unpaid creditors and, in all cases, certainly causing distress to members. In attempting to deal with these issues, it is apparent that the current Associations Incorporation Act, which dates from 1963, is deficient in a number of areas. In particular, the accounting and auditing provisions are deficient. The current act simply requires an incorporated association to prepare a balance sheet, setting out the assets and liabilities of the association once in each period of 12 months.

The current act does not require even large associations to have their accounts audited by someone with appropriate skills or qualifications. The investigation and intervention powers are deficient. The current act requires the giving of six weeks written notice before an investigation into the affairs of an association can commence. Powers in relation to books and records are not clear, it is not clear whether the powers of investigation extend to a trust. The current act does not provide an appropriate regime for disclosure of conflict of interests, and does not set out the responsibilities of office bearers. The current insolvency and winding up provisions are outdated and, in some circumstances, appear unworkable.

These issues are not new. In 1996, a discussion draft Associations Incorporation Bill was tabled in the Legislative Assembly by the then Attorney-General. In fact, in April 1997, the Associations Incorporation Bill 1997 was actually introduced into the Legislative Assembly. This bill lapsed when parliament was prorogued on 12 August 1997. In October 2002, I announced that the current Associations Incorporation Act would be reviewed and replaced with a more modern and appropriate legislation.

In February 2003, I released a discussion draft Associations Act together with an issues paper. The draft act was based substantially on the Associations Incorporation Bill 1997, but was updated in a number of important areas, particularly to take into account the recent changes to Corporations legislation. Some 200 copies of the draft act and issues paper were distributed to interested persons, and the documents were made available on my department’s web site. Seminars on the draft act were held in Darwin and each regional centre, and these were well received. A number of written submissions were received, including from CPA Australia NT branch; the National Institute of Accountants and the Law Society Northern Territory, as well as from individuals with particular interest in the operation and management of incorporated associations.

It is fair to say that the main areas canvassed in the submissions were the accounting and audit provisions, and a number of the submissions made similar comments. In line with the submissions, membership of the National Institute of Accountants, as well as the CPA Australia, or the Institute of Chartered Accountants, has been recognised as an appropriate qualification for auditors of certain associations. Further, the bill recognises that the holding of a public practice certificate, from either CPA Australia, the Institute of Chartered Accountants in Australia, or the National Institute of Accountants, is an appropriate qualification for persons auditing the largest incorporated associations, rather than registered company auditors, as proposed in the draft act.

As I said earlier, a number of submissions were received from individuals, sometimes identifying issues of particular concern, and obviously based on their personal experiences. Each of these submissions provided valuable assistance to my department in finalising the bill, and a number of the suggestions for improvements have been incorporated into the bill. I would like to express my thanks to those who took the time to make submissions and help bring about the finalisation of this important bill.

I will now turn to some of the details of the bill. Part I contains preliminary matters, including definitions. It will be noted that the Commissioner for Consumer Affairs is to administer this legislation. The discontinuation of the appointment of a separate Registrar of Associations is a matter of administrative convenience, and reflects the reality that the Registrar of Associations and the Commissioner for Consumer Affairs have been the same person for a number of years.

Part II sets out some matters relating to the administration of the act. Of note is the provision permitting the commissioner to exempt an association, or an officer of an association, from compliance with the provision of an act or the regulations. This may be particularly important for a number of indigenous organisations which have been formed for sole purpose for holding title to land. These organisations have no financial transactions from year to year and, in these circumstances, the commissioner will have the power to exempt the associations from compliance with various provisions, an example being the requirement to lodge audited financial statements each year.

Part III sets out the incorporation processes. The processes set out in the bill are much simpler than those under the existing act, and will permit associations to incorporate more cheaply and quickly than is currently the case. There is, for example, no longer a need to advertise in the newspaper the intention to apply for incorporation and wait at least a month for objections to be lodged with the Supreme Court. Under this bill, an association will be able to adopt a model constitution, which will be set out in the regulations. If an association decides to have a different constitution, that constitution must make provision for the matters set out in clause 21. An association will have two years in which to ensure its constitution complies with the act.

Part IV deals with the management of the internal affairs of the association. This is an area which has been given greater prominence over recent years in the corporations legislation, and it is appropriate that the associations legislation gives greater emphasis in setting out the responsibilities of office bearers and others involved in the management of incorporated associations. Of particular note is the prohibition contained in the clause 30 on certain persons being an officer of an association, which includes being involved in the management of an incorporated association. Breach of clause 30 leaves the offender liable to a maximum fine of $22 000. A person is prohibited for the purposes of clause 30 if the person is: insolvent; has been convicted of certain offences involving dishonesty or fraud or an indictable offence or an offence against this act; or if the Commissioner of Police has issued a certificate as to the bad character of a person who is involved in the management. Such a certificate can only be issued on the basis of criminal intelligence or information. It must indicate that the person is unfit to be involved in the management of an association, or that the person has been involved in two other corporate bodies that have ceased to exist because of financial mismanagement, or is an associate of another person who is a disqualified person. The bill also makes it clear that a member of the committee of an incorporated association who has a pecuniary interest in a contract or a proposed contract with the association, must declare that interest to the committee and to the next annual general meeting of members. The member must not vote on the matter.

Part V contains provisions relating to accounts and audits. These provisions will provide for greater accountability by committee members and others involved in the management of incorporated associations, and will provide members, creditors and other stakeholders with better and more reliable information regarding the association’s financial affairs. The bill requires an incorporated association to keep proper accounting records. The committee must ensure that a statement of the association’s accounts, setting out income and expenditure and assets and liabilities, are prepared annually. These statements must be presented to the annual general meeting, together with the auditor’s report. A member will be entitled to inspect the audited financial statements at least 14 days before the annual general meeting.

For the purposes of auditing, there will be three tiers of incorporated associations. The tier will be determined by the reference to the turnover or the assets of the association, and the dollar values which will determine the tiers will be set out in the regulations.

Tier 1 associations will be the smaller associations, and it is anticipated that these associations will have an income of less than $25 000 per annum. The actual dollar amount, along with the amounts for Tier 2 and Tier 3 associations will be set out in the regulations, and will be finally determined following further discussions between the Department of Justice, Northern Territory Treasury, accountancy organisations and associations. These Tier 1 associations may be audited by any person who is not a person of the association.

Tier 2 associations will be of the mid-size, possibly with an income of under $250 000. Again, the actual cut-off dollar will be specified in the regulations, as mentioned previously. The auditor of these associations will be required to have the qualifications or skills in accounting and auditing, and will be required to be a member of one of the three professional accounting bodies.

Tier 3 associations will be the larger and more complex associations, with incomes possibly over $250 000. Again, the actual amount will be set out in the regulations or trading associations. The auditor of these associations will be required to hold a public practice certificate from one of the three professional accounting bodies. There will be more stringent requirements for the auditors of these large associations. The auditor’s powers and duties are set out in Part 5.

Part VI deals with the disposal of property by an incorporated association. These provisions allow an incorporated association that is not a trading association to transfer its assets to another body and automatically be dissolved. These provisions are basically unchanged from those in the existing act.

This part also deals with prescribed property. These provisions have not been amended, despite the fact that the government is aware that there can be significant problems with the way in which they operate. I have foreshadowed that these provisions are to be the subject of a separate review, which will address the main issues of why the legislation contains the provisions and how they should operate in practice. The review will also deal with the appropriateness of these provisions as used in respect of the excisions legislation regarding Aboriginal living areas.

Part VII permits an incorporated association to apply to become incorporated …

Madam SPEAKER: Minister, could I just interrupt you for one moment? I am not sure how many more pages you have to go.

Dr TOYNE: Three.

Madam SPEAKER: Could I just perhaps acknowledge the students in the gallery then, before you continue?

Dr TOYNE: Yes, certainly.
_________________________
Visitors

Madam SPEAKER: Honourable members, we have year 11 Dripstone High School legal studies students, accompanied by their teachers Michelle Truscott and Margaret Vatskalis. On behalf of all members, I extend to you a warm welcome.

Members: Hear, hear!
_________________________

Madam SPEAKER: Thank you, minister, for your tolerance.

Dr TOYNE: Thank you, Madam Speaker. I certainly, personally, welcome the students too.

To continue: Part VII permits an incorporated association to apply to become incorporated under another act, for example, the Corporations Act 2001, or another act, such as the Co-operatives Act. The Commissioner will be able to direct an incorporated association to apply for incorporation under the Corporations Act 2001 or another act under certain circumstances. Matters which the Commissioner must take into account before giving a direction under these provisions will be set out in the regulations but will include matters such as the level of income or turnover, the value of assets or the complexity of corporate structures surrounding the affairs of the association.

Part VIII deals with the dissolution of associations by the Commissioner in circumstances where the association is no longer operating or carrying out its objects. These provisions are basically unchanged from those in the existing act.

Part IX deals with external administration and winding up of the incorporated association. The provisions of chapter 5 of the Corporations Act 2001, which deal with external administration and winding up, as far as possible or appropriate are adopted so that they apply to incorporated associations. These provisions will apply so that they are read with the necessary changes or the regulations may prescribe any changes that may be considered necessary.

The bill includes new provisions permitting the Commissioner appoint an administrator to conduct the affairs of the association should this become necessary. An administrator may be appointed in a number of circumstances, including if the number of members falls below five, if the incorporation was obtained by fraud or mistake, or if the association exists for an illegal purpose. Importantly, the bill gives the Commissioner the power to appoint an administrator if the association has wilfully contravened the act or the association’s own constitution, or if, following an investigation, the Commissioner is satisfied that such an appointment is in the interests of creditors or in the public interest. An administration under these provisions may cease upon election or appointment of a new committee or upon the appointment of a liquidator.

Consistent with the Corporations Act 2001, the bill contains penalties for committee members if an association incurs debts not likely to be paid. There are defences for those committee members not involved in any wrongdoing. Part X sets out the Commissioner’s powers to investigate the affairs of an incorporated association. The Commissioner must give written notice of the investigation, which must specify the grounds for conducting the investigation. The power to investigate extends to any trust operated by the association. The Commissioner has the power to require production of books and records and may require a person to answer questions relating to the investigation.

Part XI replicates existing provisions related to the incorporated associations carrying out local government functions. Part XII contains miscellaneous provisions. An important provision permits a member or expelled member of an incorporated association to seek orders from the Supreme Court or, in some cases, the local court, if the affairs of the associations are, or have been, carried out in an oppressive or unreasonable manner. In line with the government’s e-business strategy, the bill permits documents that are required to be lodged with the Commissioner to be provided by fax or by electronic means. The association is to produce the original, if requested.

Part XII also provides, in clauses 114 and 115, that persons dissatisfied with the decisions of the Commissioner can appeal to the Local Court. The Local Court is then given the power to review the decisions on their merits. This power of review includes the power to review decisions made under Clause 30 in respect of statements issued by the Commissioner of Police for the purposes of Clause 40.

As part of the process of commencing this legislation, the Commissioner of Consumer Affairs will be conducting information and training sessions for members, office bearers, accountants and auditors of incorporated associations on the requirements of the new legislation. In addition, the Commissioner will provide education and training for members and office bearers of associations to enable to meet their accountabilities, and on the operation and management of an incorporated association generally.

I also note that at a later time, legislation will be introduced dealing with consequential amendments to other legislation arising from the enactment of this legislation.

Madam Speaker, I commend the bill to honourable members.

Debate adjourned.

[Index] [Search] [Bill] [Help]