Kinds of Community Organisations

Note:  The information given below should be viewed as a guide only and should not be used as a substitute for professional legal advice.

Unincorporated Groups
It is possible for a group of people to undertake a project or stage an event without establishing a legally constituted organisation.  Some community groups are known, legally, as unincorporated associations.

They are usually established when people join together to achieve a common aim and use any profits or surplus funds to further the objectives of the organisation, rather than provide personal gain for its members.  The disadvantages are that if anything goes wrong, then the individuals involved have little personal protection.

Auspicing organisations
If you believe the risks of remaining unincorporated are low, but still wish to receive public funding, you should look for an existing legally constituted body willing to “auspice” the funds. Funding or peak bodies will be able to suggest the names of suitable organisations in your area.

The auspicing body takes responsibility for ensuring that the funds received are spent for the purposes for which they were allocated.

They may also be able to offer other operational assistance, for example public liability insurance. You need to ensure that the nature of the relationship between your group and the auspicing body is clearly articulated and agreed upon in writing.

This could involve signing an Auspicing Agreement.
The auspicing body may request a fee for their services and this will need to be factored into your budget.

An Auspicing Agreement will detail:

• A description of the project
• Contact details of all personnel involved
• The role of the auspicee in adhering to the terms of the grant and acquitting the funds
• The role of the auspicor in releasing the funds in accordance with the conditions of the grant
• Timeframe for payments
• Procedure for the auspicing body to monitor the project
• Any charges for the auspicing services
• The protocol if there are to be any changes to a project in the terms of the original funding application
• Contingency plan if there are blow outs in the budget
• Commitment by the auspicing body to  provide a financial report on completion of the project
• Procedure for any dispute resolution.

Legal Entities
There is one very practical reason why groups become legal entities.  Most public funding bodies will only support individuals or groups of individuals if the funding is received and administered by a legal entity. As part of the process of determining whether or not to establish a legal structure, you need to be really clear about the purpose of the organisation or its mission. A mission statement describes your purpose or why the organisation exists.

Other factors for consideration include:

• The nature and scope of the activity, project or event
• The size of the budget
• Relationship between professional workers and volunteers
• Experience and skills of those involved

Groups wishing to gain a legal standing can choose to do so under either Commonwealth legislation or State or Territory legislation

Commonwealth legislation – Corporations Act 2001 administered by the Australian Securities and Investments Commission (ASIC)

A company's registration under the Corporations Act 2001 is recognised Australia wide.

State or Territory legislation – administered by the relevant state or Territory authority
e.g. in Queensland the Associations Incorporation Act 1981 and Associations Incorporation Regulation 1999 are administered by the Office of Fair Trading – www.fairtrading.qld.gov.au

An organisation incorporating under State or Territory legislation is restricted to operating in its home jurisdiction.

Queensland Arts Council is incorporated under the Corporations Act 2001. Although affiliated to the QAC, Local Arts Councils in Queensland are independently incorporated bodies under the Associations Incorporation Act 1981.

Whilst there are similarities in terms of the requirements under the Acts, there are also some differences between a company structure under the Corporations Act 2001 and an incorporated association.  Before you register, you should consider what structure best suits your organisation's purposes.

Company structure
Under a company structure, a not-for-profit or charitable organisation will generally be registered as a public company that is limited by guarantee. Limited by guarantee means the liability of the company's members is limited to the amount the members undertake to contribute to the property of the company if it is wound up.    

Registration of a company under the Corporations Act 2001 creates a legal entity, separate from its members, which can hold property and can sue and be sued. As a general guide please refer to "Compliance" on the ASIC website at http://www.asic.gov.au/companies for more information.

Incorporated Associations
Incorporation is a voluntary, simple and inexpensive means of establishing a legal entity. Company registration and incorporation are systems of registration that give an association certain legal advantages in return for accepting certain legal responsibilities.

For information on Incorporated Associations, it is recommended that you refer to Incorporated Associations – Smart Business Guide which is published by the State of Queensland. An electronic version can be downloaded from www.business.qld.gov.au/

The Office of Fair Trading (OFT) registers all incorporated associations in Queensland, under the Associations Incorporation Act 1981 (the Act) and Associations Incorporation Regulation 1999 (the Regulation).

Generally, incorporation is available to any non-profit association with more than seven members that is formed or carried on for any lawful purpose.

Like a company limited by guarantee, an incorporated association is also recognised as a legal entity separate from its members. Once incorporated, an association has all the powers of an individual and is legally able to do things in its own name, such as own land, sign a lease, receive public funding or appear in court.

It may also give some protection to the management committee from personal liability for actions of the association carried out in good faith and due diligence.

Whether registered as a Company or an incorporated association, the organisation must comply with the provisions of the relevant Act and Regulations, which include:

• meeting a number of reporting obligations
• being internally managed by rules known as the Constitution
• keeping a record of all directors' and members' meeting minutes and resolutions
• keeping proper financial records.

Of greatest importance, under the legislation, Board or committee members must at all times:

• act in the best interests of the association;
• avoid conflicts of interests; and
• exercise due care, skill and diligence.

The Constitution
The rules or constitution of a registered company or incorporated association govern the day to day operations.

The Associations Incorporation Regulation 1999 Associations (Schedule 4) provides a standard template for an association’s rules called Model Rules which can be used to govern an association in accordance with the legal requirements. An organisation can choose to either adopt the Model Rules or to devise its own rules.

The constitution will set out matters such as the objects of the organisation, membership, powers and functions of the management committee or board of management, fees payable (if any), timing and conduct of meetings.

Resources
For further information on the responsibilities of boards or committees of non-profit organisations see: Fishel, David, The Book of the Board: effective governance for non-profit organisations. The Federation Press. 2003.