In our December 2019 bulletin we reported on the draft Associations Incorporation & Other Legislation Amendment Bill 2019 (AIA Reform Bill) which was introduced into the State Parliament in November 2019. A tight timeline for public submissions was specified. There were 5 submissions, including a detailed submission prepared by the Queensland law Society.
The Education, Employment & Small Business Committee (Committee) of the State Parliament reported a few days ago recommending that the AIA Reform Bill be passed in the form tabled in the Parliament without amendment.
AIA Reform Bill and fundraising reform
The Committee’s report noted that approximately 17% of incorporated associations in Queensland are registered charities and therefore regulated by the ACNC.
The Department had advised the Committee that an earlier discussion paper had addressed the potential for fundraising reform but, given the much-publicised need for national fundraising reform and potential changes, the AIA Reform Bill does not address much in the way of fundraising reform to the Collections Act. It is to be hoped that this indicates a growing acceptance by the Queensland State Government for the need for national/harmonised fundraising law reform in the next few months.
Commentary around the AIA Reform Bill
Internal governance of committees
- The AIA Reform Bill proposes obligations on members of an association’s management committee to:
- disclose material personal interests;
- disclose remuneration of benefits paid to management committee members, senior staff members and relatives; and
- prevent insolvent trading.
- The AIA Reform Bill seeks to impose obligations on officers of an association to:
- exercise their powers and discharge their duties with care and diligence in good faith;
- act in the best interests of the association and for a proper purpose; and
- not improperly use their position to gain a pecuniary benefit or material advantage; and
- not improperly use information obtained.
- These provisions reflect common law fiduciary obligations and are similar to the obligations of directors of a company.
- Submissions to the Committee included concern about increase in penalties but the Committee observed that the proposed were generally less than in other States for comparable breach.
Disclosure of remuneration
- The Committee noted that remunerating directors of incorporated associations (particularly larger associations that, for example, run licensed premises) was relatively common. There was some criticism that the publication of remuneration to senior executive staff would disclose commercial in-confidence information. It would seem that the compromise and the obligation will be to attribute remuneration in bands to various levels of pay in a manner consistent with obligations for companies registered under the Corporations Act.
- It was pointed out that there was a risk that organisations would migrate to companies to get away from a potentially harsher reporting regime under the AIA. The use of reporting arounds bounds of remuneration is expected to address this concern.
Duty to prevent insolvent trading
- This change was generally commended by submitters to the Committee.
Dispute resolution/grievance procedure
- There was some criticism of the grievance procedure prescribed provisions in the AIA Reform Bill.
- It was noted that the intention was to provide for a cheap grievance alternative than the current obligations under the AIA of going straight to the Supreme Court in the event of dispute. The thinking behind the amendment in the AIA Reform Bill is that a grievance procedure will provide a formal internal dispute resolution process that needs to be followed before an application may be filed with the Court.
- There was some criticism that mandating a grievance procedure did not allow for quick and effective concerns to be addressed where there had been a major breach of the law or association requirements by an individual.
- The Committee noted the concern and was informed by the Office of Fair Trading that further detail regarding particulars of a grievance procedure are to be contained in the model rules which have yet to be amended. This will include how a grievance procedure is initiated and how a grievance procedure would interact with other rules of an association. It was noted that the AIA Reform Bill does not stipulate that an association would be prohibited from taking disciplinary action because it had a grievance procedure in place.
- The rules of an incorporated association can include appeal processes. It would therefore be a matter for the rules of an association as to whether a grievance procedure could act as a type of appeal for disciplinary action taken by an association.
Reducing regulatory burden (financial reporting)
- The Committee noted that approximately 3,759 incorporated associations in Queensland and approximately 3,220 entities registered under the Collections Act are also registered with the ACNC. All these organisations suffer the obligation of duplicating annual financial reporting requirements.
- The duplication of reporting requirements has been a major concern of the not-for-profit sector since the ACNC was established. Certain other States and Territories have progressed changes to partially address the concern either by exempting ACNC-registered entities from State-based reporting requirements or by aligning those reporting requirements with those of the ACNC. It was pointed out the AIA Reform Bill seeks to address the issue by allowing the exemption of certain classes of association to provide financial reporting requirements to the Office of Fair Trading. It is intended that this include ACNC-registered entities.
- This is not a pure fix of the problem but goes part of the way at least. It is envisaged that regulations made under the AIA can prescribe classes of association which would be exempt from reporting.
The AIA Reform Bill is, in the main, a big improvement. Unfortunately not all of the submissions made, at least by the Law Society, have been acted upon but it does appear that the process will be staged with the finalisation of the Bill and then the introduction of amended regulations (including new model rules). This is where the detail will be important to understand carefully because the door has been left open for government to perfect what are seen as some shortcomings in the AIA Reform Bill in the final drafting of regulations.