In business or making a profit?
As a general rule, associations are not eligible to be incorporated under the Act if the purpose is to trade or secure financial benefits for their members.
If an association does so, it may be wound up or required to change its incorporation to a different jurisdiction, such as a company subject to regulation by the Australian Security and Investments Commission.
Under the Act, however, there is some clarification about what this prohibition against trading or
securing a financial profit for members means, and details are set out in full in the Act.
Some of the circumstances in which an association is not regarded as trading or securing a financial profit for members for the purposes of the Act include:
- the association is allowed to, or does, make a financial profit so long as the profit is not
received by the members or some of them; - the association is established for the protection or regulation of some trade, business or
industry in which its members are interested, provided the association does not engage in
such trade, business or industry; - any member of the association receives financial profit from the association as an employee
or officer of the association; - any member receives financial profit from the association to which he or she would equally
be entitled if not a member of the association; - the association provides facilities or services for its members; and
- the association trades with its members or the public provided that:
- the trading is secondary to the principal purpose of the association; and
- any trading with the public is not substantial in relation to other activities of the
association.
Note: Members cannot avoid these requirements by arranging to have the financial profits payable to them as a member, received by someone else who is not a member.
As indicated, an application can be made to the Supreme Court to have an incorporated association wound up if an association is thought to be in breach of these requirements. There also is another provision in the Act which allows the Commissioner for Consumer Protection to transfer the operations of an incorporated association to a body incorporated under different legislation, for example, a co-operative or company, if the Commissioner is of the opinion that the association has ceased to be eligible for incorporation under the Act or would be more appropriately regulated under different legislation. It is up to the Commissioner to determine which action is the appropriate one in all the circumstances.