1. A step-by-step guide

An association can only change its rules by passing a special resolution at a general meeting of the association. The Meetings section provides an introduction to the concept of a special resolution.

The main steps to changing the rules of an association are to:

• determine what amendments are going to be made;
• call a general meeting of members to consider the amendments;
• pass the amendments by one or more special resolutions; and
• notify Commerce.

Each of these steps is discussed in more detail below.

1.1 What changes are needed?

There are various reasons why associations need to make changes to their rules. Usually, it is because the rules have become inadequate to serve the changing needs of the association, or they are ineffective in dealing with issues faced by the association, or they are simply out of date.

Committee members most commonly have the task of planning changes to the rules of association and there are some useful resources available to assist them in this task.

• The rules of every association incorporated in Western Australia are a public record available from Commerce for either inspection or purchase for a fee. The rules of associations with similar objects or purposes to your own may provide helpful examples of new provisions or improved wording.
• Commerce has produced a set of model rules for associations that may be adopted outright or used to provide examples of new rules or improved wording. These model rules are particularly useful because they comply with every requirement of the Act. Associations are free to alter any of the provisions as they see fit, but take care that the important elements of the rules are not lost.
• Schedule 1 of the Act lists all of the matters that must be provided for in the rules of any association incorporated after July 1988. These matters are set out in instruction sheets attached to Commerce's model rules, and can also be viewed in the Act itself. Generally speaking, these matters will be of most use to older associations that were incorporated before July 1988, but might also prove informative to others.

It is likely that the proposed legislation will require all associations, regardless of when they were incorporated, to ensure that their rules are consistent with the proposed Act. This is intended to overcome the present situation where some associations have rules that are not consistent with the Act and which may be confusing to members. Associations would probably have a period of 18 months to complete any necessary changes.

10.1.2 Calling the meeting

In order for an alteration of the rules to be valid, the association must make sure that it follows the correct procedure in calling the meeting.

Please note that the meeting must be a general meeting. It could be either a special general meeting or the annual general meeting, it doesn't matter. The important point about a general meeting is that all members of the association, whether they have voting rights or not, must be given notice of the meeting and be invited to attend. This requirement of the Act is so that the rules of an association cannot be changed without all its members having the opportunity to know about it.

The association must, therefore, in accordance with the existing rules, give notice to all members of the time, date, venue and purpose of the general meeting. Note that sometimes the rules of association provide for a longer notice period for a meeting where a special resolution is to be considered. Check your rules carefully – the last thing you want is a meeting that is invalid because of insufficient notice!

The Act requires that notice must also be given of the actual special resolution(s) that are being proposed. The notice should state in full the proposed special resolution(s) to be voted on at the meeting. Where space permits, these can be included on the meeting notice paper itself.

Alternatively, a list of the proposed alterations to the rules can be attached to the notice. It is good practice to also include an explanation for members of why the changes to the rules are being proposed.

Please note that it is important that the words "special resolution" appear as part of the notice. A notice to change the rules has previously been ruled invalid because these words were omitted. Commerce's model rules provide a further example of an appropriate notice of meeting to change the rules.

On occasions, an association may want to make so many changes to its rules that it could be inefficient or confusing to list every change individually. In this case, it would be appropriate to simply provide each member with a copy of the complete new rules, as they will appear after approval. The notice of special resolution might then read: "It is proposed to adopt the attached rules in place of all of the existing rules of XYZ Association (Inc)".

If your association's rules provide for proxy or postal voting, the relevant forms will also need to be forwarded to members with the meeting notice. The section on Meetings provides more information on this topic.

10.1.3 A special resolution

Firstly, the committee needs to ensure a quorum is present at the meeting. The special resolution (or resolutions) will need to be moved in the same way as any other resolution.

In order for the alteration of the rules to be valid, the association must make sure that the resolution(s) to adopt the altered rules is passed by the required majority. A special resolution needs at least 75% of members voting in person, or (if permitted) by proxy or postal vote, to vote in favour of the rules being altered in the manner proposed. This larger than usual majority is why it is called a special resolution. Note that this does not mean 75% of all the members of the association, only 75% of those voting.

Caution: if your association was incorporated before July 1988, its rules may state that a two-thirds majority is all that is necessary to pass a special resolution. In such cases, the provisions of the Act override the rules of association. Regardless of what the rules may say, the Act requires 75% and nothing less is acceptable.

A special resolution to alter the rules must be lodged at Commerce to have effect.

Any special resolution altering the rules of an association will not have legal effect unless, within one month of passing the resolution, the association lodges with the Commissioner at Commerce:

• the notice of special resolution; and
• a certificate from a member of the association certifying that the resolution had been duly passed and that the altered rules conform with the Act.

For convenience, Commerce has developed a form that associations can use to lodge this information. Note that a fee is also payable at the time of lodgement.

Associations that do not lodge the notice on time can apply for an extension by stating their reasons. The Commissioner may agree to accept the request. Please note, however, that even with very good reasons, extensions are generally allowed for a maximum of two to three months only. If the Commissioner does not agree to an extension, it will be necessary to start the process all over again by calling another general meeting.

The new rules do not take effect until the notice is lodged with and confirmed by Commerce. Commerce will send a letter to the association, confirming lodgement and the date when the altered rules will take effect. At the risk of stating the obvious, this means that the new rules cannot be used until this notification is received. In the past, more than one association has altered its rules in one part of a meeting, and then used the altered rules later on in the meeting, for example, in an election of office bearers. It doesn't work that way.