Winding up an association

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When an association is incorporated it becomes a legal entity, separate from the individual members of the association. Winding up an association is the process of finalising the business of an incorporated association so that the Commissioner for Consumer Protection can dissolve it as a legal entity. 

Voluntarily winding up an incorporated association

An incorporated association may be wound up voluntarily if the association is solvent and resolves by Special Resolution that it be wound up voluntarily. The Department must be notified by lodgement of a Notice of Special Resolution within 14 days after the general meeting is held at which the Special Resolution was passed.

  • If your association will have no extra money, equipment or other property remaining after paying its debts and liabilities, the voluntary winding up process is a simple one. (See steps 1 to 5 in 'What you need to do' below).
  • If however, your association will have money, equipment or other items of value left over, called surplus property, the process is more complicated. (See steps 1 to 4 and 6 to 9 in 'What you need to do' below).

Some useful tips when winding up an incorporated association

  • Make sure your association can still function until it is formally dissolved. It is only upon the dissolution of an incorporated association that the responsibilities of ordinary and committee members of the association cease.
  • Make sure all of the incorporated association’s debts and liabilities are paid out before the association is dissolved. Committee members may be held liable if all of the association’s debts and liabilities are not paid.
  • Make sure you contact your association’s bank or other financial institutions. All association accounts must be closed before the association is dissolved. Banks and other institutions may require that unused cheques and other items are returned to them.
  • Consider what you are going to do with the records of the association. Remember that there might be legal obligations that need to be complied with, for example, retaining tax records or employee information.

Also note that the J. S. Battye Library of West Australian History identifies, collects, organises, preserves and provides access to Western Australia's published documentary heritage as well as collections of original Western Australian historical records.

The Battye Library may be interested in your records and can be contacted on 9427 3291.

Steps for winding up an association

The winding up process gives members the opportunity to ensure all of an incorporated association’s debts and liabilities are paid, all of its property distributed, and contracts or other arrangements finalised before the association is dissolved.  Here are the steps to follow: 

1. Is the association solvent?

  • YES – Go to 2.
  • NO – The association cannot be wound up voluntarily. Please contact the Department of Commerce.

2. Convene a special general meeting to resolve to wind up

Make sure:

  • Notice is given to members as required in the rules (constitution) of your association;
  • There is a quorum as defined under those rules;
  • The motion to wind up the association (see Note 1) is carried by special resolution (that is, the vote must be carried by at least three-quarters [75%] of the members present who are entitled to vote in person or by proxy or postal votes, where these are allowed under the rules of the association);
  • If the association will have surplus property, the members may, by ordinary resolution:
  • Authorise and direct the committee to prepare a distribution plan in accordance with the dissolution clause (if any) in the rules, OR
  • Give directions to the committee about the distribution of property if there is no dissolution clause in the rules or if it is impractical.

3. Submit notice of the resolution to wind up within 14 days of the meeting

Complete the form “Notice of Special Resolution to Voluntarily Wind Up an Incorporated Association” (Form 6 on forms page) and send it to the Commissioner for Consumer Protection at Commerce within 14 days of the resolution to wind up (see also Note 2).

There is no fee for lodging this form.

At item (e) of the form strike out one of the options “has/does not have” depending on whether the association will have surplus property after paying its debts and liabilities.

Please take note:

  • It is an offence punishable by a maximum fine of $500 to submit a statement to the Commissioner which is false or misleading.
  • The completed form will be kept by Commerce as a publicly available document.

4. Does the association have surplus property?

  • YES – Go to 6.
  • NO – Go to 5.

5. Dissolving an incorporated association without surplus property

The association will be dissolved by the Commissioner for Consumer Protection 14 days after the “Notice of Special Resolution to Voluntarily Wind Up an Incorporated Association” form (Form 6 on forms page) has been lodged with Commerce.

A letter confirming the date on which the incorporated association was dissolved will be sent to the person nominated on the form.

6. Prepare a distribution plan if there is surplus property

There are two important legal requirements for all distribution plans:

  • An incorporated association is not allowed to distribute any surplus property to its members or former members.
  • An incorporated association is required to distribute any surplus property to associations incorporated under the WA Associations Incorporation Act or for charitable purposes.

The distribution plan usually is based on the dissolution clause of the association’s constitution. See also Note 3.

7. Submit the distribution plan to Commerce

Complete the “Distribution Plan For Voluntarily Winding Up an Incorporated Association” (Form 7 on forms page) and send it to the Commissioner for Consumer Protection at Commerce together with the required fee. See also Note 2.

Make sure you indicate the name of the contact person in relation to implementing the distribution plan for the association.

Indicate on the form at (d) whether the plan is in accordance with the association’s rules. If it is not you will need to forward an additional fee.

If the distribution plan varies from the dissolution clause in the rules or if there was no issolution clause, your association will receive a letter from the Commissioner either approving the plan or asking the committee to revise the plan. Additional relevant information will be provided in the letter.

Reminder:

It is an offence punishable by a maximum fine of $500 to submit a statement to the Commissioner which is false or misleading.

Commerce will keep the completed form as a publicly available document.

8. Implement the distribution plan no sooner than one month after lodging it

Important:

Unless the Commissioner writes and directs otherwise, do not implement the plan until one month after the day on which the plan is lodged (see also Note 4).

The distribution of property must then be completed within a further month.

9. Dissolving an incorporated association with surplus property

The association will be dissolved by the Commissioner for Consumer Protection two months after the “Distribution Plan for Voluntarily Winding Up an Incorporated Association” form (Form 7 on forms page) has been lodged with Commerce (unless the Commissioner directs otherwise).

A letter confirming the date on which the incorporated association was dissolved will be sent to the person nominated on the form.

Notes and definitions

Note 1

The suggested wording for a resolution to voluntarily wind up an incorporated association is “[name of association] be wound up voluntarily”. This wording is used as one option on Form 6 Notice of Special Resolution to Voluntarily Wind Up an Incorporated Association”, although the wording is not compulsory.

Note 2

You can lodge the distribution plan (see Step 7) at the same time as the Notice of Special Resolution to Voluntarily Wind Up an Incorporated Association, but you do not have to. You should however, lodge it as soon as possible so that the winding up can proceed.

Note 3

If the dissolution clause is not consistent with the requirements of the Act or is impractical for any reason, or if there is no dissolution clause in the rules, then the distribution plan should be based on the directions of members at the special general meeting.

If the members gave no direction, the committee should develop a distribution plan that they think is just and fair when considering the objects or purposes of the association.

Note 4

In some cases the Commissioner may require you to wait more than one month before the distribution plan is implemented. You will be advised in writing of any variation.

What is a dissolution clause?

Most associations’ rules (constitution) make provision for what should happen to the association’s surplus property if it is wound up or dissolved. This provision is called a “dissolution clause”. It is unlawful for surplus property to be distributed to members or former members, and any surplus property may only be distributed either to another association incorporated under the Associations Incorporation Act 1987, or for charitable purposes.

What does dissolving an incorporated association mean?

When the Commissioner for Consumer Protection dissolves an incorporated association its legal identity is brought to an end. Once the legal identity as an incorporated body is ended, an association cannot own any property or be sued for any debts in its own right. (Committee members may then be held liable, which is why all debts should be finalised before an incorporated association is dissolved.)

What is a distribution plan?

A “distribution plan” sets out what the association would like to do with any surplus property after all its debts and liabilities are paid. The plan needs to be submitted to the Commissioner for Consumer Protection for review and approval before any of the property is distributed.

What is an ordinary resolution?

For an “ordinary resolution” the vote is carried by more than half of the members present at the meeting who are entitled to vote in person or by proxy or postal votes, where these are allowed under the rules (constitution) of the association. This compares with a “special resolution” which requires the vote to be carried by at least three-quarters [75%] of the members present.

What does being solvent mean?

This means that the association must be able to pay all its debts and liabilities.

What does having surplus property mean?

If the association will have real estate, money, equipment or other items of value left over after paying all its debts and liabilities this is referred to as having “surplus property”.

This page must not be relied on as legal advice. For more information refer to the complete Associations Incorporation Act and Regulations, available from the State Law Publisher (08) 6552 6000 or on their website.

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