This is the eighth of a series of legal updates that Kott Gunning is producing throughout 2016 on the key features and reforms under the new Associations Incorporation Act 2015 (WA) (Act).
This instalment deals with new administration and winding up provisions introduced under the Act.
The association may voluntary wind up
Where an association has surplus property to be distributed on winding up it may be wound up voluntarily upon a special resolution to that effect. The winding up is to be carried out under the relevant provisions contained in the Corporations Act 2001 (Cth).
Surplus property is defined in the Act as the property of the association remaining after the payment of all debts and liabilities, and any costs charges and expenses of winding up or cancelling the incorporation of the association, but does not include the books pertaining to the management of the association.
The Supreme Court may wind up the association
An association can be wound up by the Supreme Court upon any of the following grounds set out in schedule 4 to the Act:
- ineligibility at time of incorporation;
- incorporation obtained by fraud or mistake;
- a contravention of section 17 of the Act (i.e. the association must continue to be carried on for its purposes, have at least 6 members with full voting rights, and must not secure pecuniary profit for its members);
- the association has suspended its operations or has been dormant for a whole year or more;
- an inability of the association to pay its debts as and when they become due and payable;
- engagement in activity outside the scope of its objects or purposes;
- management committee acting oppressively against members;
- failure to remedy contraventions of the Act;
- the association has by special resolution resolved to be wound up by the Supreme Court;
- the Supreme Court forms the view that it is just and equitable that the association be wound up.
Who can make application to wind up an association
An application in the Supreme Court to wind up an association can be made by any of the following:
- the association itself;
- a member of the association;
- the Commissioner;
- the Minister; or
- a creditor (if the association is unable to pay its debts as and when they become due and payable).
The voluntary cancellation of incorporation when there is property
An association may voluntarily cancel its incorporation and dispose of property under Part 10 of the Act. The requirements are as follows:
- the management committee must examine the affairs of the association and by resolution declare that in its opinion the association is able to pay its debts and liabilities;
- the association must then pass special resolutions to the effect that its incorporation be cancelled under Division 1 of Part 10, and approving a plan of distribution that complies with sections 133 and 134 of the Act; and
- the distribution plan must be approved by the Commissioner.
If an association has passed the special resolutions required under Part 10, it must apply to the Commissioner for approval of the distribution plan and cancellation.
If an association fails to make the application to the Commissioner within 28 days of the resolutions or within such further time as the Commissioner may allow it commits and offence and is liable to a fine of $1000.00.
The commissioner may require that public notice be given of an application and distribution plan.
A distribution plan must comply with the rules of the association and section 24 of the Act which limits the way property may be distributed on cancellation.
The Commissioner is required to fix a period of time within which the distribution plan must be completed. The association must ensure that the distribution plan is carried out and within the time period set by the Commissioner. The association must also report in writing to the Commissioner after the distribution plan is carried out by lodging a certificate.
The voluntary cancellation of incorporation when there is no debt or property
An association may voluntarily cancel its association where there are no debts or property as follows:
- the management committee must examine the affairs of the association and by resolution declare that in its opinion the debts and liabilities of the association have been satisfied and that there is no surplus property; and
- the making of the application has been approved by a special resolution.
The application to have the incorporation cancelled must be lodged with the Commissioner.
The Commissioner may cancel the incorporation of the association if satisfied that the special resolution was passed in accordance with the Act, that the debts and liabilities have been satisfied and there is no surplus property, and that the requirements of the Act in respect of the association have been met.
Cancellation of incorporation by order of the Commissioner
The Commissioner may issue a notice to an association to ‘show cause’ why the Commissioner should not cancel the incorporation of the association if the Commissioner has reasonable grounds to believe that the association:
- was not eligible at the time of incorporation;
- has contravened section 17 of the Act (i.e. the association must continue to be carried on for its purposes, have at least 6 members with full voting rights, and must not secure pecuniary profit for its members);
- has suspended operations or been dormant for a whole year or more;
- has resolved to wind up but no person is prepared to act as liquidator;
- has failed to comply with a direction by the Commissioner under section 95; or
- has failed or refused to remedy a contravention of the Act within 60 days’ notice having been given by the Commissioner.
If the Commissioner issues a show cause notice then the association has 60 days to respond.
If the association is unable to satisfy the Commissioner that the ground or grounds contained in the notice do not apply then the Commissioner may by order published in the gazette cancel the incorporation of the association.
However, the Commissioner must first give the association 28 days written notice stating that the Commissioner proposes to make the order. The association can seek a review of the Commissioner’s proposal in the State Administrative Tribunal within those 28 days.
The Commissioner’s powers in respect of property if incorporation cancelled by order
Upon the Commissioner making an order published in the gazette to cancel the incorporation of the association all property held by the association vests in the State.
The Commissioner has the power to act in the name of the State by realising the property, paying out the debts of the association and otherwise winding it up. However no obligation of liability is imposed on the Commissioner or the State to do anything in relation to the property other than to pay out liabilities of the association from the proceeds of the said property.
Liabilities of management committee
Any liability of a member of the management committee is not affected by cancellation of the incorporation and may be enforced as if the association’s incorporation had not been cancelled.
Reinstatement of incorporation
If the Commissioner is satisfied that the incorporation should not have been cancelled then the Commissioner can reinstate the incorporation.
Where an association’s incorporation is reinstated under the Act it is treated as having never been cancelled so that the association’s existence is continuous.
The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.