The Law Handbook 2024

Chapter 6.6: Community organisations 613 processes. The rules are an instruction manual about how an association is to be run. In the Associations Act there is a list of matters that must be contained in the rules (e.g. a grievance procedure). Associations that do not require a complex membership structure may find it easier to: • adopt the model rules (which are set out in schedule 4 of the Associations Incorporation Reform Regulations 2023 (Vic)); or • use Not-for-profit Law’s ‘Rules Tool’ to create a customised set of rules (available at https://apps. nfplaw.org.au/vic-rules-tool) . Both sets of rules will contain all the matters required under the Associations Act. An association’s rules can be changed when at least 75 per cent of the members voting at a general meeting approve passing a special resolution. Members must have at least 21 days’ notice of a general meeting. The notice must say that a special resolution is intended to be passed and the wording of the resolution must be set out in the notice. A change to an association’s rules is effective once CAV has approved the alteration. Associations registered as charities with the ACNC will then need to provide the ACNC with a copy of the amended rules via the Charities Portal (within 60 days for small charities and within 28 days for medium and large charities). Incorporated associations: the legal duties of office holders The legal duties of office holders, and the penalties for breaching them, are set out in the Associations Act. An office holder includes: • a member of the committee; • the secretary; • a person, including an employee of the association, who makes, or participates in making, decisions that affect the whole, or a substantial part, of the operations of the association; • a person who has the capacity to significantly affect the association’s financial standing; and • a person in accordance with whose instructions or wishes the committee of the association are accustomed to act (but excluding a person who gives advice to the association in the proper performance of functions attaching to the person’s professional capacity or to the person’s business relationship with committee members or with the association). Broadly, office holders have a legal duty: • to act in good faith and for a proper purpose; • to act with reasonable care, diligence and skill; • to not misuse information or their position; and • to disclose and manage conflicts of interest. For more information about office holders’ legal duties, see www.nfplaw.org.au/free-resources/who- runs-the-organisation/responsibilities-of-the-board- and-committee-members. The incorporated association is a very common form of legal structure used by groups operating in Victoria, which is discussed in more detail in ‘Incorporated associations’, below. More information about the process of incorporation and the administration of incorporated associations is available at www.nfplaw.org.au/free-resources/ getting-started/legal-structure. 3 Companies limited by guarantee Overview of companies limited by guarantee Groups may incorporate under the Corporations Act 2001 (Cth) (‘ Corporations Act ’). Under this Act, a group may incorporate as either a company limited by shares, or as a company limited by guarantee. Only the latter is discussed here, as it is the most appropriate company structure (and the most common structure) for community organisations. In a company limited by guarantee, the members guarantee to pay a fixed but nominal amount in the event that the company does not have enough money to pay all its debts when it is wound up. In general, a company’s internal management is governed by: • the Corporations Act provisions that apply to that type of company (called ‘replaceable rules’); • a constitution (or a memorandum and articles of association for a company formed before 1 July 1998 that has not adopted a constitution); or • a combination of both.