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Perhaps the first question to be addressed is ‘why incorporate?’ Is it really necessary? The following may be helpful in answering those questions.
What is incorporation?
Who can incorporate?
Deciding whether to incorporate
Incorporation is not obligatory
Advantages and Disadvantages
Incorporation is a voluntary, simple and inexpensive means of establishing a legal entity, separate from the individual members. It is an alternative to forming, for example, a company limited by a guarantee, or co-operative.
It is particularly suitable for small, community-based groups. In other words, the association is considered by law to have a distinct identity that continues despite changes to its membership.
Incorporated Associations are not profit organisations. Any profits made should be kept by the association and should not used by members for personal gain.
Incorporation is a system of registration that gives an association certain legal advantages in return for accepting certain legal responsibilities.
Incorporated Associations:
Incorporation is available to any association that is formed for:
If the objects for which an association has been formed do not fall within any of the provisions. It is possible the association cannot be incorporated under the Act and another form of incorporation (e.g. as a public company) will be necessary. If you are unsure please seek appropriate legal advice.
An association should consider consulting a solicitor if, as an unincorporated association
Some people assume that it is obligatory for an association to be incorporated. As long as people are not associating for the purpose of profit any number may form an association without, there arising any obligation to incorporate the association. Incorporation may be a wise choice but it is not mandatory.
Advantages of not being incorporated
Advantages for being Incorporated
Ownership of land
Limitation of Liability
Litigation
Automatic Approval for Charitable Organisations
Name Protection
There are a number of advantages for unincorporated bodies. These include:
Incorporating establishes your association as a legal entity, which allows your association to:
In relation to ownership of land, registration cannot be in the name of an unincorporated association. Instead, the land must be registered in the names of all the members, which can create difficulty as new members join. If incorporated, title to land is vested in the name of the association as a separate legal entity.
One of the principal reasons for incorporation is to gain the benefits of limited liability. Section 27 of the Act provides as follows.
"A member of an incorporated association is not liable, except as provided in the rules of the association, to contribute towards the payment of the debts and liabilities of the association or the costs, charges and expenses of a winding up of the association".
In relation to liability, generally the members of the committee of an unincorporated association will be personally liable for anything for which, if the association were a company, the company would be liable. In particular if some person acting in the course of their duties does some negligent act, which results in damage to person or property, the members of the committee will normally be personally responsible – risk of this kind can be covered by insurance. If incorporated, an insurance policy can be taken out in the name of an association and this covers at least part of the legal liability. However, you should note that at times these insurance policies are difficult to obtain.
Circumstances are possible when members of an incorporated association can be exposed to unlimited liability. If members of an association are in any doubt as to the extent to which this section will be effective in limiting their liability they should consult their legal advisers. The assumption that incorporation removes the need to effect public liability insurance may be unwise and any decision not to insure should be discussed with the association's legal adviser.
In relation to litigation, an unincorporated association cannot sue or be sued in the name of the association. Any action taken must be in the name of individuals on behalf of the members of the committee. If incorporated, any action in law is taken out in the name of an association as a separate legal identity.
If charitable organisations wish to solicit for donations from the public they must either be a corporation, become incorporated, or apply for an approval from the Commissioner of Corporate Affairs. It is not necessary for a body to apply for approval if a charitable organisation is incorporated (only in Tasmania). If the organisation is not incorporated, or incorporated in a jurisdiction other than Tasmania, it will be necessary to apply for approval. In this way some charitable organisations may incorporate as an alternative to seeking a separate approval for charitable collections.
Information about the rules for charitable collections can be found on the charities page of our website.
It is not a purpose of the Association Incorporation Act to protect names and the incorporation of an association under a particular name will not improve any right to use the name. If for example the name under which the association were incorporated, whether unconsciously or not was identical or very similar to the name of another prior existing organisation, which was not incorporated, that prior existing organisation may seek the assistance of the Courts to restrict the incorporated association from continuing to use the particular name.
