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Ending an association

If two incorporated associations wish to combine, they may choose to amalgamate or one association may decide to wind up and transfer its assets to the other.

To amalgamate, the two associations must each resolve separately by special resolution to amalgamate as a new association. A special resolution is one where twenty one days written notice of the resolution must be given and three quarters of those voting must approve it. Normally, the members of both associations will have agreed on a new constitution and hold a joint meeting where the members of each association pass their resolutions consecutively and the newly amalgamated group then continues with the meeting. The property and the rights and liabilities of the former association become the property, rights and liabilities of the association formed by the amalgamation. There is a fee and a form to register the amalgamation with the Corporate Affairs Commission (part of Consumer and Business Services) and the form makes it clear how the procedure works.

The alternative method is for one organisation to resolve to wind up and to transfer its assets to another association, which may make changes to its constitution to reflect the new arrangements.

Very occasionally, two associations wind up and transfer their assets to a third newly formed group. The associations which wind up no longer exist, so in most circumstances their contracts and other legal obligations terminate.

Where the Corporate Affairs Commission thinks that an association no longer complies with the eligibility requirements for incorporation, or that the association's operations would more appropriately be performed by a body incorporated under another Act, then it may send a notice to the association informing it of this opinion. The association has three months to request the commission to transfer its operations to another body corporate. The commission may then order the transfer and on the date of the order, the property, rights and liabilities of the association become the property, rights and liabilities of the body corporate referred to in the order [Associations Incorporation Act 1985 (SA) s 42].

An incorporated association can voluntarily resolve to wind up as provided in its rules, or it can be wound up by the Supreme Court or the Corporate Affairs Commission [Associations Incorporation Act 1985 (SA) s 41].

If an association voluntarily resolves to wind up and assets exceeding $5000 remain after its debts have been paid, a liquidator must be appointed to distribute the assets in accordance with the association's rules. This is a similar procedure to a company winding up. Usually, an association's rules provide that assets will be paid to non-profit organisations with similar aims or with other charitable aims. The assets cannot be distributed to members unless the members are all incorporated associations with identical or similar aims and objects to that of the association winding up. The Corporate Affairs Commission may approve the appointment of someone who is not a registered company liquidator, as liquidator of the association [Associations Incorporation Act 1985 s 41(9), s (10)].

If an association has surplus assets not exceeding $5000, it can apply to Corporate Affairs Commission for deregistration [Associations Incorporation Act 1985 s 43A]. Normally, the application must be made following a special resolution of the association. However, if there are no longer sufficient active members to do this, the application can be made by at least two people, each of whom is either an officer of the association, a member of the association, or a person who, in the opinion of the Corporate Affairs Commission, has a proper interest in the application.

In this situation, a liquidator is not appointed, but the Corporate Affairs Commission must approve the manner of distribution of assets. Further, the Commission must publish a notice to check that no-one believes the association has any liabilities. Consumer and Business Affairs can provide you with the relevant form and fee details.

The Supreme Court can wind up an incorporated association if [Associations Incorporation Act 1985 (SA) s 41(3)]:

  • the association has resolved by a special resolution that it be wound up by the court;
  • more than one year after its incorporation, it has not commenced any activity or function;
  • the association is unable to pay its debts;
  • the committee members of the association have acted in their own, rather than the members', interests or in a manner that appears to be unfair or unjust to other members;
  • the affairs of the association are being conducted in a manner that is oppressive, unfairly prejudicial to, or unfairly discriminatory against, any member or contrary to the interests of the members as a whole;
  • an act or omission (or proposed act or omission) of the association would be oppressive, unfairly prejudicial to or unfairly discriminatory against any member, or contrary to the interests of the members as a whole;
  • the court thinks it is just and equitable that the association be wound up.

The Corporate Affairs Commission can wind up an incorporated association if [Associations Incorporation Act 1985 (SA) s 41(7)]:

  • the association has failed to comply with a lawful condition imposed on it by the commission or the Minister;
  • the incorporation was obtained by mistake or fraud;
  • the association has not remedied a breach of the Associations Incorporation Act 1985 (SA) or its own rules within the time allowed by the commission;
  • the commission issued a notice that it considered the association was no longer eligible for incorporation or that its undertaking should be transferred to a body incorporated under some other Act and the association did not reply within three months;
  • the association is defunct.

Possible offences when an association is ending

The offences are set out in the Associations Incorporation Act 1985 (SA). These offences are relevant where an association:

  • is being or has been wound up
  • has been in the course of being wound up, where the winding up has been stayed or terminated
  • has had a provisional liquidator appointed
  • is or has been under administration
  • has executed a deed of arrangement
  • is defunct or unable to pay its debts (both of these events are specifically defined in the Associations Incorporation Act 1985 (SA) ).

Non-disclosure [Associations Incorporation Act 1985 (SA) s 49AB]

It is an offence for an officer or former officer not to make full disclosure of the issues required by the Associations Incorporation Act to the liquidator or other appropriate person. It is an offence not to deliver up property or documents as required. Certain fraudulent acts within the previous five years also come under this section. The maximum penalty is $10 000 or two years imprisonment.

Failure to keep proper records[Associations Incorporation Act 1985 (SA)s 49AC]

If the association is ending and there are not proper records for any period during the previous two years, an officer (see DUTIES OF OFFICERS) who has not taken all reasonable steps to ensure compliance with the requirement to keep proper records is guilty of an offence. The maximum penalties are $5000 or one year imprisonment for a prescribed association, and in other cases $5000.

Incurring debts not likely to be paid [Associations Incorporation Act 1985 (SA) s 49AD]

If an association incurs a debt when there are reasonable grounds to expect it will not be able to pay all its debts as and when they become due, any committee member or person who took part in the management of the association at the time the debt was incurred commits an offence punishable by up to $5000 or one year imprisonment. The court can also order payment of an amount equal to some or all of the debt. It is a defence if the debt was incurred without the person's express or implied authority or consent, or if there was no reasonable cause to expect that the association would not be able to pay all its debts.

Where an association has done an act with intent to defraud, any person who was knowingly concerned in this act commits an offence punishable by up to $10 000 or two years imprisonment. The court can also order payment of the amount needed to satisfy all or any of the association's debts.

Fraud [Associations Incorporation Act 1985 (SA) s 49AF]

This section sets out various offences in relation to fraud with which an officer of an association may be charged. The penalties are a fine of up to $10 000 or two years imprisonment.

    Ending an association  :  Last Revised: Tue Dec 20th 2016
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