Strategic Planning and Governance

Club Incorporation

One of the main issues often facing administrators in voluntary positions in golf clubs is the issue of incorporation. There is no legal necessity for a sport organisation to become incorporated if it remains a voluntary organisation.  However, remaining unincorporated can leave the club in a difficult situation in regard to the law. If a club is not incorporated, legal rights and obligations can fall on to individual members.

Whether to incorporate or not is an important decision that should be reviewed from time to time, especially if the size or nature of your club changes (for example, your club wants to employ a paid staff member). This is one of the most important legal decisions you will face as a group.  

Club Incorporation Quote

 

When becoming incorporated, member-based golf clubs are typically not-for-profit organisations incorporated either as an Incorporated Association or Company Limited by Guarantee. 

Based on data from Golf Management Australia’s benchmark tool, the proportion of Australian not-for-profit golf clubs being either Incorporated or Company Limited by Guarantee is approximately 50/50.

Incorporated Association

The law relating to incorporated associations is state-based. 

Some attributes of an Incorporated Association include:

  • Obtaining not-for-profit status – exemption from income tax and other tax concessions;
  • A legal entity – ability for the club to conduct business and enter into legal agreements;
  • Limited legal liability – for members and office bearers;
  • Less complex and less expensive to administer than a Company Limited by Guarantee;
  • Flexibility for amalgamation.

There are a number of obligations incorporated associations must fulfil, including a written set of complying rules (constitution), governance, accounting, auditing and annual reporting and compliance requirements.

Company Limited by Guarantee

Not-for-profit clubs incorporated under the Commonwealth Corporations Act 2001 (Cth) are typically classified as a company limited by guarantee and registered with the Australian Securities and Investments Commission (ASIC).

Some attributes of a Company Limited by Guarantee include:

  • Ability to ‘operate’ anywhere in Australia;
  • Obtaining not-for-profit status – exemption from income tax and other tax concessions;
  • A legal entity – ability for the club to conduct business and enter into legal agreements;
  • Limited liability – for members and directors;
  • More complex and more expensive to administer than an Incorporated Association;
  • Less-flexibility for amalgamation.

There are a number of obligations companies must fulfil, including a written constitution, governance (significant penalties imposed for breaches by Directors), accounting, auditing and annual reporting and compliance requirements.

Why incorporate?

The benefit of incorporation is that the club becomes ‘registered’ as an incorporated club. This means that the club has a legal identity, separate and distinct from the individuals who formed or make up the club.  With the club having a legal existence, it can conduct business in its own name, including:

  • protect club members, to a certain extent, from being sued individually;
  • sign documents and enter into contracts;
  • buy, sell, own, lease and rent property and other assets;
  • can sue and be sued in its own right;
  • can receive grants from government and other philanthropic groups; and
  • borrow money.

One of the main benefits of incorporation for a club is that the group has ‘limited liability’. This means that in most cases, the responsibility for debts or any legal proceedings or costs, is limited to the amount of money and assets held by the club. This protects individuals in the club from being personally liable if anything goes wrong. However, there are exceptions to limited liability with the main one being if a person or persons on the committee act improperly or unlawfully, then they will not be protected. It is imperative then that all committee members are fully aware and understand their responsibilities as office holders.

What are the dangers of remaining unincorporated?

If your club chooses to remain unincorporated, it is important to understand that the club will not have its own legal status. Incorporation creates a legal ‘identity’ that is separate and distinct from that of the individual members. It is therefore important that a club and more importantly, the office bearers, are made fully aware of the risk of personal liability for any debts or legal costs incurred.

Groups should also consider the other practical difficulties that arise by remaining unincorporated, which include:

  • an inability to receive grants from government or philanthropic trusts and foundations;
  • an inability to enter into contracts or agreements under the group’s name (including applications for tax concessions);
  • an inability to own/lease property in the group’s name; and
  • an inability to sue or bring a legal action in the group’s name.

A group should think about how much financial risk it may be exposing itself to through its actions.  Incorporation should be viewed as an opportunity to limit personal risk, and unincorporated groups should therefore consider whether they are putting their members in a position where they may become personally liable for the actions of the group.

See a short video. http://www.youtube.com/watch?v=2KgGvbKy_y4

Remaining unincorporated

Some of the benefits of remaining unincorporated are that the club doesn’t have to hold meetings in a specific format, register with government, inform who their members are or financial situation, or pay any annual fees to government. However, it is strongly recommended that unincorporated clubs develop a set of rules, similar to a constitution, that assists with governing the club and particularly decision making. It is also best practice to regularly review the decision to incorporate at least every year and particularly as your club changes and grows.

Steps to incorporation

Golf Australia recommends that all golf clubs should incorporate.

If your club decides to incorporate as an association, you should contact the relevant authority in your state or territory that deals with not for profit organisations and incorporation. The websites below will provide you with the relevant information, paperwork, costs and a template constitution for your club to use:

State/Territory

Department

ACT

Associations | Office of Regulatory Services

NSW

Incorporated associations - NSW Fair Trading

NT

Licensing, Regulation and Alcohol Strategy - Department of Justice

QLD

Incorporated association : Department of Justice and Attorney-General

SA

CBS - Incorporated Associations

TAS

Consumer Affairs and Fair Trading : Incorporated associations

VIC

Consumer Affairs Victoria - Incorporated associations

WA

Associations - Consumer Protection - Department of Commerce

 

Alternatively, contact ASIC regarding details on incorporating your club as a company limited by guarantee.

The Club Constitution resource available for download below outlines the club constitution, provides a check list for developing a constitution and access to the model rules provided by the relevant department in each state or territory.