Should you consider an alternative legal structure? - NSW Fair Trading has issued a policy setting a financial threshold for incorporated associations
Late last year, NSW Fair Trading implemented a policy that establishes a discretionary limit of $2 million for the annual income and total assets of incorporated associations registered in NSW.
This policy has significant implications for State Sporting Organisations (SSOs) that are currently registered as incorporated associations in NSW and have annual income or total assets that either exceed or are close to $2 million.
This eBulletin considers these implications and how NSW SSOs should consider transitioning to an alternative legal structure.
The introduction of the Policy
In September 2016, NSW Fair Trading issued a policy titled "Financial Threshold for Incorporated Associations under the Associations Incorporation Act 2009 (NSW)" (Policy). The Policy's primary purpose is to set an upper limit of $2 million for both annual income and total assets held by an incorporated association in NSW.
The stated rationale for the Policy is that the incorporated association regime is intended for bodies that are engaging in small-scale, non-profit and non-commercial activities. Under the Policy, exceeding the $2 million threshold for either annual income or total assets "would be the first indicator" that an association's activities are no longer in accordance with the objects of the Act.
The powers of NSW Fair Trading to direct the Secretary of the Department of Finance, Services & Innovation to apply to cancel the registration of an incorporated association registered under the Act are broad. As a result of the Policy's introduction, SSO's with annual income or total assets exceeding the new threshold may be contacted by NSW Fair Trading to discuss the adoption of an alternative legal structure.
SSOs that are currently registered as incorporated associations in NSW should review their financial position to ascertain whether or not they currently exceed or are close to exceeding the $2 million threshold for annual income or assets.
If organisations find that they are in this financial position, it may be necessary to consider a transition to an alternative legal structure, such as a company limited by guarantee.
The Sports Business Group at Lander & Rogers is able to assist associations in understanding their obligations under the Policy, and to consider alternative legal structures if it becomes necessary to transition from an incorporated association.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.