As a legal body in its own right, an incorporated association can:

• enter into and enforce contracts including the power to hold, acquire and deal with property,
• sue or be sued, and
• continue regardless of changes to membership.

The existence of a separate legal entity means that the association bears liability for its acts. Briefly, this means that claims made against an association, either as debts or compensation for negligence, are answerable by the association and not the individual members.

Members of an incorporated association have limited liability.  In general terms, this means that they are only liable for the amounts each member owes the association in respect of their membership.  For most associations this means the fees or subscriptions due to the association.  Members of the management committee of an association also have limited liability for the debts of an association as long as they follow accepted business and community standards.

Groups seeking government grants will frequently find that it is a condition of their grant that they be incorporated.

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The purpose of the Associations Incorporations Act is to allow small, community based groups a simple, inexpensive means of establishing a legal entity separate from its members.  There is no maximum limit to the number of members, however, the Act requires that there be a minimum of 5 members.

An association will be refused incorporation or directed to transfer its incorporation if the Commissioner for Fair Trading is satisfied that incorporation as an association is inappropriate or inconvenient by reason of the Commissioner’s assessment of:

• the likely scale or nature of the activities of the proposed incorporated association,
• the likely value or nature of the property of the proposed incorporated association (as a guide, the amount of $500,000 as a measure of assets, income or expenditure is used to determine whether it is appropriate for the proposed association to be incorporated under the Act), and
• the likely nature and extent of the proposed incorporated association’s dealings with the public.

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There is no express legislative requirement that the association have all of its operations in NSW. However, it is not appropriate that the association be incorporated within NSW but have all or the majority of its operations outside NSW.

The legislation imposes duties and liabilities upon the association and members of the committee. The association must also ensure that it is able to meet all the statutory requirements to have documents and records accessible to its members and authorised officers of the Office of Fair Trading.

If an association wishes to establish an office or carry on some of its activities outside of NSW, it should obtain advice from the Australian Securities and Investments Commission (ASIC) or its own legal adviser about registering as a Registerable Australian Body under the Corporations Act 2001.

In addition, the Act expressly requires that the person applying for incorporation of an association and the public officer be a resident of NSW.

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See the fact sheet Setting up an incorporated association for information about the steps to incorporate an association.