[Aust-NZ] [Fwd: Re: OSGeo local chapter incorporation legal advice]

[Tim Bowden]

I've had the following advice from Jeremy Malcom, a well known lawyer
and hacker specialising in open source legal matters.  I believe it
answers any questions we have regarding the legal issues involved in
incorporating.

It looks like the requirements for WA are being tightened a
little, bringing them more in line with requirements in other states.
Given our cashflow and/or assets will always be under $100k, I don't
believe we will be too adversely affected by the changes.

Regards,
Tim Bowden

-------- Forwarded Message --------
From: Jeremy Malcolm <Jeremy at Malcolm.id.au>
To: Tim Bowden <tim.bowden at westnet.com.au>
Subject: Re: OSGeo local chapter incorporation legal advice
Date: Sun, 27 Jan 2008 09:33:41 +0900

On 25/01/2008, at 5:11 PM, Tim Bowden wrote:

> The Aust-NZ chapter of OSGeo (Open Source Geospatial Foundation) is
> looking to become incorporated as a non profit.  We are looking for
> advice (which we are happy to pay for so long as it doesn't bankrupt
> us!) as to the potential liabilities of members and office holders  
> under
> various courses of action.  Are you able to help us or point us in the
> direction of someone who can?

I can give you some free advice since I'm not meant to be practising  
law while I'm meant to be studying full-time for my PhD.

> There have been a few questions raised as to the personal liability
> office bearers or members may have while operating outside our state  
> of
> incorporation.  As far as my reading is concerned, I don't believe we
> have a problem, but as I'm not trained in the art of law we have
> resolved to get advice on the matter.

You have the right approach, registering as a State association and  
then getting an ARBN to enable you to trade in other States.  This is  
fairly common and I used to be the Secretary of another association  
which did the same thing (APANA).

One of the purposes of incorporating is so that the association can  
sue and be sued in its own right.  This means that office holders will  
not be liable for actions or debts incurred by the association (even  
if the office holder was the one who performed the action or incurred  
the debt on its behalf), or for the actions of other office holders or  
members of the association.  If the association is sued, the worst  
that can happen is that its own assets will be used to satisfy any  
court judgment.

However if an office holder has acted negligently and caused damage to  
a third party then they could also be sued personally.  Office holders  
can also be liable if they have breached their fiduciary duties  
(duties of good faith) to the association, for example by acting  
fraudulently or breaching confidences.  They may also be liable for  
incurring debts that they should know the association cannot pay.  It  
makes no difference in these cases whether the association is trading  
inside or outside of its home state.

If office holders want to be completely covered for liability for  
their actions, the only way to do this is for the organisation to  
obtain insurance.  This is also very common and has been done by some  
of the other associations I am involved with (such as WAIA).

The other thing to know is the Associations Incorporation Act was  
reviewed in 2006, and is about to be completely replaced.  If  
Parliament passes a law that accords with the current draft bill,  
there will be some completely new audit requirements, and they depend  
on the extent of the financial activities and property of the  
association.

You will probably fall within Tier 1 of the new scheme, assuming you  
will have less than $100,000 turnover and less than $100,000 worth of  
assets.  This means that your accounts:

* must be audited, but

* this can be done by "any suitable person", so long as they are not an
  office holder or someone who prepared the accounts, or their spouse;

* the audit statement doesn't need to be lodged with anyone unless there
  are problems; it just needs to be kept on file somewhere.

This means that as long as you can find a volunteer to act as auditor,  
there shouldn't be any additional costs for the association.  Also,  
this only applies from when the new Act comes into effect - which  
won't be for a few months.

It will now also be necessary to lodge an annual financial statement  
with the Commissioner of Associations.

There are a few other minor proposed changes, none of which are of  
much consequence, but let me know if you want a precis of them, or  
check out http://www.docep.wa.gov.au/Corporate/Content/Reviews/Associations/overview.html 
.

I hope this helps.