Guidelines on the Statutory Manager provisions for Associations
Purpose of the Guideline
The Guideline has been developed to assist the public to understand the circumstances where the Commissioner for Consumer Protection may consider exercising the power under Part 8 - Statutory Management of an Incorporated Association in the Associations Incorporation Act 2015 (the Act).
The Act commenced on 1 July 2016 providing for associations in Western Australia to become incorporated. The Act superseded the Associations Incorporation Act 1987 and includes obligations relating to the corporate governance, financial accountability and matters relating to the rules and membership of incorporated associations.
There are more than 19,000 associations currently incorporated in Western Australia. The Department of Mines, Industry Regulation and Safety – Consumer Protection Division (Consumer Protection) administers the Act on behalf of the State Government.
The Act, provides the Commissioner with the authority to apply to the State Administrative Tribunal (SAT) for the appointment of a statutory manager to administer the affairs of an association in some circumstances. Recent enquiries to Consumer Protection about the statutory manager provisions in the Act are most commonly received from parties in dispute with their association.
The Explanatory Memorandum speech that accompanied the 2014 Associations Incorporation Bill outlined that the statutory manager provision is “…a mechanism for intervention as a last resort”. The Department also views the appointment of a statutory manager as a last resort and therefore likely to only occur in a minority of cases.
At the time of writing the Guideline, the Commissioner had not made an application to SAT seeking to have a statutory manager appointed and disputes were being resolved by alternative means.
Appointment of a statutory manager
The Commissioner is able to apply to SAT for the appointment of a statutory manager under sub-section 109(1) of the Act:
“(1) The Commissioner may apply to the State Administrative Tribunal for the appointment of a statutory manager to administer the affairs of an incorporated association.
The Commissioner is not compelled to make an application and ultimately, SAT will make a decision based upon the evidence available as to whether a statutory manager should take over the running of the incorporated association.
It is relevant to note that SAT cannot appoint a statutory manager unless it is shown that the association is not functioning effectively in terms of its objects or purposes or as required by the Act. Sub-section 110(2) of the Act provides:
“The State Administrative Tribunal must not appoint a statutory manager unless it is of the opinion that —
- the incorporated association is not functioning effectively in accordance with its objects or purposes or this Act; and
- the appointment of a statutory manager is —
- likely to improve the functioning of the incorporated association; and (ii) in the best interests of the association.”
1a: The service being delivered by the association
Guideline 1a: The association provides essential and/or critical services.
The objects or purposes of the association referred to in section 110 of the Act are contained in the rules (commonly called the constitution) of each association. Consumer Protection registers the rules for every incorporated association and a copy can be purchased using AssociationsOnline by simply doing an Incorporated Association Search.
Associations undertake a wide variety of activities with many delivering essential or critical services. For example some associations provide health care and accommodation for aged persons.
Others associations undertake activities that are social in nature with no significant impact on persons outside their group, such as a club for car enthusiasts.
The Commissioner is more likely to consider it appropriate to seek to appoint a statutory manager in a situation where the provision of an essential or critical service has been or is likely to be adversely affected.
1b. Risk to the assets or an adverse impact on financial position
Guideline 1b: The association has substantial property interests or valuable assets that are at risk OR it is a medium to large association and experiencing a significant adverse impact on its financial position.
The Commissioner is likely to consider the benefit a statutory manager could deliver where an association has substantial property interests or other valuable assets that are at risk. Likewise, where the financial position of a medium to large association (i.e. revenue greater than $250,000) is experiencing a significant adverse impact. Examples could include:
An association with considerable freehold or lease-hold property interests that are at risk;
The continuation of a medium to large association is reliant on continued funding or maintenance of licences that are at risk because of poor business acumen or governance issues.
2. Whether the appointment is likely to improve functions
Guideline 2: The appointment of a statutory manager will likely improve the functioning of the association and the appointment would be in the best interests of the association.
Is the association functioning effectively?
Implicit in the improvement of functions is evidence that the association is not already functioning effectively, in accordance with its objects or purposes, and the Act. SAT cannot appoint a statutory manager unless it can be shown that the association is dysfunctional.
SAT will need to consider whether:
- the association’s objects and purposes are generally being achieved;
- the association is contravening its own constitution; and
- the association is complying with the requirements of the Act, for example in:
- Management of the association (Part 4 of the Act); and
- Financial and record-keeping (Part 5).
The Commissioner is likely to be required to establish that more than a single contravention of the Act occurred and to show that the dysfunction is impeding the ongoing function of the association.
Would the appointment of a statutory manager improve the functioning of the association?
A statutory manager cannot be appointed unless it is able to be shown it would be the only way to improve the functioning of the association. This will largely depend on the cause of the problems and why the matter has not been able to be resolved to date.
Consideration will be given to any skills or expertise required to improve the functioning of the association. For example:
- a Board may lack the skills to make sound decisions and is causing the association to become financially vulnerable; or
- poor corporate governance – including continuing disregard for the association’s constitution or the Act – is exposing the association and its members to serious risks.
These situations may give rise to considerations for the appointment of a suitably qualified statutory manager.
Is appointment of a statutory manager in the association’s best interests?
Is the problem a dispute where parties within an organisation are unable to broker a compromise position? The achievement of a positive outcome may be unlikely; even where a statutory manager is appointed.
Where a long-lasting resolution to a dispute cannot be achieved, the appointment of a statutory manager may be of some limited benefit and may not be in the best interests of the association in the long term.
Consumer Protection’s experience has shown that positive long-term outcomes can often be achieved by the members when they are given an opportunity. Parties are encouraged to take all necessary steps to allow the members to find a resolution.
3. Alternative options may be available
Guideline 3: Other options to resolve the current problem have been exhausted.
The Act provides members with several options to consider in an attempt to resolve concerns with their association, such as:
- Requiring the rules to include a procedure for dealing with any disputes between members and the association (schedule 1, item 18 of the Act);
- The ability for members, or the association, to apply to SAT if the dispute cannot be resolved using their internal dispute resolution process (s182 of the Act); and
- In extreme cases Section 120 of the Act makes provision for the voluntary administration of an association under the Corporations Act.
Other options available for members to consider include:
- Engaging a professional dispute resolution service to intervene in the form of negotiation, mediation or arbitration;
- An application can be made to a court to settle certain disputes, for example, where a committee member or an employee has mismanaged association funds. It is recommended that the association executive and the individuals involved seek their own independent legal advice about the avenues available; and
- Depending on the nature of the concerns, some other government departments may be able to provide assistance or advice. If the association receives funding and the concerns relate to matters within the funding agreement you may wish to discuss the matter with the funding body.
4. Cost and expenses of a statutory manager
Guideline 4: Is the association insolvent or likely to become insolvent with the appointment of a statutory manager?
Any expenses relating to the conduct of a statutory manager in managing the affairs of an association under the Act are payable from the association’s funds. This includes remuneration of the statutory manager. The rate of remuneration is either determined by the Commissioner (where the person is a public service employee) or by SAT.
The Commissioner will consider the association’s financial position as part of the assessment of the appointment of a statutory manager. A copy of the association’s most recent financial statements and other relevant financial information is required for this purpose.
If an association is insolvent or likely to become insolvent, it may not be appropriate to appoint a statutory manager that would likely incur further expenses for the association. As noted under Guideline 3 above, section 120 of the Act makes a provision for the voluntary administration of an association. Voluntary administration may provide an appropriate option where an association is experiencing temporary insolvency or other financial difficulties, but is otherwise sound.
5. Proposed action by members
Guideline 5: Members of the association have not resolved to take other action.
Associations are established for the benefit of members and, as noted above, members are often able to achieve a lasting resolution to a problem. Members have a right to take appropriate action to ensure their organisation is run appropriately.
Members have the power to take matters to SAT themselves or to call a special general meeting of members to consider specific issues. The Commissioner encourages members to take action when needed.
The following is a summary of these guidelines outlining circumstances that need to be met in order for the Commissioner for Consumer Protection to consider applying for the appointment of a statutory manager.
It is important to note that even though the circumstances may support an argument to take this form of action the matter would still be subject to assessment before the Commissioner will consider making an application to SAT for the appointment of a statutory manager.
Where an element of these guidelines is not met, the Commissioner will still consider bringing an application if exceptional circumstances exist. In this context, guideline 2 is not discretionary, as it represents the test to be applied by the SAT.
Guidelines - Statutory management of an association
- 1a. The association provides essential and/or critical services; OR
- 1b. The association has substantial property interests or valuable assets that are currently at risk or it is a medium to large association and its financial position is being adversely impacted;
- 2. The appointment of a statutory manager will likely improve the function of the association and the appointment would be in the best interests of the association;
- 3. Other options to resolve the current problem have been exhausted;
- 4. Is the association insolvent or likely to become insolvent with the appointment of a statutory manager; and
- 5. Members of the association have not resolved to take other action.
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