LinuxSA Mailing list archives

  From: David Newall <davidn@rebel.net.au>
  To  : Jason Tan <jason@rebel.rebel.net.au>
  Date: Tue, 27 Feb 2001 16:32:50 +1030 (CST)

Re: LinuxSA, Organisers and incorporation

Jason Tan <jason@rebel.rebel.net.au> wrote:
> Not sure about the "putting your house on the line" bit.
> From austlii(http://www.austlii.edu.au/au/legis/sa/consol_act/aia1985307/s21.html)
> ASSOCIATIONS INCORPORATION ACT 1985 - SECT 21 
> Rights and liabilities of members

All well and good, but that section relates to members, not to office holders (who I claimed are
the one's who put their houses on the line.)

> http://www.austlii.edu.au/au/legis/sa/consol_act/aia1985307/index.html
> Will get you the table of contents for the act.

And under section 39B we find:

  Provisions indemnifying officers or auditors

  39B. (1) Any provision, whether contained in the rules of an
  incorporated association or in a contract with the association or otherwise,
  exempting any officer or auditor of the association from, or indemnifying him
  or her against, any liability to the association that by law would otherwise
  attach to him or her in respect of any negligence, default, breach of duty or
  breach of trust of which he or she may be guilty in relation to the
  association, is void.

Thus an assocation cannot indemnify its officers or auditors from blah blah.

Further, from section 49AD:

> Incurring debts not likely to be paid

 (1) Where-

   (a)  an incorporated association has incurred a debt; and

   (b)  immediately before the time when the debt was incurred-

      (i)    there were reasonable grounds to expect that the
      incorporated association will not be able to pay all its debts
      as and when they become due; or

      (ii)   there were reasonable grounds to expect that, if the
      incorporated association incurs the debt, it will not be able
      to pay all its debts as and when they become due; and

   (c)  the incorporated association was, at the time when the debt was
   incurred, or becomes, at a later time, an incorporated association to
   which this Division applies, a person who was a member of the
   committee of the association, or took part in the management of the
   association, at the time when the debt was incurred commits an
   offence. Maximum penalty: $5 000 or one year imprisonment.

Okay, $5,000 is not exactly loss of your house, and neither is one year
imprisonment, however it puts to rest the idea that merely incorporating
relieves everybody of any financial risk.

More specifically, this act is not the only act that covers incorporated
bodies.  For a stupid example, obviously the act is silent on the issue
of an officer who burns down the clubhouse.  That would be covered by a
separate act.  This act makes many references to the corporations act,
and I suspect that, as with Directors of a Company, the office holders
are absolutely liable for the debts incurred by the incorporation if they
permit those debts to be incurred knowing (or if they should have known)
that the debts could not be met as they fell due.  Hence, "putting your
house on the line."

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