What Changed Under the Associations Incorporation Act 2023?

The Associations Incorporation Act 1966 was a short colonial-era statute: publish a notice, lodge the rules, get a certificate, file the occasional change. The 2023 Act is more than three times its length, and its long title tells the reader why.

Two kinds of association

The 1966 Act treated every association alike. The 2023 Act requires each applicant to declare whether it will be a public benefit association, formed for a charitable purpose benefiting the public, or a member benefit association, operated primarily for its members (section 3, section 6(2)(b)(viii)). The choice determines whether the Registrar can join court proceedings about the association (sections 45, 50, 70), whether it can opt out of financial statements (section 81), whether it can dispense with annual meetings and reports (sections 66, 74), and where its surplus assets may go on winding up (section 143(4)). See the difference between the two.

Committee members now owe statutory duties

Part V of the 2023 Act imports, almost clause for clause, the director’s duties of the Companies Act 1997: a duty of care (section 38), reliance on advice (section 39), disclosure of material interests (sections 40 to 42), confidentiality of association information (section 43), and an offence of serious breach of the duty to act in good faith carrying a fine of up to K50,000 or two years’ imprisonment (section 44). It adds the concept of a shadow committee member (section 47), lets the court disqualify people from serving (sections 32 to 34), and disqualifies undischarged bankrupts, people prohibited under the Companies Act and anyone convicted of a “relevant offence” in the last five years (section 30). None of this existed in the 1966 Act.

Reporting, financial statements and audit

Every incorporated association must now keep accounting records for seven years (section 72), prepare an annual report for its members (sections 74 to 76), and file an annual return with the Registrar in its allocated month (section 77). Associations that receive any government grant, or whose gross revenue or public donations exceed thresholds set by regulation, must prepare financial statements within four months of balance date and have them audited (sections 78 to 82). The draft Regulation sets the thresholds at K2,000,000 gross revenue and K500,000 donations. The annual report must disclose committee remuneration, employees paid above a threshold (K150,000 in the draft), and total donations, dues and grants. See financial statements and audit.

An online register kept by the Registrar of Companies

The Registrar under the new Act is the Registrar of Companies appointed under the Companies Act (section 3), and the register may be kept “wholly or in part, by means of an electronic or digital format register” (section 144). The draft Regulation allows the Registrar to require all filings through the online registry and makes most forms online data-entry forms rather than paper (regulation 4). Registration by the Registrar is also now the moment a filing takes effect: a change of rules, a special resolution or a written resolution “until registered, does not take effect” (sections 21(4), 64(5), 69(3)).

Overseas associations

Part XIII requires any association incorporated outside Papua New Guinea to obtain a certificate of registration before it “conducts operations or otherwise transacts business” here, on pain of a penalty of up to K50,000 for each day of unregistered operation (section 120). Registered overseas associations must file annual returns, keep accounts for their PNG activities and maintain a registered office and, if they wish, an agent. See registering an overseas association.

Anti-money-laundering measures

Several provisions exist to satisfy the Anti-Money Laundering and Counter Terrorist Financing Act 2015: donors of more than K10,000 in a year must be recorded by name, jurisdiction and contact details (section 73(2)(b)); transactions over K20,000 must be itemised; the beneficial owner of any membership must be identified and disclosed to the Registrar on request (section 89); the Registrar may inspect documents, including bank records, and pass them to the Financial Analysis and Supervision Unit of the Bank of Papua New Guinea and the police (section 154); and offences under the 2015 Act and the Proceeds of Crime Act 2005 are “relevant offences” disqualifying a person from the committee.

Other changes worth knowing

• Objections to incorporation now go to a Principal Magistrate on appeal (section 10), and other Registrar decisions to the National Court within 15 working days (section 157).
• Amalgamation of two associations is provided for (Part XI), as is restoration to the register (Part XII, Division 4).
• Pre-incorporation contracts can be ratified (sections 92 to 94).
• Expulsion of a member requires a fair procedure with 15 days’ notice and a hearing (section 71).
• Members may participate remotely in meetings and pass written resolutions by 75 per cent (sections 65, 68).
• Winding up uses Part XVIII of the Companies Act with modifications (section 142).

Every existing association must re-register

Part XVII gives associations incorporated under the 1966 Act one year from commencement to apply for re-registration; those that do not are removed from the register (sections 167 and 168). The 1966 Act is repealed one year after commencement (section 172). The details are in the re-registration article.