Under the old law a corporation could act only within its objects, and outsiders were deemed to know its constitution. The 2023 Act, following the Companies Act, largely abolishes those doctrines for associations while keeping the objects as the boundary of legitimate activity.
Subject to the Act, any other law, and any special restriction or prohibition in its rules or trust deed, an incorporated association has, both within and outside the country, “(a) full capacity to carry on or undertake any activity, do any act, or enter into any transaction so long as those activities and transactions are in furtherance of the stated objectives of the incorporated association; and (b) for the purposes of Paragraph (a), full rights, powers, and privileges”.
The listed powers
Section 14(2) of the Associations Incorporation Act 2023 spells out, “without limitation”, that the grant includes authority to:
- act as trustee for any other association that has the prescribed qualifications for incorporation;
- accept and hold property on trust, and carry out the trust;
- invest its money in any security in which trustees are authorised by law to invest trust funds;
- open and operate bank accounts;
- borrow money on such terms and security as it thinks proper for its objects;
- secure repayment or any debt by mortgage, pledge, charge or security interest over any of its property; and
- hold, own, purchase, sell, mortgage or lease land, build on it, and deal with it “as fully and effectually as a natural person could do”.
Section 13 supplies the foundation: the association “is a legal entity in its own right separate from its members and continues in existence until it is removed from the register”. It can therefore sue and be sued, employ staff, hold licences, and contract in its own name.
“In furtherance of the stated objectives”
The capacity is tied to the objects. An activity outside them is not one the association has capacity to undertake, and a committee that pursues it breaches the duty in section 38(2) not to act contrary to the rules. But the consequence is internal, not external. Section 90(2) provides that the validity of a transaction “is not affected by” a failure to comply with the Act (other than section 36 on the form of contracts) or the rules, the absence of express authority in the rules, a failure to take steps the rules require, the transaction not being in the association’s best interests, or a breach of duty by a committee member. The outsider keeps the contract; the committee answers to the members, the Registrar and the Court under sections 41, 50 and 52, which section 90(3) preserves.
Restrictions in the rules
Section 14(3) allows the rules to contain a provision about capacity, rights, powers or privileges “only where the provision restricts” them. A church may forbid borrowing; a landowner association may cap the amount the committee can spend without members’ approval; a public benefit association may prohibit trading. Such restrictions bind the committee, and the members can enforce them by injunction (section 50) or an order to comply (section 52). What the rules cannot do is give the association a power the Act denies it, such as paying dividends.
Major transactions need the members
Section 62 reserves to the members, unless the rules provide otherwise, “the power to approve a major transaction”: an acquisition or disposal of, or an obligation over, assets worth more than half the association’s assets before the transaction. Selling the clubhouse, borrowing more than half the association’s net worth, or buying land that would double its assets, therefore requires a members’ resolution, though the transaction itself remains valid against the other party under section 90 if the committee skips the step.
No constructive notice
Section 91 provides that a person “is not affected by, and is not taken to have notice or knowledge of the contents of, the rules of the incorporated association or of other documents relating to the incorporated association merely because” they are on the register or available for inspection. A supplier need not read the constitution before accepting an order. Combined with section 36, which makes a contract signed by a person acting under the association’s express or implied authority binding, this puts the risk of internal irregularity on the association and its committee rather than on the public. See signing contracts.
Acting outside Papua New Guinea
The capacity extends “both within and outside the country”. A PNG church may run a mission overseas, a sports body may affiliate to an international federation, and an NGO may receive foreign grants and hold foreign accounts, subject to the foreign law and to the Bank of Papua New Guinea’s exchange controls. The Act’s reporting and anti-money-laundering rules apply to the whole of the association’s affairs wherever conducted.
Property held on trust is held on its terms, and the association’s general powers do not override the trust. Where the trust has ended or become unduly onerous, section 37 lets the National Court authorise disposal and direct how the proceeds are applied.
Sources
- Associations Incorporation Act 2023 — ss 13, 14, 36, 37, 38(2), 41, 50, 52, 62, 90, 91
- Companies Act 1997 — ss 16, 17 (capacity and powers of a company, on which section 14 is modelled)
Before relying on anything here, read the current text of the Associations Incorporation Act 2023 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.