A not-for-profit may change shape for several reasons. Two similar groups may merge. An incorporated association that has grown may want to become a company limited by guarantee. Or membership may have declined until the committee asks whether to continue.
Each path raises legal issues best managed before decisions are announced. This article outlines them, with a Victorian focus, for community, cultural and faith organisations in particular.
Victorian incorporated associations: the main mechanisms
The Associations Incorporation Reform Act 2012 (Vic) provides several routes, administered by Consumer Affairs Victoria (CAV). In general terms:
- Amalgamation. Each association passes a special resolution approving the amalgamation and the new association’s name, rules and first committee, then they apply to CAV. On registration, the original associations’ property, contracts and liabilities generally pass to the new association, and their incorporations are cancelled.
- Transfer of incorporation. An association may transfer its incorporation to another form of body, such as a company limited by guarantee. The organisation generally continues as the same legal person in a new form.
- Voluntary winding up. Members may resolve by special resolution to wind up, generally with a registered liquidator appointed and the Corporations Act processes applying.
- Cancellation. A small association that has stopped operating and has no debts may be able to apply for cancellation instead of a winding up, subject to conditions set by the Act.
Converting to a company limited by guarantee
Organisations may convert to operate nationally or meet funders’ expectations. Conversion generally involves a new constitution, a special resolution of members, CAV’s process for the transfer, and registration of the body as a company under Part 5B.1 of the Corporations Act 2001 (Cth). The ACNC strongly recommends that a charity changing its legal structure obtain a new ABN, which may mean revoking the existing registration and applying again, so the timing needs care.
Companies limited by guarantee: deregistration or winding up
A company limited by guarantee that wishes to close may, if it meets the conditions in the Corporations Act, apply to ASIC for voluntary deregistration. Otherwise it may need to be wound up, through a members’ voluntary winding up if it is solvent, or under the insolvency provisions if it is not. Insolvency concerns need prompt advice.
Distribution of surplus assets
This is often the most sensitive issue, and several layers can apply:
- The not-for-profit clause. Generally, surplus assets cannot be distributed to members. They usually must go to a body with similar purposes that also does not distribute to members.
- The DGR gift fund. A deductible gift recipient’s governing documents must generally require surplus gifts, deductible contributions and money received from them to pass to another DGR.
- Land and funds held on trust. Property held on trust for a charitable purpose remains bound by it and may not pass freely to a merger partner; a cy-près scheme under the Charities Act 1978 (Vic) may be needed if the purpose can no longer be carried out.
- Grants. Funding agreements may require unspent money or funded assets to be returned or transferred as the funder directs.
Where members cannot pass the required resolution, or the rules do not work, the Supreme Court may be asked to make orders about the distribution.
Contracts, leases, people and grants
Even where the law transfers contracts automatically, landlords, funders, banks and suppliers should be told. Leases often need landlord consent to an assignment, and grants usually cannot move without the funder’s agreement.
For employees, a merger may engage the transfer of business provisions of the Fair Work Act 2009 (Cth), which can affect which industrial instrument applies and how prior service is recognised. Volunteers’ insurance and screening checks should also carry across.
ACNC and ATO notifications
A registered charity must notify the ACNC of changes such as its name, legal structure, purposes and responsible people, and request revocation of registration as part of winding up. The ATO and Australian Business Register need to be told, and DGR endorsement and tax concessions confirmed for any new entity. A merger or winding up may also have CGT consequences, and Victorian duty and land tax treatment should be checked. Advice from a qualified tax adviser is recommended.
Members’ and directors’ approvals, and disputes
Most of these steps need a board or committee resolution and then a special resolution of members on proper notice. Long-standing members may oppose a merger out of loyalty to the organisation’s history or concern about losing a building. Victorian courts can make orders to enforce an association’s rules, and company members have remedies for oppressive conduct, but litigation is costly and divisive.
Due diligence before a merger
Each organisation should understand the other’s governing documents, finances, titles, contracts, employees, grants, insurance, disputes and restricted gifts before committing. Gifts in Wills deserve attention: an amalgamation under the Victorian Act generally carries Will references across to the new association, but other mergers may not, so some organisations keep the old entity in existence to receive future bequests. Larger mergers may also need to consider whether the ACCC merger notification regime, mandatory from 1 January 2026 for acquisitions above set thresholds, applies.
Founder-held property
Many community halls and temples were bought decades ago in founders’ names, before incorporation. The title may still show individuals, some now deceased or overseas. Whether the property belongs to the organisation may depend on who paid, the minutes and the intention at the time. Resolving this can involve founders’ estates and heirs abroad, and is best done before any merger or wind-up.
A hypothetical scenario
Consider a Victorian hometown association with an ageing membership, a hall registered in the names of three founders, and a small DGR fund for scholarships. It is considering a merger. The issues may include the hall’s title, where the scholarship fund must go, which route fits, and members’ support. The right approach depended on facts that needed advice.
Questions to discuss with your adviser
- What do our rules or constitution say about amalgamation, winding up and surplus assets?
- Is any of our property held on trust, or in individuals’ names?
- Do we hold DGR gifts, restricted gifts or unspent grants?
- How will we consult members, and what if some object?
- How will future bequests reach the organisation after the change?
Frequently asked questions
How do you wind up an incorporated association in Victoria?
Generally, either by applying for cancellation if the association is small, has stopped operating and has no debts, or by a special resolution to wind up with a liquidator appointed.
Can you convert an association to a company limited by guarantee?
Yes. A Victorian incorporated association can generally transfer its incorporation and register as a company, but charity registration, ABN and tax concessions need careful handling.
Can a charity’s assets be given to members when it closes?
Generally not. Surplus assets usually must go to another not-for-profit with similar purposes, and DGR gifts to another DGR.
How we work with your board or committee
We work with the committee or board as a whole, and where a merger is proposed, with both organisations. We have worked with community, cultural and faith organisations on governance from the inside, including at board and committee level. Typical work includes choosing the route, preparing resolutions and constitutions, resolving title issues, and mediating between members.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates advises not-for-profits and charities in Victoria and across Australia on mergers, conversions, wind-ups and the property and governance issues they raise. Justin Chua is a Nationally Accredited Mediator and an Accredited Family Business Advisor. He trained in accounting (Bachelor of Commerce, accounting major). We work with the organisation’s accountant, registered tax agents and liquidators, and with lawyers in Asia where founders or their heirs are overseas, and advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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