Frequently asked questions

A CLG is a public company that does not have shareholders. Instead it has members. A CLG is an appropriate legal structure for larger non-profit and mutual (membership) organisations.

RAC currently operates as an incorporated association. The legislation that governs RAC is most appropriate for small not-for-profit organisations operating at a community level. While this model has been appropriate for much of RAC’s 120-year history, RAC has outgrown this form of legal structure.

A mutual organisation is one that has members rather than shareholders. Each voting member has no more than one vote.

Australian Unity issued MCIs in November 2020. Many other mutual organisations have included provisions in their constitutions to allow for MCIs.

Yes, the change will not have any impact on RAC’s status as a member organisation.

Yes, RAC’s status as a not-for-profit organisation does not change by becoming a company limited by guarantee.

No – RAC will not have shareholders if it becomes a company limited by guarantee. It will remain a member organisation (otherwise known as a mutual organisation).

Yes, you will be a member of the CLG. The constitution provides that any member who is a member of RAC immediately before conversion, becomes a member of the CLG.
Members agree to become members of RAC through purchasing or renewing a qualifying product, which will continue to be the case if RAC becomes a CLG.

No. Voting Members will keep the same voting rights at general meetings. If the conversion to a CLG goes ahead members’ powers will be strengthened. Refer to the Notice of meeting for a summary of members’ rights.

For RAC to convert to a CLG, a special resolution needs to be approved by not less than 75 per cent of the Voting Members present in person, entitled to vote and who cast a vote at the AGM in favour of the conversion. Following this approval by members, RAC will need to request the approval of the Commissioner of Consumer Protection under the Associations Incorporation Act 2015 (WA) and ASIC.

We’ll still be known as RAC, however our legal name will change from: “The Royal Automobile Club of W.A. (Incorporated)” to: “The Royal Automobile Club of W.A. Limited”

On conversion to a CLG the Council will be known as the Board, under the Corporations Act 2001 (Cth). Councillors will be known as Directors, with the number of directors being determined by the constitution.

Yes, the majority of directors will be elected. The constitution allows for a maximum of 9 directors, with 6 of those directors being elected by RAC members.

One important (but minor) change is that in a CLG, members have ‘limited liability’ in the unlikely scenario where the company is wound up. If this were to happen, each member (and each person who was a member in the 12 months before) may be requested to contribute a nominal amount (up to $1) towards the payment of any unpaid debts – known as the members’ limited guarantee. The amount is enshrined in the constitution and it cannot be changed.
All companies operating as CLGs are legally required to have this, with $1 being the amount provided in the constitution of many other CLGs.

It’s very unlikely RAC would be wound up – we’ve been around for more than 120 years, and we plan to be here well into the future. However, if this did happen, under the constitution each member is liable for up to the amount they have guaranteed (i.e. up to $1) towards the payment of any unpaid debts. The collection of the amount of up to $1 is typically administered by an external administrator and often, it is for them to decide whether it is actually feasible to collect the limited liability from each member. Members are not required to pay this amount upfront.

An MCI is a type of financial instrument created exclusively for Australian mutual (membership) organisations registered under the Corporations Act. Currently, RAC’s ability to access different and more cost-effective funding sources is constrained because we’re not a company registered under the Corporations Act. Our current sources of funding are limited to raising debt and using retained profits that we have built up gradually over time. While this has served us well up to now, it’s important for RAC to unlock all possible sources of funding available, should it need to do so, to continue to provide the best products, services and benefits to our members. The proposed conversion and changes to the constitution will expressly allow RAC to raise funds beyond existing sources without risking its mutual (membership) status. This provides additional flexibility for the RAC in the future.
It doesn’t mean that RAC will seek finance however MCIs provides the organisation with another way to raise funds (if we choose to do so), strengthening our financial standing and enabling us to bring greater value to our members. Many other mutual organisations in Australia have provisions in their constitutions to be able to issue MCIs, and some have taken up this form of funding. RAC will be a member owned mutual organisation regardless of whether it issues MCIs or not.

No, the changes are necessary because RAC has outgrown the Associations Incorporation Act which is intended to regulate much smaller, local clubs and community organisations in WA.