Topics covered in this article: Incorporated Societies
Overhaul on the horizon for the Flat Earth Society... and all other New Zealand clubs and societies.
New Zealand laws governing incorporated societies are soon to be given a long overdue update. This means that all clubs and societies in New Zealand – regardless of their outlook on the world – will need to make changes in order to comply with the new regime.
In 1908 the Incorporated Societies Act became law in New Zealand. This important piece of legislation sets out certain matters that must be included in the rules of a society. It also allows an incorporated society to run its affairs as an individual, and removes any personal liability from members (e.g. for debts or obligations). In layman’s terms this means that a club or society can run its affairs as a single legal entity and in doing so limit the individual liability of its members – in much the same way as a company operates.
In New Zealand there are a wide range of groups and organisations that have become incorporated societies. These include sports clubs, social clubs, music and cultural groups, special interest and activist organisations. At Cooney Lees Morgan we act for a wide range of charitable and non-charitable (not-for-profit) clubs and societies, from sports clubs right though to large organisations such as Kiwifruit Vine Health Inc which is the agency responsible for pest and disease management and response for the kiwifruit industry.
Given that over 100 years has passed since the current Act first became law, and the world we live in has changed considerably during that time, we were pleased to learn that the regime is about to undergo a complete overhaul. Many clubs and societies are now large and sophisticated organisations, and in general, the standards of governance and accountability that we expect from those in positions of responsibility in those organisations are higher. It’s it current form, the Act does not provide the levels of governance standards and accountability that we expect in the modern world.
A draft bill has already been published and it is likely that the Act will be passed substantially in this form within in the next two years. Under the new legislation every incorporated society will need to have a new constitution that complies with the requirements of the new Act. There will be a transition period, giving time for societies to get their constitution in order and to re-register under the new regime.
The new Act will be more prescriptive in terms of things that must be included in the rules of an incorporated society. Mandatory provisions will include:
- Procedures for member grievances and complaints (which must meet a minimum standard set out in the Act).
- How the Register of Members will be kept up to date and whether (and if so, how) the members will have access to the Register of Members.
- How the society will control and manage its finances.
- Composition, roles and functions of the management committee.
- More detail around the Annual General Meeting (AGM), including the information that must be presented at general meetings and when minutes are kept.
- How a contact officer will be elected/appointed.
- Nomination of a not-for-profit entity, or a class or description of not-for-profit entities, to which any surplus assets of the society should be distributed on liquidation or removal from the register.
The new Act includes provisions designed to highlight the importance of good governance. For example:
- Societies will need to be governed following similar good governance principles applicable to company directors.
- Society officers will need to meet certain criteria (similar to charities officers and company directors) and will be subject to duties along similar lines as directors’ duties – including a requirement to disclose and manage conflicts of interest.
- Officer indemnities will be limited along similar lines as officer indemnities under Companies law.
Whilst the Flat Earth Society might not welcome the new legislative changes on the horizon, we believe the new Act will drive a significant improvement in the standards of governance and accountability in this increasingly important sector of our society and our economy.
Incorporated Societies should start thinking now about how they will go about complying with the requirements of the new Act. If you want to find out more please don’t hesitate to get in touch with us. Phone (07) 578 2099 or email email@example.com.