What is an incorporated society?
An Incorporated Society is a not-for-profit organisation often used by cultural and religious groups, sports and social clubs, special interest, and activist organisations. As a separate legal entity, an Incorporated Society is better able to enter into contracts and own assets, while allowing its members to have limited liability protection.
What is changing for incorporated societies?
In New Zealand, all Incorporated Societies are currently registered under the guidelines set out in the Incorporated Societies Act 1908. As you may expect from the date of the Act, updates have been discussed for a very long time. Finally, the new Incorporated Societies Act 2022 will replace the current legislation to modernise and allow for more practical guidance, as well as to bring the duties of incorporated society officers more in line with the duties of Company officers.
Thankfully, there is a generous transition period of several years before each incorporated society is expected to comply with this new legislation. Given the existing legislation is over 100 years old, some will welcome the update - however, these changes will also result in plenty of remedial work required for each of the 24,000 incorporated societies already present in New Zealand.
Top 3 things you should know about the incorporated societies bill:
All incorporated societies will need to re-register: there is a grace period under the new Incorporated Societies Act 2022 where all societies have until April 2026 to re-register as an Incorporated Society. After this time, any non-complying societies will face deregistration.
New Requirements for all officers of an incorporated society: Officer's duties will be similar to obligations placed on company directors under the Companies Act 1993. Specifically, officers will need to:
Exercise their powers in good faith and for a proper purpose.
Exercise care and diligence when making decisions.
Comply with the new Act and the constitution.
Avoid situations that could cause financial loss to the society.
Avoid conflicts of interest between the society's interests and their own.
Criminal penalties are also included for dishonesty offences, along with factors that will disqualify a person from holding office in an incorporated society.
An incorporated society must have a constitution compliant with the new Act:
A constitution must contain provisions regarding the committee's structure, powers, roles and procedures that align with the new Act's requirements. For example, a society must have dispute resolution procedures.
It's envisaged that no current incorporated society will be up to this standard, and thus, a lot of work will be needed to comply. While time is on our side, all sports clubs, Kapa Haka groups, bridge clubs, tramping clubs, environmental groups and other organisations using an incorporated society will need to seek legal advice.
If you are concerned about what these changes might mean for you, and to check if your incorporated society will meet these new standards - do not hesitate to contact solicitor Sharnae Aben - sharnae@iclaw.com or associate Isaac Whatnall - isaac@iclaw.com.