An incorporated society is a popular structure for members
pursuing shared cultural, sporting, recreational, community,
religious or educational interests. Incorporated societies must
have at least 15 members (note that a corporate body counts as the
equivalent of three individual members). The key feature
distinguishing an incorporated society from other business
structures such as a company is that it must not distribute profits
or financial benefits directly to its members. An incorporated
society is allowed to run a business, provide benefits to members
and the public and reimburse members for reasonable expenses, but
the members should not have an ownership interest in the society or
Incorporated societies are currently governed by the
Incorporated Societies Act 1908 (Act) and the society's rules
(or constitution). It is intended that societies should be largely
self-governing and free from inappropriate state interference.
Thus, the Act provides a broad framework, allowing each society the
flexibility, through its rules, to operate in furtherance of its
particular structure, culture and goals.
Recommendations for new Act
The proposed legislative overhaul will seek to refresh and
modernise a very old piece of legislation (the current Act still
refers to fines in terms of pounds and shillings) and fill some
gaps where the Act is deficient. In particular, the Act lacks
guidance about how disputes within societies should be resolved and
about the obligations of the officers running societies.
We set out below some of the key recommendations for reform:
That the minimum membership requirement be cut from 15 members
That every society be required to have a committee of officers
to make decisions and run its affairs, including one person to be
the society's statutory officer.
That the new Act contain a list of officers' duties along
the lines of directors' duties in the Companies Act 1993 and a
set of rules governing the disclosure and management of conflicts
That the new Act contain an expanded list of statutory
requirements for the content of every constitution and the
introduction of a model constitution containing all of those rules
required by the new Act.
That every society must have rules in its constitution to
provide procedures for the resolution of complaints about
misconduct and discipline of members and about grievances brought
by members concerning their rights or interests as members.
That members may resolve to liquidate a society at a single
meeting, rather than the current double meeting requirement, but 30
days' notice of a motion to liquidate would be required.
The deletion of the current provision that members will not be
deemed to be associated for pecuniary gain merely because they are
entitled to a share of society property on dissolution. This is in
conflict with the fundamental rule that a society must not operate
for the pecuniary gain of its members. The new Act should provide
that any surplus assets on dissolution should be distributed to
another incorporated society, charitable trust or not-for-profit
entity that is prevented from distributing its surplus assets to an
What this means for current societies
When the proposed changes come into effect, every current
society will need to check that its constitution complies with the
new requirements. Amending a society's constitution can be a
lengthy process, so there will probably be a transition period to
allow those societies which require amendments to their
constitutions sufficient time to comply. In the meantime, members
setting up a new incorporated society should consider the Law
Commission's recommendations when drafting their constitution
and considering their governance structure.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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