What is the new bill about?
From the Taupo Mountain Bike Club to Deaf Aotearoa to the Lindis Pass Conservation Group, incorporated societies are said to "make a significant contribution to New Zealanders' wellbeing." 1
Over 113 years have passed since the current 1908 Act was enacted and so the new legislation is hoped "to put in place a modern framework of basic legal, governance, and accountability obligations for incorporated societies and those who run them."2
There are many changes in respect of governance structures and arrangements that board and committee members will need to understand.
What are the key changes proposed under the new law?
- Capacity: subject to a society's constitution, societies will have the full capacity, rights, powers and privileges of a natural person at law
- Minimum number of members: the number of members societies must have to be able to incorporate and maintain their incorporated status is reduced from 15 to 10 members
- Consent to membership: people must expressly consent to becoming members of a society, it is not automatic
- Constitution: the new bill outlines what a society's constitution must include, such as how a person may become, or cease to be, a member, the powers and function of the board/committee, how the society will control and manage its finances, members' rights to access certain information and a disputes resolution procedure to deal with disputes between members, and disputes between members and the society;
- Officers' duties: the new bill codifies case law that committee members owe fiduciary duties to their societies, similar to those imposed on directors under the Companies Act 1993;
- Contact person: every society must have a least one contact person who is a New Zealand resident and over 18 years old
- Financial gain: a society must not operate for the financial gain of its members. The new bill sets out circumstances in which this rule will not be breached such as reimbursing members for reasonable legitimate expenses, or paying them for services on arm's length-terms
- Financial reporting: there is a new tiered reporting regime based on the size of the society or where they are not already subject to statutory reporting requirement
- Amalgamation: under the current 1908 Act restructuring options for societies are limited so the new bill provides for the amalgamation of two or more societies.
Will there be a transition period?
Yes, the proposed final transition date will be the later of 1 December 2025; and the date that is 2 years and 6 months after it is no longer possible to apply for incorporation under the 1908 Act.
To transition to the new regime, you will need to comply with, and reregister, under the new Act. This transition period will allow time for societies to review their constitution and governance framework, and make any necessary changes to ensure they comply when they reregister.
If by the end of the transition period a society has not reregistered under the new regime or has not applied to reregister, then the society will cease to exist. The society would need to apply for restoration under the new regime.
1 Explanatory note to the Incorporated Societies Bill 2021
2 Explanatory note to the Incorporated Societies Bill 2021
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