New Societies Act
The New Incorporated Societies Act 2022
The Incorporated Societies Act 1908 has governed the incorporation and administration of societies for over 100 years with the courts also adding legal guidelines for societies. Given that there are approximately 24,000 Incorporated Societies in New Zealand operating across a diverse range of activities, the law relating to societies needed focused attention. In short, a complex area of neglected law has been in need of modernisation and overhaul for considerable time.
The Law Commission has now undertaken a comprehensive review of the 1908 Act and how such legislation could best fit modern circumstances. The review took over three years between 2010 and 2013 and the report produced by the Law Commission has formed the basis of the new legislation.
The Incorporated Societies Act 2022 was signed into law in April this year. Much of the new Act will come into force progressively over the following 18 months, although in the meantime the 1908 Act remains in force until provisions of the new Act come into force by Order in Council.
The purpose of the new Act is to put in place a modern framework outlining the essential legal governance and accountability obligations for Incorporated Societies and those involved in their administration.
The key changes made by the new Incorporate Societies Act 2022:
Re-registration: All existing incorporated societies will be required to re-register with the Registrar of Incorporated Societies over the next transition period of 2 ½ years.
Constitution: Every incorporated society must have a constitution and that constitution needs to sit in harmony with, and not contradict, the new Act.
Dispute resolution. The constitution needs to include dispute resolution procedures that align with natural justice.
Committee: An Incorporated Society must have a committee of at least 3 officers who must be qualified to be elected or appointed.
Officers: Every officer must be a natural person who has consented in writing to be an officer and certifies that they are not disqualified from being elected or appointed or holding office as an officer of the society.
Disqualification of officer: A person may not be an officer of an incorporated society who:
is under 16 years of age;
is an undischarged bankrupt;
is disqualified under the Companies act 1993, the Financial Markets Conduct Act 2013, or the Takeovers Act 1993;
is disqualified from being an officer of a charitable entity under section 31 (4)(b) of the Charities Act 2005;
has been convicted of certain criminal offences and has been sentenced for the offence within the last seven years;.
is subject to certain orders under the Credit Contracts and Consumer Finance act 2003, Criminal Proceeds’ Recovery Act 2009 or the Protection of Personal and Property Rights Act 1988
does not comply with any qualifications for officers that are contained in the society’s constitution.
Officers duties: Officers make up the committee that is tasked with the role of managing, directing, and supervising the operation of the affairs of the society.
Officers must, just as Company Directors must:
act in good faith and in the best interests of the society.
exercise powers for proper purposes only.
comply with the Act and the Constitution.
exercise reasonable care and diligence.
not create a substantial risk of serious loss to creditors.
not incur an obligation the officer does not reasonably believe the society can perform.
Membership: A minimum of 10 on going members (no longer 15) is required.
Contact Person. At least one contact person must be available to the Registrar of Incorporated Societies as a point of contact and communication. A contact person does not need to be an officer but must be a member.
Financial statements and audits: Incorporated societies must now file financial statements and meet audit requirements with a qualified auditor as defined by s36 of the Financial Reporting Act 2013.
Annual Return: Now required to be filed annually.
Amalgamation: Societies may now amalgamate through a similar process as the amalgamation of companies under the Companies Act. Previously amalgamation was not possible.
Offences: Providing for certain criminal offences such as making false statements, fraudulent use or destruction of property, falsification of documents, defrauding of creditors, improper use of Incorporated or its Te Reo equivalent ‘manatopu’ and breaching of a banning order.
Annual General Meetings must be held within 6 months of the society’s financial year end.
Next steps?
Begin the re-registration process which must be completed by the latter of 1 December 2025 or the date which will be two years and six months after certain transitional provisions in the Act commence.
Prepare an updated constitution to accompany the application for re-registration that complies with the new legislation.
Either choose to adopt Schedule 2 of the new Act or formulate dispute resolution procedures that work in harmony with the new legislation in your constitution. The threshold of natural justice must be met.
Elect the committee, which will be made up of at least 3 officers, this is an essential requirement of the new legislation.
Membership will need to self-assess whether or not they are qualified to stand as officers. Remember, an officer needs to certify that they are qualified. They also need to give their written consent.
Review the membership process to ensure you have the consent of each member to join and the written consent of a member who becomes an officer.
Develop a budget that will cover the new higher standard expected for the accounting aspects of as well as considering indemnity insurance and in particular for officers.
Be aware of the timeline requiring the AGM to be held six months from the end of the financial year as well as financial reports filed with Registrar.
Given the new financial standards a society must decide whether it qualifies as a small society and if not, they need to appoint an auditor.
Auditing annually for all societies not just the charities.
Decide upon whether they are a not-for-profit entity upon which surplus assets will be distributed to upon the winding up once all debt is paid. This entity must be named in the constitution.
Decide who the contact person(s) will be. They do not need to be an officer but must be a member.
Annual Returns must be filed- unlike the 1908 Act.
Maude & Miller can assist with the re-registration process, ensuring your constitution will meet the new requirements and any other questions you may have around the 2022 Act.