Why write about not-for-profits? A personal view.

Change is always with us With the change of ownership of NZ Lawyer I do not yet know whether this series of articles will continue, but if there is one constant in life – for each of us and for not-for-profits – it is that change is always with us, and we must change to adapt to that changing world. Should we all know more about Not-for-Profits? Feedback informs me that readers of this series of articles have read them for a variety of reasons. I know that many lawyers (and judges) read them, and the reasons are simple; almost all lawyers are asked to advise on or get involved in governance of not-for-profits, no matter the area of law they practice in, and they learned nothing much about not-for-profits at law school. A wide range of folk in the community also read these articles, as emails and phone calls I have received from all over the country attest. Certainly the Law Commission believes not-for-profits are important (see its recent Report at page 3): New Zealand has over 23,000 incorporated societies spanning a diverse range of interests and purposes. Approximately 45 per cent of them are cultural, sporting and recreational bodies. The remaining 55 per cent comprise a broad range of community activities, including social service providers, religious groups, development and housing bodies, educational and environmental interest groups, and business and professional groups. These community organisations play a very important role in New Zealand society. Together they are often referred to as the not-for-profit sector or as the “third sector”, existing alongside the private (for profit) sector and the public (or...

Law Commission Report – Legal Dealings of Incorporated Societies

Updating the Legislative Provisions Act Corporate Capacity of Incorporated Societies The introductory two sentences of the Law Commission’s chapter on this issue succinctly states its position “Gaining a separate legal personality is at the heart of why societies incorporate. In this chapter we recommend changes to the Incorporated Societies Act 1908 to bring it into line with modern models of incorporation.” Limitation of Liability The Commission recommends that, as in section 13 of the 1908 Act, “The statute should provide that a member is not liable for an obligation of the society by reason only of being a member. The provision should be aligned to that in s 97 of the Companies Act 1993, with the necessary changes.” It recommends a new provision, that “The statute should expressly allow societies to indemnify members and employees who act in good faith in pursuance of a society’s activities, and allow societies to take insurance, if they so wish, for the purposes of that indemnity.” Corporate Capacity At present, incorporated societies only have such legal capacity as is conferred by statute and their constitutions. Drawing on the New Zealand Companies Act provisions and British Columbian legislation the Commission recommends that incorporated societies should have all the powers a of a natural (human) person with some further clarification: The statute should provide that a society has full capacity to carry on or undertake any business or activity, do any act or enter any transaction. The provision should be aligned to that in s 16 of the Companies Act 1993, but it should also state, for avoidance of doubt, that a society has the...

Law Commission Report – Establishing and Registering Societies

Status Quo The Law Commission concluded that the existing system for establishing and registering societies is working reasonably well, but recommends some improvements. Minimum membership As the Commission observes “A minimum threshold requirement … is inevitably somewhat arbitrary.” Why section 4, Incorporated Societies Act 1908 set the minimum number of members for a new incorporated society at 15 is anyone’s guess, notwithstanding the fact that there are 15 players in a rugby team. The Commission concluded “that the requirement to maintain a minimum number of members should be clearly stated to apply throughout a society’s existence as a body corporate. If being a membership-based organisation is important, it remains important once a society has been incorporated and commences operating. If the requirement is not on-going then there could even be a possibility of sham or shell incorporated societies. In our view the scheme of the Act is to permit the incorporation and operation of membership-based societies. An on-going requirement to maintain membership at or above the specified minimum level is a necessary part of this scheme.” This “strikes a balance between increased flexibility for small sport and hobby societies as well as social service organisations, while ensuring that incorporated societies remain membership-based.” The Commission’s recommendations are: The minimum membership requirement for incorporation of a society under the new statute should be 10 members, with 10 applicant members to be named on any application for incorporation. Corporate members should continue to count as three members. The statute should provide that: the minimum membership requirement continues after incorporation; a society that falls below the 10 member requirement is not automatically deemed...