Protecting the Destiny of a Society

I have previously written of the need for members of a society to exercise vigilance if they are to protect or control the destiny of their society (see for instance, “Trouble at the Courts – anyone for tennis?”).  The ease by which the balance of democratic power can be tipped is illustrated by the facts of a recent High Court decision, in this case involving the formation of new branches of a “federated” society (the Māori Women’s Welfare League).  Many societies struggle to attract new members, so increasing the membership by a third would normally be a cause for rejoicing.  As illustrated by the following text from the judgment in Tamaki v The Māori Women’s Welfare League Incorporated, CIV-2011-485-001319, High Court, Wellington, 21 July 2011, Kos J, that is not necessarily so: The sudden addition of over 900 new members in one fell swoop was a singular event for the League. Its membership has lain within the range 2500 to 3000 throughout the last 10 years. … the evidence regarding the formation of the new branches gives me considerable disquiet regarding their legitimacy. I summarise my concerns as follows: (a)   All branches were formed on the same day, 4 June 2011. (b)   The inaugural meetings were held at the same location, … the Auckland headquarters of the Destiny Church. (c)   That date and location coincided with the annual conference of The Destiny Church. In other words, the meetings were held within the aegis of The Destiny Church’s annual meeting, rather than of the League. (d)   The meetings, all 10 of them, were held at precisely the...

Reforming the Not-For-Profits Statutes – Liquidation, Dissolution, Mergers and Transition

This is the last of my series of articles on the Law Commission Issues Paper (NZLC IP 24) the first having been published on 15 July. Question 38: Have you experienced problems with the liquidation or dissolution provisions? Question 39: In what ways can the procedure for liquidation and dissolution be improved? Question 40: In particular, should the double meeting requirement for members’ liquidation be altered? Questions 38, 39 and 40 are fairly open-ended, probably because the last acts of most societies cause few ripples in legal ponds.  My response is that the present provisions work pretty well.  Section 24(1), Incorporated Societies Act, provides that “A society may be put into liquidation if the society, at a general meeting of its members, passes a resolution appointing a liquidator, and the resolution is confirmed at a subsequent general meeting called together for that purpose and held not earlier than 30 days after the date on which the resolution to be confirmed was passed.” The rationale for the double meeting requirement is to avoid liquidation occurring without all members having the opportunity to reflect on the wisdom of winding-up. In practice, however, once members lose enthusiasm for maintaining a society, expecting them to meet once, let alone twice, does cause practical difficulties in achieving a quorum. Question 42: Should there be a provision for mergers of societies? In practice, at present mergers are achieved either as a take-over of one society by another, or the formation of a new society with the two former societies transferring their assets to the new society. This is frequently a costly business. I favour a...