“Purposes Drift” in Not-for-Profits

When a group of people decide to form a not-for-profit entity there are many things to consider, such as whether the entity should be a charity or society, what sort of constitution will suit it, and what its purposes should be. My experience indicates that too great a degree of rigidity in defining the purposes (whether of a society or a charitable trust) will cause problems. Conversely, too great a degree of flexibility may also cause problems. There has to be a “happy medium” somewhere. Tightly confined purposes Having very restrictive purposes will prevent many not-for-profits evolving with experience, with changes of personnel, and by adapting to changes in society. I recall one charity formed almost than 40 years ago, where the original motivation for its formation was to provide support for single unmarried mothers. The purposes adopted were somewhat broader than that, and that charity’s actual activities have evolved over time to provide a broader range of social and counselling services for adults and children struggling to cope in different ways. Subsequent amendments to the charity’s purposes have extended them to cover charitable purposes in New Zealand whether relating to the relief of poverty, the advancement of education, the advancement of religion, or any other purpose beneficial to the community, followed by examples reflecting the original more confined objects as well as specific, broader purposes. Flexible purposes The converse is to adopt purposes that are very flexible and possibly rather vague, but this means a not-for-profit may lack a defined focus for its activities, and may also enable hijacking of the entity by folk wanting to pursue their...

Determining Who Becomes a Member of a Society

Initial Members To adopt a constitution before incorporation a society normally has a meeting of members. Patently, there can be no society without members, so those who were members at the time of adoption of the rules and the decision to incorporate (usually decisions made at the same meeting), whether or not present at the meeting, must be existing members when a society incorporates. Section 4(2) states that “No such application shall be made except with the consent of a majority of the members of the society,” while s 7(2) (b) requires confirmation “that a majority of the members of the society have consented to the application, and that the rules so signed or sealed are the rules of the society,” and both sections appear to assume that others may be members but may not have signed the application to incorporate. Under section 7(1)(a), Incorporated Societies Act 1908, it must be “signed by not less than 15 persons being members of the society” (noting that s 31 provides that “every corporate body that is a subscriber or member shall be taken as the equivalent of 3 subscribers or 3 members, as the case may require,” but the Charitable Trusts Act 1957 has no provision). Any member who signs the incorporation is described in ss. 7(3) and 10 as a “subscriber.” However, in reality the subscribers are usually only the minimum required to obtain society registration. In my view, therefore, nothing can be read into who signs or does not sign the application for incorporation, and no special status is accorded to those who actually sign the application for incorporation....