Law Commission Report – Personal Gain for Society Members

The Dilemmas Benefits to members, in themselves, are not inappropriate for a society or indeed a charity if those benefits are non-monetary or intangible (see Canterbury Orchestra Trust v Smitham [1978] 1 NZLR 787 (CA) and Royal Choral Society v Commissioners of Inland Revenue [1943] 2 All ER 101 at 104–5 (CA)). When benefits become tangible some dilemmas arise. The 1908 Act contained what the Commission records as the “important innovation of drafter John Salmond [which] has been copied in other jurisdictions.” The Report records that “It appears from parliamentary debates that the particular issue that gave rise to the enactment of the 1908 Act was the inability of the Victoria University College Students Association to incorporate to run a hostel. This was presumably because of an intention to charge board for those staying at the hostel. This resulted in ss 4 and 5 of the 1908 Act, which allow incorporated societies to essentially trade so long as the profits of that trade are not to be distributed to members.” A distinction is drawn in some countries between “member benefit” and “public benefit” societies. The Law Commission’s Report noted that reaction to the possibility that we might adopt that model “was somewhat mixed. Just over half of submitters thought it inadvisable to divide societies on this basis because many societies had both objectives and benefits to members and to the public, which cannot always be clearly separated. Most saw little value in the distinction, especially as public benefit is considered in determining whether a society has a charitable purpose and so can be registered as a charity.” The Commission...

Law Commission Report – Types of Incorporated Societies

A Diverse Range of Incorporated Societies The Law Commission’s Report, “A New Act for Incorporated Societies” records that “It is clear from Hansard that the original 1895 Act and the 1908 Act were intended to cover what might be referred to as members clubs. What the Act’s drafter, John Salmond could not have anticipated is the sheer diversity of bodies that have come to be incorporated as incorporated societies.” The Report refers to societies such as national sporting bodies that are responsible for multi-million dollar budgets, racing clubs that organise major events, social service organisations that provide services to the community rather than necessarily providing services to their members, health-based organisations that provide services to the general public or those affected by a particular condition, or support those who are caring for those with particular conditions, professional bodies that may have a quasi-regulatory role like Law Societies, private clubs, industry groups that may represent particular industries or coordinate participants in a particular industry, and small sporting, hobby or community groups that may, or may not, have assets. As the Report goes on to say: This very diversity makes it difficult even to talk of the statute currently covering a single not-for-profit sector. In fact it currently covers, and we recommend generally it continue to cover, this broad range of organisations (so long as the individual societies adhere to the essential characteristics of the incorporated societies model). The traditional clubs and associations that perhaps were the object of the original 1895 Act and the current 1908 Act focus on the needs of their particular members, while social service or health...