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...