by Anna Neil | Nov 27, 2017 | Societies and Charities Articles |
2010 Article, updated November 2017 Anyone for tennis? Just before the out-of-town bach owners and holidaymakers increased the population of Pauanui on the Coromandel Peninsula for the Christmas holidays, on 16 December 2010, the High Court in Hamilton issued a judgment in Reeves & Hartstone v Pauanui Sports and Recreational Club Inc (CIV-2010-419-1599). The decision made no new law and is not otherwise greatly noteworthy (other than for those who own property at Pauanui or enjoy its facilities), but it highlights a number of points about the operation of community organisations and what can be done when things go wrong. Pauanui Sports and Recreational Club Inc The society, with a membership of between 1,400 and 1,500, was well-established, and its purposes were to foster sporting, recreational and cultural activities at Pauanui. The society owned a number of properties there, and proposed to sell its tennis courts at Gallagher Park Lane to fund refurbishment of its principal building elsewhere, alleging that the tennis courts were under-utilised, in poor repair, and subject to vandalism. The plaintiffs opposed the sale, asserting that the tennis courts were an important, well-used facility. The power of an interim injunction As is common, the High Court proceedings were prompted by the Society’s proposed actions, and an urgent hearing was required because a tender for the sale of the tennis courts was to close on 17 December 2010, the day after the hearing. The Court was satisfied that the society’s processes were defective and an interim injunction was granted to stop the tender process. The Court, of course did not consider the merits of the arguments about whether or not...
by Anna Neil | Nov 27, 2017 | Societies and Charities Articles |
2010 Article, updated November 2017 Issues The first interview with people wanting to form a society is usually interesting, as there are issues to be discussed they have never thought of. Generally, I try to avoid getting into details immediately, as I think it is important to understand what may be required by exploring: What the organisation is doing and may do in the future, Whether the organisation will make commitments or incur risks that make an incorporated entity desirable to manage personal financial risks for members (especially the executive), How the entity is governed and managed, to ascertain whether a democratic entity is involved or whether a trust might be more suitable, How complex and extensive the entity’s operations may be, and What ideas and expectations the interviewees have. What form of legal entity? Whether an entity should be a society or trust depends largely on the extent of involvement of the “members” in its governance and choice of executive. If a democratic model is desired then a society is usually the best model, although a trust’s trustees may be selected by election. The nature of the possible choices may be illustrated by an example. If the formation of an entity to control a performing cultural group is being considered there are different options, including: If the group takes “all comers,” with all welcome, then the best governance model is likely to be a society, with a traditional form of membership, annual meetings of members, elections of the governing executive, and day-to-day governance (and, usually, management) handled by the elected executive. If members are graded in some way by...
by Anna Neil | Nov 27, 2017 | Societies and Charities Articles |
2011 Article, updated November 2017 Big brother is interested It should come as no surprise that the State has an interest in the winding up of societies and charitable trusts, as noted in Hunt v Border Fancy Canary Club of NZ (Inc) (2000) 8 NZCLC 262,140, para [30]: The Incorporated Societies Act 1908 [and the Charitable Trusts Act 1957] governs the conduct of non-profit associations. The purpose of the Act is to establish a state-controlled system of registering and controlling non-profit making associations and providing for the dissolution and winding up of those associations. . . . The power to wind up [a society] rests with the majority of members at a general meeting or the High Court. Alternative ways of winding up a society or charitable trust There are three main different ways an entity may be dissolved or wound up: Registrar’s dissolution, Members voluntarily liquidation, and High Court liquidation. Registrar’s dissolution The Registrar’s attention is drawn to a society incorporated under the Incorporated Societies Act if it fails to file its annual financial statements. In such a case, or where after an enquiry or for other reasons the Registrar concludes that a society incorporated under the Incorporated Societies Act or an entity registered under the Charitable Trusts Act is no longer in existence, the Registrar may dissolve the society by notice in the Gazette, the effect being to strike the entity off the Register (see s 28, Incorporated Societies Act, or s 26(1), Charitable Trusts Act). There is a right of appeal under s 34B to the High Court after Registrar’s dissolution, but where the dissolution is under the Charitable Trusts Act...
by Anna Neil | Nov 24, 2017 | Societies and Charities Articles |
2010 Article, updated November 2017 Definitions – Audits and Reviews According to the (former) New Zealand Institute of Chartered Accountants website in 2011, an audit is an engagement: where an independent expert, the auditor, provides an opinion on “a matter of accountability” (the subject matter), where the “matter of accountability” is the responsibility of someone else (usually the management of the entity, and which is designed to provide a high, but not absolute, level of assurance on the subject matter. In contrast, a review engagement is designed to give the reader of financial statements limited assurance on the information. It is an independent examination of information, It requires enquiry and analytical procedures to assess the information, The reviewer needs to have a level of knowledge of the organisation in order to be able to identify the events and transactions that may have a significant effect on the financial statements, A review provides a moderate level of assurance on the subject matter. Community auditing A generation or so ago most community organisations had their accounts audited. There used to be retired accountants, bank managers and trust officers around who would do this as a community service, usually rewarded with a bottle of whisky or a dozen beers. Those days are well-past, and there is an ever-diminishing number of accountancy firms prepared to do audits, especially on a pro bono basis. The cost of auditing is now a significant burden on community organisations. An experienced auditor of community organisations provided me with a snapshot of the problems involved in such audits – “sets of accounts (and rules) that are frankly hopeless,” and...
by Anna Neil | Nov 24, 2017 | Societies and Charities Articles |
2010 Article, updated November 2017 What societies and charitable trusts should do when mistakes are alleged or identified was discussed in We Made a Mistake. This article looks at the reverse side of that discussion. Despite the best of intentions (but sometimes with malice aforethought) entity governance or management often falls short of what is legally required, but the institution may be unwilling or unable to address its alleged shortcomings – perhaps because the allegations are considered to be unjustified, seem insurmountable, arise from lack of organisational skills, or are consequent on personal greed. The skills and abilities of those who govern, manage, or benefit from community entities are very varied. However, as I observed in the previous article, people involved in societies and charitable trusts can get very emotional and passionate about perceived problems. Many such community entities attract some who are lonely, lack social skills, or are vulnerable in some way, and many of these people have plenty of time to devote to making life miserable for those who control an organisation. Much of what I said in the last article is relevant to the advice that needs to be given to those who allege mistakes by others in the governance or administration of a society or charitable trust. The first priority is to ascertain the facts and how they may be proved and consider those facts having regard to the entity’s constitution and relevant legislation (particularly, if the entity is incorporated, the statute under which it is incorporated). Once this is done there are a number of options to consider: Writing to the organisation’s governing body...
