Charitable Gifts to Non-Charities

2011 Article, updated November 2017 Is there a problem? There are a number of charitable institutions that will not, as a matter of policy, make grants or gifts to entities that are not also recognised or registered as charities.  This has always struck me as a possibly “over-the-top” approach, perhaps demonstrating some lack of sophistication in the screening of grant applications.  Even if the donee is a registered charity, poor donation decisions can still be made which may cause trouble. I believe there is nothing inherently wrong if a charity makes a gift, grant or donation to a non-charity as long as that gift, grant or donation is made and used for a charitable purpose.  Of course, if the donee is not accepted as having “donee status” by the Inland Revenue Department (see below), the donor may not be able to obtain revenue advantages from the donation. If a donor charity declines to give to any entity unless it is also charitable, that still begs the question of whether its gifts will actually be used for charitable purposes. Analysing the issues Problems can arise because of the uncertainties that arise after any gift, grant or donation is made.  It is inescapable that those potential problems still exist even when money is given to a charity; every donee needs to be taken on trust that they will use the gift, grant or donation for the intended charitable purpose.  In Audits or Review of Accounts I referred to the inherent limitations in any audit or verification process – “no auditor is able to supervise every transaction to ensure that money received does...

Privacy of Society and Charity Records

2011 Article, updated November 2017 The problem – ignorance about the Privacy Act 1993 For many lawyers and other professionals the implications of the Privacy Act 1993 are scarcely “top of mind,” or particularly well-known and well-understood.  Briefly, the Privacy Act controls how what are called “agencies” in the Act collect, use, disclose, store and give access to “personal information.”  An “agency” is “any person or body of persons, whether corporate or unincorporate, and whether in the public sector or in the private sector …” so the Act clearly covers incorporated and unincorporated societies and charities. In response to my request for topics for this series of articles some years ago, a staff member at the Privacy Commissioner’s office advised me that they receive a number of complaints about how small organisations like charities and societies handle privacy issues such as requests for personal information.  Such privacy issues usually arise in the context of disputes between members, or between the committee and members.  As is normal with most community organisations, the committee and officers are usually volunteers and don’t know what to do and, frequently, make a mess of things. Clearly, knowing about the Act and what to do about privacy issues should save amount of time, anguish and stress. So what is “personal information” under the Privacy Act? Anything about an identifiable, living human being is personal information, and it doesn’t have to be in any way sensitive or “private.”  For societies and charities personal information may include information about members and former members (name, home, postal and email addresses and phone numbers, offices held, awards, skills, references, and photographs), but...

The Quorum for Meetings

2011 Article, updated November 2017 There are often misunderstandings about the rules which apply to the quorum for a meeting (the minimum number of members that must be present at a meeting). General principles As it may be difficult to attract a majority of members to the meetings of some organisations, the quorum is commonly set at a fraction (less than half) of the membership, or at a fixed number of members. However, for an organisation’s executive committee it is common to find the quorum set at one more than half the number on the committee.  When a subcommittee is established the quorum will be all members of that subcommittee, unless a different quorum is prescribed in the rules or when the subcommittee is constituted.  While unusual, one person may be appointed as a committee or subcommittee if the wording of the relevant rules allows this (Re Taurine Co (1883) 25 Ch D 118 (CA), cited with approval in Green v Meltzer, Court of Appeal, CA153/92, 7 April 1993, by McKay J). A public meeting, of course, has no quorum. At any time during a meeting, any member or the meeting chairperson, may question whether a quorum is present. Such a “call for a quorum” takes precedence over all other business.  If there is no longer a quorum the meeting is said to be “inquorate” and unless absent members can be called back into the meeting it must be closed and the reason for the closure noted in the minutes. The Local Government Act 2002 and other statutes have special rules for statutory bodies, but for community organisations reference should...

“Clear days” – Trouble at the Courts – anyone for tennis?

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...

Types of Society

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...