Be Prepared – Incorporated Societies Law Reform

January 2015 Article, updated June 2018

According to comic Tom Lehrer, “Be Prepared” is the Boy Scouts’ marching song.  That clarion call should now be resounding in the ears of all societies and New Zealand lawyers as replacement of the Incorporated Societies Act 1908 looms (possibly 2020).

All lawyers, whether or not in private practice and whatever their legal specialty, are fair game if they are associated with a not-for-profit organisation – lawyers are asked to join committees and people assume we know the law, including law we have never looked at.

According to the website of the Registrar of Incorporated Societies, at 30 June 2013 (the latest information I could locate when this article was originally written) there were 24,476 registered incorporated societies and 21,782 registered charities (charities which are either trusts or societies registered under the Charitable Trusts Act 1957 – the numbers of each are not known).

Given that there were, respectively, 802 and 747 new registrations in the 20123-2013 period, and allowing for some dissolutions, by now we may have around 28,000 registered incorporated societies and 25,500 registered charities (both trusts and societies).

Those charitable societies registered under the Charitable Trusts Act 1957 (perhaps around a quarter of registered charities registered under that Act) will be transferred to the new incorporated Societies Act regime.

Constitution review

This all means that we may now have over 34,000 incorporated societies whose constitutions will need to be reviewed in the proposed 4 year transitional period after the new Incorporated Societies Act is passed.

According to “Snapshot of the Profession” at 1 February 2018 (28 February 2014) we have around 7,690 lawyers in private practice in New Zealand.

If you look only at law firm principals and sole practitioners (other barristers) there may be potentially about four societies per principal and sole  practitioner seeking advice after the new Incorporated Societies Act is enacted.

However, if you assume that practitioners who spend over 50% of their time dealing with company and commercial practices are most likely to be asked for assistance in revising incorporated societies’ constitutions, then those people may each have six to seven societies seeking such advice.

Is the legal profession, adequately equipped to provide that advice?  Does it have the ability to rise to the challenge of helping societies review their constitutions in the transitional period after the new Act is passed? Those are serious questions to which I have no answers, but I suspect that the answer may be “no”.

Concerns

I have the following concerns:

  • New Zealand lawyers lack academic training in incorporated societies law (in the last decade of presenting seminars on society law to New Zealand lawyers I can count on the fingers of one hand the number of times a lawyer has answered the question whether they ever heard of the Incorporated Societies Act 1908 while doing their law degree (and the longest time spent on the subject was 10-15 minutes!));
  • there are very few lawyers specialising in advising incorporated societies;
  • most lawyers who are “honorary solicitors” for not-for-profit societies do not charge for their services, but the burden of coming up to speed with the changes and then reviewing and revising incorporated society constitutions for compliance with the new Act will be significant, so doing the work pro bono is unlikely to be realistic;
  • whether or not lawyers charge for their advice to incorporated societies, if they provide incorrect advice they can still be sued for negligence; and
  • the potential flood of incorporated societies that will seek advice could overwhelm many lawyers who will, as a result, be tempted to place that work at the back of the queue simply because they will not know where to start and what needs doing (compounding the professional indemnity risks).

In my opinion, legal firms need to be proactive, and “be prepared” for this work:

  • every firm should have some lawyer or work group assigned to deal with enquiries about the new Incorporated Societies Act 1908; and
  • those who will do this work need to start up-skilling themselves now.

If this is not done I believe the legal profession will struggle to cope.

This is one of a series of articles on societies and charitable trusts (originally published in the LawTalk magazine) by Mark von Dadelszen, a Hastings lawyer and author of Law of Societies, 3rd Edition, 2013. If any reader has examples of issues that have arisen or questions about societies or charitable trusts that might be a suitable subject for one of these articles please contact Mark at mark.vondadelszen@bvond.co.nz.