Annual General Meeting of a Society or Charitable Trust under COVID-19 Restrictions

Background – the problem The COVID-19 epidemic resulted in restrictions on travel and public gatherings being imposed at a very awkward time, because most societies and charitable trusts were required by their Constitutions and by Statute to have their annual accounts (where their financial years ended on 31 December 2019 or 31 March 2020) approved by their members,  and then to file some form of annual return filed promptly with the Registrar of Incorporated Societies or Charitable Trusts, and, if a registered charity under the Charities Act, with Charities Services. On 15 May 2020 Parliament enacted a statute providing a framework to resolve these problems; the COVID -19 Response (Requirements for Entities- Modifications and Exemptions) Act 2020.   CAUTION: This general article is intended to assist not-for-profit organisations facing problems related to the COVID-19 restrictions by drawing attention to key aspects of the Act.  This Act is 25 pages in length and can be readily accessed here. For those with specific problems, professional advice should be obtained. Section 3(1) of the Act explains its purposes, while section 3(3) and section 9 make it clear that what the Act provides for is only temporary:   3       Overview of Act (1)    This Act provides processes for an entity affected by COVID-19— (a)    to, in some circumstances, use electronic means for doing things if its constitution or rules would otherwise prevent this; and (b)    to modify certain requirements or restrictions in its constitution or rules if it is not reasonably practicable to comply with them. … (3)    Modifications made to constitutions or rules under section 13 are temporary. ...

Commercial Leases

Almost all of our clients who are a landlord or a tenant of a commercial property use the Auckland District Law Society “ADLS” Lease. For those of you whose lease is on the 2012 format clause 27.5 of that lease provides for the right for a tenant to seek a reduction by a “fair proportion” of the rent and outgoings. There is deliberately no definition for what is a fair proportion because that will depend on the circumstances. There has been no case law to provide guidance on the interpretation of this clause in these circumstances for obvious reasons. What is largely agreed by most lawyers and commentators is: that clause 27.5 can apply in the current Covid-19 Level 4 Lockdown (there are interpretations which are not tested on issues like whether the tenant is an essential service or not and whether a tenant truly cannot “access” their premises); the landlord and tenant need to agree what is a fair proportion, neither party can impose their will on the other; if the parties cannot agree the dispute resolution provisions of the lease can be used; it is in the interests of the parties to try and agree a fair solution to both since in most circumstances the relationship is likely to continue. The landlord wants a tenant and usually the tenant will want premises to operate their business from when they are able to resume in some manner as we come to grips with Covid-19. The government has announced some intended changes to the Property Law Act (which will act retrospectively) to give tenants some limited relief by extending...

Not-for-Profits’ Obligations under their Constitutions and Statutes and COVID-19

The constitutions of most societies and charitable trusts require the holding of an Annual General Meeting within 3 or 4 months of their balance date (to allow time for accounts to be compiled and in many cases audited).  31 March is the balance date for the majority of societies and charitable trusts, with 31 December being the other most popular date.  After the approval of those accounts there are statutory obligations relating to the filing of annual returns.  Because of the COVID-19-related difficulties associated with travelling to holding meetings, we posted an article on 17 March 2020, “Holding (or not holding) General Meetings of Members in extraordinary circumstances,”.  Copies of that article were sent to the Registrar of Incorporated Societies, Charities Services, and senior staff in the Ministry of Business Innovation and Employment.   Government action On 8 April the COVID-19 Ministerial Group considered a background paper and made a number of decisions that offer societies and charitable trusts some relief from the obligations discussed in our 17 March article.   Compliance with statutes and constitutions The Minutes of the Decision of the COVID-19 Ministerial Group (see ) summarise the relevant decisions as follows: Extending statutory deadlines 8 noted that many statutory deadlines in corporate governance legislation, relating to such matters as holding annual general meetings and filing annual returns should be relaxed because they are unachievable or are relatively unimportant in the current circumstances; 9 noted that there are powers to make exemption notices in relation to statutory obligations under some Acts (e.g. the Financial Markets Conduct Act 2013 and the Charities Act 2005) but not others (e.g. the...

Holding (or not holding) General Meetings of Members in extraordinary circumstances

The current issues relating to the COVID-19 virus give rise to some difficult problems for many organisations that are required to hold regular meetings of members (including companies and not-for-profit organisations such as societies and charities).  This is particularly pertinent in March when many organisations face the need to hold an annual general meeting within a specified period after the end of an entity’s financial year – commonly 31 March.  While the current issues do not often arise, it is not uncommon for organisations to face difficulties holding meetings where their constitutions require a specified quorum but some members are unable to attend.  Legally, a meeting held without the required quorum being present is invalid (see Re Dannevirke Motor Co Ltd [1920] GLR 266). “On 16 March 2020, the Government advised public events or mass gatherings where 500 or more people are together in one place, at one time should be cancelled” (a quotation obtained on 16 March from the Ministry of Health website. Where there are restrictions on the movement of people or meetings of groups of people the inter-related legal obligations imposed on organisations concerning the meetings they are required to hold need to be considered.  Those organisations need to comply with those obligations, but they also need to consider their other legal obligations, such as: The requirements of the constitution of an entity (such as a company, a society or a charity) to hold an annual general meeting at certain times (typically 3-4 months after the end of the financial year, allowing time for the entity’s annual accounts to be completed and then reviewed or audited...

NEW INCORPORATED SOCIETIES ACT – WHAT EXISTING SOCIETIES WILL HAVE TO DO AND BE AWARE OF

This Article is based on what was proposed in the 2015 Exposure Draft Incorporated Societies Bill, but also having regard to some modifications signalled in the Minister’s June 2019 Cabinet Paper.  The article will need to be revised after the new statute has been enacted, hopefully later in 2020. In the meantime, existing societies and new societies need to be aware of what was proposed in the 2015 Exposure Draft Incorporated Societies Bill and the Minister’s June 2019 Cabinet Paper, and may wish to take the proposals into account when considering their constitutions and other issues that may arise before the new statute comes into force.  While the new Act will not be exactly the same as what was proposed in 2015, we do not expect the eventual statute to differ significantly from the extracts from the 2015 Exposure Draft Bill set out in this Article).   1. Transitioning to comply with the new Act Important note: If a society does not re-register under the new Act, it will cease to exist on the transition date, but may later be restored to the Register, but if it is not restored its surplus assets must be distributed as prescribed in the new Act.  However: Every society continues to be subject to the 1908 Act until the later of the date it re-registers as a society under the new Act or the transition date (currently proposed to be 30 months after the new Act comes into effect), and Prior to the transition date, a society can amend its rules and make other arrangements to facilitate its transition to becoming a society...