New Incorporated Societies Act – Progress?

NOTE These notes, prepared by Mark von Dadelszen QSM, provide an overview of the more significant elements of the proposals to replace the Incorporated Societies Act 1908. This overview is a much abbreviated summary of the main proposals approved by cabinet in late June (Reform of the Incorporated Societies Act 1908). The Exposure Draft of the Incorporated Societies Bill released in November 2015 (see Incorporated Societies), largely followed the recommendations in the 2013 Law Commission Report 129 (see Incorporated Societies Act 1908 Report). We recommend that new and existing societies be proactive in anticipating the reforms when adopting or revising constitutions. The most recent advice we have is that a Bill may be introduced in 2019, and enacted in 2020. Incorporated Societies Act Reform The Minister of Commerce and Consumer Affairs hopes the reform Bill will be introduced to Parliament by the end of 2019. The following is a brief background to the reform: The Incorporated Societies Act 1908 has effectively remained unchanged for over a century (in 1920 it was amended to allow for branch societies, and on the introduction of decimal currency in 1967 a shilling fine was changed to 10 cents). In contrast, our companies’ legislation has been totally re-enacted six times since the Joint Stock Companies Act 1860 (1868, 1882, 1901, 1903, 1933 and 1993), all with regular amending Acts. The Law Commission’s 2013 Report 129, A New Act for Incorporated Societies, recommended a complete overhaul of the Incorporated Societies Act 1908. A 2015 Exposure Draft of the Incorporated Societies Bill largely followed the recommendations in the 2013 Law Commission Report. In a 26 June...

Record-Keeping for Not-for-Profit Organisations

Introduction Most not-for-profit organisations (societies and charitable trusts, abbreviated to N-f-P’s in these notes) are governed and managed by well-intentioned, honest people, but many of those people lack some or all of the knowledge and skills about the decision-making and record-keeping required in such an organisation. The sections that follow provide a brief guide to help get people started, but, first, some preliminary advice: What follows is only a brief overview of the essential requirements for good N-f-P record-keeping, and: It may be helpful if every incoming N-f-P Committee is provided with some basic training in governance, and An N-f-P may be well-advised to engage someone to provide such hands-on training or to advise the secretary and treasurer (or, possibly, to be responsible for some specific tasks). Where an N-f-P is incorporated under a statute (such as the Incorporated Societies Act 1908 or Charitable Trusts Act 1957) it gains the benefits of being an incorporated entity, and: The statute under which it is incorporated sets out general requirements for the entity’s governance, management and operations (as noted below, there may be some other statutes applicable to some of the organisation’s activities), It follows that those in charge of the entity need to be aware of and understand that legislation (noting that penalties may be imposed on people who fail to comply with the requirements in applicable Acts of Parliament), and There are annual reporting obligations (for instance to the Registrar of Incorporated Societies or to Charities Services), and Both the Registrar and Charities Services must be provided with details of a registered office (a physical address, not a P...

When a Society can Find no Officers

A practical problem, and not uncommon We are quite frequently asked by members of incorporated societies for advice about a problem which is not uncommon – a society which is unable to find anyone willing to stand for office as chairperson, secretary or treasurer, and where the constitution does not outline what should be done in those circumstances (and few society constitution do so). Most society constitutions provide that these positions are to be filled by people elected from the membership and may provide for the co-option of people to fill vacancies. However, finding volunteers to stand for election or for co-opted appointment is often difficult, and few society constitutions provide any solution in the absence of volunteers willing to take office. In addition, of course, it is sometimes difficult even to find enough people to form the size of committee prescribed in a society constitution. If an incorporated society fails to comply with its constitution by failing to elect officers (or the number of people required to form its committee) as prescribed under the constitution then High Court proceedings could be commenced (at considerable expense) to try to find a remedy, and if the society is a charity the failure to comply with the constitution could be the subject of a complaint to Charities Services.   Is there a sensible answer to the problem? If a society is unable to elect or appoint enough officers or committee members as required by its constitution and the issue came before the High Court, the presiding judge is likely to look for a practical solution, particularly as ordering the society to...

GOVERNING CHARITABLE TRUSTS AND CHARITABLE SOCIETIES

Background This article has been prepared to help trustees of a charitable trust or committee members of a charitable society governing the charity more readily to understand the obligations they assume when appointed or elected. Because committee members of a charitable society are effectively “trustees” of the society they are referred to as “trustees” in the balance of this article. A trustee’s first obligation is to become familiar with: The trust instrument establishing the charity (such as the trust deed, or will, or the rules of the charitable society), generally referred to in these Notes as the charity’s constitution, which governs what can and cannot be done, especially the charity’s purposes, The charity’s property and records, Any limitations to which the charity is subject, The charity’s strategic plan and policies (which must always be consistent with the charity’s purposes), and then Never to forget the purposes and terms of the trust. It has been said that too many trustees accept appointment without fully understanding that being a trustee involves serious and onerous duties and a commitment of potentially significant time. Being a trustee may be a complex burden, involving not only an understanding of the trust but also being acquainted with relevant legal rules and principles. This article may help to redress those deficiencies, but it is of limited value for two reasons. First, this article is not specific to the circumstances of any particular charity and, second, the detail which may be found in text books cannot be included in such a relatively short article (rather more detailed notes are available to charities which are clients of Bannister...

Not-for-Profits and Anti-Money Laundering and Countering Financing of Terrorism

Risks relating to Money Laundering or Financing of Terrorism The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT) is intended to prevent money-laundering by criminals and the financing of terrorism. Societies and charitable trusts (“not-for-profits”) and those providing them with services (such as legal, accounting and banking) are now affected by this legislation: The “risk profile” of a club or society will be assessed having regard to its purpose and size and whether it is a national or local entity. If the organisation has or will have a social or local community focus, such as a sporting or cultural group, the potential risk associated with it is likely to be low. If the club’s or society’s activities are likely to be cash-intensive (with greater potential for it to be used for the placement of illicit money) the risk will be assessed as being higher. The “risk profile” of a charitable trust is considered to be higher because of the potential for trusts to be used to disguise the criminal origin of funds or the true ownership and effective control of the trust, particularly where ownership and control arrangements are sophisticated or complex. As a result, all charitable trusts are subject to what is called “Extended Due Diligence,” and any charitable trusts that are geographically or financially linked to higher risk countries, or include politically exposed persons, may have increased Money Laundering or Financing of Terrorism risks.   Lawyers and Accountants Advising Not-for-Profits and Financial institutions providing Not-for-Profits with financial services Before any lawyer or accountant provides a proposed or existing club, society or charitable trust with advice,...

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...