We now have new legislation governing incorporated societies in New Zealand – the Incorporated Societies Act 2022.
The previous Incorporated Societies Act was first passed in 1908 and was one of the oldest, pieces of legislation still in place in NZ.
After many years of delays, due to this update being “important but not urgent” a new and updated Act finally received Royal Assent in April.
Changes focus on improving and modernising the governance framework as well as codifying case law into the Act.
Some of the key changes
All incorporated societies will need to take some action.
Constitution
The 2022 Act requires a number of things to be included in all Constitutions such as, the composition, roles, powers functions and procedures of the committee or governing body.
The Constitution must not give members rights or interests in society’s property. The compliant Constitution (and any amendments thereto) must be registered with the Registrar of Incorporated Societies.
While many societies may have amended their constitutions over the years to include such good practice, these are now required by all. So, all societies will need to check if their constitution is compliant.
Governing Committee
All societies now require a governing committee of at least 3 officers. While most will have such a committee in place, the 2022 Act is more explicit about both who can be an officer as well as what their duties are.
They are essentially the codification of existing common law duties such as the duty to act in good faith and in the society’s best interests, the duty to exercise powers for a proper purpose, and a duty of care.
The new Act defines what is expected of a member in a governance role including dealing with conflicts of interest, personal liability, and the consequence of acting outside of the constitution
Minimum number of members
Under the 1908 Act, it required 15 members to form a society. This has now been decreased to 10 members. However, the 2022 Act is more detailed around membership and requires that a society must have at least 10 members at all times.
Disputes Resolution
Incorporated societies must now have a clear disputes resolution process to be able to deal with member grievances and complaints. Like the approach of much of the new Act, it specifies what is good practice and sets out minimum requirements. Any society can always go beyond the statutory minimum if they deem that helpful to the smooth running of their organisation.
Similar to the reform of the Trusts Law, incorporated society members can seek information about their society increasing the transparency.
Annual returns will become more detailed, along with the requirement to update the registrar on any changes to keep the registry information up to date.
Financial Reporting
Different financial reporting requirements are specified based on the size of the society. This is to balance improved understandability and comparability between societies by requiring them to adopt specified financial reporting standards, as well as balancing the cost/benefit equation by allowing small, simple entities to report very simply.
Larger societies will also be required by law to be audited and to file these on the public register.
Going forward it is expected that large societies that are not registered charities will need to have their accounts audited1 if one of the following apply:
- Annual expenditure is over $2 million
- Total assets are over $4 million
Timeline of Transition Period
May 2022 – September 2023
Regulations developed
The regulations will flesh out the details of the legislation. For example, they will determine what information societies must provide to register or reregister under the new Act.
October 2023 – April 2026
The reregistration period will run for 2 1/2 years from October 2023 to April 2026
To reregister you’ll need to meet new requirements under the new Act including:
- Update to constitution / rules
- Ensuring all members are eligible under the new Act
- Re-registering under the new Act (this will not be an automatic transfer)
- Ensuring financial reporting systems and information are ready to report under the appropriate standards
Until societies reregister, they will operate under the 1908 Act.
Any society that doesn’t reregister during this time will cease to exist.
We recommend if you are involved in an incorporated society that you seek to understand the changes and plan appropriately to act.
If you would like further assistance, please do not hesitate to contact cynthia@forbesca.co.nz