The New Landscape of the Incorporated Societies Act 2022
Introduction
Incorporated societies within New Zealand have been regulated by the Incorporated Societies Act 1908 (“Previous Act”) for more than 100 years, it should be brought up to date to provide practical guidance in relation to the operations of incorporated societies. The new Incorporated Societies Act 2022 (“New Act”) provides for a lot of changes to the requirements for an entity to be an incorporated society and received Royal Assent on 5 April 2022. Parts of the New Act is now in force, for the rest of the New Act, no later than the 5 October 2023.
Under the New Act, all existing incorporated societies will be required to re-register with Registrar of Incorporated Societies by 1 December 2025 (“Transition Date”). If an existing incorporated society has not registered by the Transition Date, the existing society shall cease to exist on the Transition Date.
Key Changes:
As per the New Act, a committee must be established to oversee the management and administration of the incorporated society.
In contrast with the Previous Act, the New Act codifies the existing common law officer’s duties owed to the incorporated society. In summary, these include:
Duty to act in good faith and in the best interest of the society
Duty to exercise powers for a proper purpose
Duty to comply with the New Act and the society’s constitution
Duty of care
Duty not to create a substantial risk of serious loss to creditors
Duty not to incur obligations on behalf of the society, which the society cannot perform
Duty to disclose any conflict of interest
Furthermore, every society must have a contact person as defined in section 114 of the New Act.
The New Act provides a minimum of members each society shall continue to have, and if the society shall fail to meet this threshold, the Registrar may take action against the society.
The New Act also indicates that a person must consent to become a member of the society.
The New Act also required all incorporated societies to have a constitution which contains a clear disputes resolution procedure and grievances.
The New Act requires all incorporated societies to prepare financial statements in accordance with the size of the society. These financial statements shall also be dated and signed by 2 members of the committee and provided to the Registrar for registration.
Certain incorporated societies (to be prescribed in regulation) are required to have their financial statements audited.
The New Act also provides for a mechanism for the members of the society to request information held by the society.
Introduction of an amalgamation framework, which is a simpler version of the process contained in the Companies Act 1993.
Part 4 of the New Act provides that the Court shall be able to make orders on, but not limited to the enforcement of a society’s constitution and bylaws, make orders to enforce officers’ duties, and make orders where the operation of a society is oppressive, unfair or prejudice.
The New Act also provides several criminal offences such as but not limited to false statements, fraudulent use or destruction of property, falsification of register, records, or documents, operating fraudulently or dishonestly incurring debt, and the improper use of “Incorporated”, “INC”, “Manatōpū”. A breach of some of these criminal offences could result in a term of up to five years imprisonment, and/or a fine of up to $200,000.
Summary
We note that a copy of the incorporated society’s constitution will need to be provided on reregistration and the same shall be compliant with the requirements set out in the New Act.
With the number of changes to the new legal framework, we highly recommend that all incorporated societies review their existing rules and constitution to ensure compliance with the requirements of the New Act, and to take steps to make modifications where needed to allow the incorporated society to be reregistered prior to the Transition Date.
This article shall not be a substitute for legal advice. Please consult your lawyer about your specific situation. Please do not hesitate to contact us at Focus Law, so we may be able to advise you on how the New Act may impact you. Focus law has assisted many incorporated societies over the years and can assist you with regard to the compliance of your constitution with the New Act, any required modification to the constitution, and guidance through the reregistration process.
If you would like to make a query or book a consultation, please contact us by calling 09 366 6860, emailing info@focuslaw.co.nz, or filling out our secure and confidential contact form.
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