Incorporated Societies Act 2022: a new beginning

Some nine years after the Law Commission released its report “A New Act for Incorporated Societies” the Incorporated Societies Act 2022 (New Act) is now with us as a replacement for the Incorporated Societies Act 1908 (1908 Act).  The New Act presents a modern framework around which incorporated societies and those who run them can adapt their operation.

There are around 24,000 incorporated societies currently registered in New Zealand, and each one now has the benefit of a transition period in which to register under the New Act.  Failure to re-register before the transition date[1] will see the society removed from the Incorporated Societies Register – the transfer of registration of societies currently listed on the Register will not take place automatically, re-registration is to be an active rather than a passive process.

Now is, therefore, an ideal opportunity for society members to consider their place in the sun, to perhaps re-assess their role in, and contribution to, the communities in which they operate, and to give considered thought to the adoption of a new constitution that properly captures the aspirations of the members and functions of the society.

The key element of the re-registration process is the drafting and adoption of a new constitution, what some societies refer to as their ‘Rules’.  The New Act specifies a number of matters that must be included in the new constitution – matters of membership (including admission and cessation), the functioning of the committee, procedures for resolving disputes, and meeting procedures are the broad topics to be considered.  An over-riding principle that has not changed is that an incorporated society must not exist to provide financial gain to its members.

One novel aspect of the New Act is the degree of liability that may attach to a society’s officers (essentially, the committee members) who now have a legal duty to act in good faith, and a duty not to create a risk of loss to creditors or incur obligations they don’t think can reasonably be met.  That degree of liability, it is argued by some, is more akin to that of a company director.  What is causing the fuss is that the Supreme Court is presently in the process of reviewing the liability of company directors as part of the Mainzeal case.  The mischief being questioned is whether volunteer officers in small societies, many limited in the time they can spend on society business, should be held to the same standards of accountability of directors in a large company.

The Minister of Commerce and Consumer Affairs responsible for the New Act, Hon Dr David Clark, is of the view that the New Act will be able to be amended during the transition phase if, as a result of the Supreme Court’s findings in Mainzeal, change is deemed to be necessary.  Watch this space.

In the meantime I would encourage all societies to see this as an opportunity to engage in a spot of spring cleaning.  Set up a sub-committee, perhaps, to thoroughly and thoughtfully scrutinise the current constitution to identify the society’s operations and its needs – what works well and what doesn’t, are there matters that are largely historical and past their ‘best before’ date, can some operational matters be streamlined?  Consult with members to elicit and consider their opinions – it is, after all, their society.  Drafting a new constitution will be much easier if the desired outcomes and the operational needs are clear.

At various points along the legislative journey we have been told that there will be a DIY ‘cut and paste’ kit available to enable a society to prepare its new constitution.  In my view, however, the more important task is to engage in a review and consultation process from which point drafting a new constitution will be a largely mechanical exercise.

Please contact us if you would like assistance with anything described above or if you just need some direction, or you need more practical help with a review, a consultation process, drafting a new constitution, attending a meeting to explain matters to members, or attending a meeting to adopt a new constitution.

 

[1] The ‘transition date’ will be the later of 1 December 2025, or the date that is two and a half years after the Incorporated Societies Regulations are in force.  There is no word yet on how far away the Regulations might be.

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