- All Societies must re-register by April 2026 or will be struck off the register
- Committee members’ conduct will now be closely monitored
- All Societies will likely be required to update their Constitutions
- Breaches of the incoming legislation may attract criminal penalties
In April 2022, the new Incorporated Societies Act 2022 (2022 Act) passed through Parliament and is expected to come into force in 2023. Despite incorporated societies (Societies) not currently being able to re-register under the 2022 Act, all Societies should be considering the impact this piece of legislation will have on the sector and prepare accordingly.
The Incorporated Societies Act 1908 (1908 Act) has become more outdated as the Societies sector has grown. To remedy this, the 2022 Act has been introduced to assist Societies as they navigate contemporary issues.
New Zealand’s 24,000 Societies will continue to be subject to the 1908 Act until they re-register. Unless provided otherwise, Societies should be able to re-register under the 2022 Act from October 2023 until April 2026. If they fail to do so before April 2026, they will be struck off the Incorporated Societies Register and will cease to exist.
Further details on the most significant changes that the 2022 Act will impose on Societies are set out below.
New Officer Duties
The 2022 Act now codifies a list of duties which all officers (the new name for committee members) must comply with, as well as setting out a list of disqualifying factors that will prohibit a person from becoming an officer.
Notably, the degree of liability that may attach to the actions or omissions of a Society’s officers are brought in line with that of a director of a company. Key duties which must be both understood and adhered to by Societies’ officers under the 2022 Act include the duty to:
- act in good faith and in the best interests of the Society;
- exercise powers for a proper purpose;
- act with care;
- disclose conflicts of interest;
- not incur obligations the officer doesn’t think the Society can reasonably meet; and
- not engage in activities that may create substantial risk of serious loss to the Society’s creditors.
Officers must be well versed in these duties, as volunteer officers in small Societies will now be subject to similar standards of accountability of directors in a large company. Importantly, officers owe these duties to their Society itself rather than to the Society’s members.
Constitution and Membership
The 2022 Act requires all Societies to re-register with a compliant constitution. While most Societies have a constitution in place already, the 2022 Act outlines minimum standards with which all constitutions will need to comply. These matters include procedures to resolve internal disputes, grounds for removal of an officer, and the management and control of the Society’s finances.
Additionally, the 2022 Act reduces the minimum number of paying/affiliated members that a Society must have and maintain from 15 to 10. However, an over-riding principle that has not changed is that a Society must not exist to provide financial gain to its members.
General Administration
The 2022 Act includes various administrative matters that each Society must adhere to, such as:
- a committee that complies with the 2022 Act’s requirements;
- the proper preparation and filing of financial and annual reports;
- a compliant annual general meeting to be held in a timely manner; and
- having its accounts audited or reviewed.
Failure to comply with some of these general administrative matters carries the prospect of monetary penalties, both for the Society and (potentially) for officers.
The 2022 Act introduces a comprehensive amalgamation scheme for Societies that allows any two or more Societies to merge and continue as one. The scheme follows a simplified form of the amalgamation scheme found in the Companies Act 1993.
Penalties
Notably, unlike the 1908 Act, the 2022 Act can impose criminal penalties, some of which are significant. Penalties may be imposed on either the Society itself, or on any officer, member, employee, or Society affiliate. Some offences carry maximum penalties of a $200,000 fine and/or 5 years’ imprisonment.
Making the complex simple
If you are a member, officer, or committee member of a Society, we strongly encourage you to use the time between now and October 2023 to start planning for these changes. As such, we suggest that all Societies consider what changes will need to be made to their current operations to ensure they are compliant with the 2022 Act.
Lane Neave’s Corporate & Commercial team holds specific expertise in the law of Societies and is well placed to assist your Society as the sector adjusts to the incoming mandatory changes. If you require more information about the 2022 Act, how it will affect your Society and what it should do moving forward, please contact the head of Lane Neave’s Corporate team Aaron Pickett (Partner), Peter Orpin (Special Counsel) or David Wakefield (Solicitor).
