{"id":469,"date":"2022-12-06T04:43:50","date_gmt":"2022-12-06T04:43:50","guid":{"rendered":"https:\/\/taylorshaw.co.nz\/?p=469"},"modified":"2022-12-06T23:25:43","modified_gmt":"2022-12-06T23:25:43","slug":"law-changes-for-incorporated-societies-are-you-up-with-the-play","status":"publish","type":"post","link":"https:\/\/taylorshaw.co.nz\/law-changes-for-incorporated-societies-are-you-up-with-the-play\/","title":{"rendered":"Law Changes for Incorporated Societies \u2013 Are You Up With The Play?"},"content":{"rendered":"\n
After more than 100 years, we have new legislation for New Zealand\u2019s more than 23,000 incorporated societies, replacing the Incorporated Societies Act 1908. Not surprisingly, the 1908 Act no longer meets the needs of many of today\u2019s incorporated societies which can be very significant entities managing considerable assets. The 2022 Act, which was passed into law on 05 April 2022, gathers up a century of case law and modernises the way societies deal with internal disputes, clarifies officers\u2019 duties, and prescribes accounting standards for larger entities.<\/p>\n\n\n\n
Under the 2022 Act, the essence of an incorporated society remains the same \u2013 that is, it is a private\/non-governmental, self-governing, membership-based corporate structure to facilitate the pursuit of any lawful purpose, other than financial gain. <\/p>\n\n\n\n
Although it has been enacted, many of the 2022 Act\u2019s provisions will not take effect immediately. For example, for anyone wanting to create a new society:<\/p>\n\n\n\n
In addition, the situation for any society registered under the 1908 Act (including those that register before the end of October 2023) is as follows:<\/p>\n\n\n\n
Transition Period<\/strong><\/p>\n\n\n\n A transition period, until October 2023, is now in place to allow Regulations to be developed and give societies time to become familiar with the new regime. The Regulations will flesh out the details of the 2022 Act and will likely determine what information societies must provide to register or re-register under the 2022 Act. Societies and the public will have the opportunity to comment on the proposed Regulations.<\/p>\n\n\n\n Key Aspects of the 2022 Act<\/strong><\/p>\n\n\n\n Maintenance of minimum membership<\/strong>: All societies will need to start with and maintain a membership of at least 10 members (with corporates continuing to count as 3 members for this purpose). The minimum under the 1908 Act is 15 persons.<\/p>\n\n\n\n No financial gain<\/strong>: Provisions relating to societies not operating for financial gain are fleshed out and tightened, to affirm that a society must not be carried on for the financial gain of its members and to clarify circumstances in which this requirement will or will not be breached. This includes a general prohibition of any distribution of surplus assets to members on winding up, with any such surplus instead needing to be distributed to one or more other not-for-profit entities.<\/p>\n\n\n\n Regulation of boards\/committees and officers<\/strong>: Every society will need to have a governing body (board or committee) of 3 or more individuals who are members. The 2022 Act prescribes disqualification criteria for board\/committee members and other officers, and sets out the core duties that they owe to their society, being:<\/p>\n\n\n\n Mandatory contact person(s)<\/strong>: Every society will need to have at least one New Zealand resident contact person (and may have up to 3 contact persons). <\/p>\n\n\n\n Membership<\/strong>: A person must consent to membership. There are new provisions relating to members\u2019 entitlement to, and requests for, society information, and more detailed provisions regarding annual and other general meetings of members and (if a constitution permits this) member resolutions in lieu of such meetings. <\/p>\n\n\n\n Financial reporting and assurance<\/strong>: For societies to which updated financial reporting and assurance requirements do not already apply (eg under the Charities Act 2005 or Financial Markets Conduct Act 2013), the 2022 Act prescribes new, size-based, requirements for financial statements that must be prepared and filed by all societies. Large societies (to be defined by Regulations) will need to have their accounts audited.<\/p>\n\n\n\n Annual returns and register updates<\/strong>: The register will include more detailed society information and societies need to file annual returns and notify changes (including officer\/contact person changes) to keep their registry information up to date. <\/p>\n\n\n\n Enforcement<\/strong>: The 2022 Act includes a range of provisions dealing with Court orders relating to the enforcement of a society\u2019s constitution and bylaws, the enforcement of officers\u2019 duties, oppressive, discriminatory, prejudicial operation of a society, recovery of impermissible financial gain from members, and various offences. <\/p>\n\n\n\n Maximum penalties for those running a society are up to 5 years in prison and\/or a fine of up to $200,000.<\/p>\n\n\n\n The society is liable for an infringement fee of up to $3,000 for failure to comply with certain provisions, including a failure to:<\/p>\n\n\n\n What Should You Be Doing Now?<\/strong><\/p>\n\n\n\n Although, it may seem like a long time until the April 2026 cut-off date, the 2022 Act is something that societies need to be turning their minds to now. A good start would be to review your society\u2019s Constitution to determine whether it meets the requirements of the 2022 Act. Section 26 of the Act sets out what must be in the Constitution. Here is a link to Section 26:<\/p>\n\n\n\n\n
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