A New Incorporated Societies Act – a guide for societies Mark von Dadelszen* These notes, prepared by Mark von Dadelszen, provide an overview of the more significant elements of the proposed replacement of the Incorporated Societies Act 1908. The Bill has now had its second reading. An Exposure Draft Bill was produced in 2015, and an Incorporated Societies Bill had its First Reading in Parliament on 6 April 2021. The Select Committee has now reported back to Parliament and the Bill had its Second Reading on 17 November. If the new Act is not enacted in December, it is likely to be enacted in early 2022. New and existing societies should be proactive in anticipating the reforms when adopting or revising constitutions, but it would now be sensible for existing societies to defer adopting a new constitution until the new Act has been enacted. There are estimated to be over 24,000 incorporated societies, and every currently incorporated society (including those incorporated under the Charitable Trusts Act 1957 as societies) will be required, by the end of 2025, to re-register under the new Incorporated Societies Act if it wants to continue to have the rights and protections of being an incorporated society, and when re-registering, it must have a constitution that complies with the new Act.
1. Incorporated Societies Act reform The following is a brief background to the reforms: • The Incorporated Societies Act 1908 has effectively remained unchanged for over a century (in 1920 it was amended to allow for branch societies, and on the introduction of decimal currency in 1967 a shilling fine was changed to 10 cents, without allowing for the effects of inflation over six decades). In contrast, our companies’ legislation has been totally re-enacted six times since the Joint Stock Companies Act 1860 (1868, 1882, 1901, 1903, 1933, 1955 and 1993), all with regular amending Acts. • The Law Commission’s 2013 Report 129, A New Act for Incorporated Societies, recommended a complete overhaul of the Incorporated Societies Act 1908 (see www.lawcom.govt.nz/project/reviewincorporated-societies-act-1908/report).
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• A 2015 Exposure Draft of the Incorporated Societies Bill largely followed the recommendations in the 2013 Law Commission Report (see http:// www.mbie.govt.nz/info-services/business/ business-law/incorporated-societies). The Bill as introduced, also, broadly follows those recommendations. The following principles in the Law Commission’s 2013 Report underpin the proposed new statute: • Societies are organisations run by their members, and those members have the primary responsibility for holding their societies to account. A group without members to hold it to account should consider an alternative form of incorporation (such as a trust). • Incorporated societies should not distribute profits or financial benefits directly to members (who join to achieve a shared purpose, and not for their personal financial profit from the activities of the society) – a key feature that sets incorporated societies apart from other types of incorporated entities. • Societies are private bodies that should be selfgoverning and largely free from inappropriate State interference. • The legislative regime should give societies some flexibility to adapt their operating environment to suit their purposes and their culture.
2. Members’ pecuniary/financial gain The new statute will continue (with minor exceptions) to prohibit societies from operating for the financial gain of their members and from distributing any gain, profit, dividend, or other financial benefit to its members. However, a society will be permitted to “trade” (run a business), reimburse members for reasonable expenses related to society, pay members for services on a normal “arm’s length” basis, and provide benefits and incidental prizes and discounts to the public including members or their families.
3. Membership of societies Minimum society membership is proposed to be 10 (with corporate members still being equal to three
DECEMBER 2021
