Incorporated Societies Act 2022 – Parent incorporated societies and their branches

Structuring the relationship of parent and branch societies

The Incorporated Societies Amendment Act 1920 (the only significant change in the 114-year life of the 1908 statute) established a very rudimentary framework for the incorporation and operation of branches, and that Amendment Act provided for the incorporation of a branch of a parent society where the branch had at least 15 members (Incorporated Societies Amendment Act 1920, s 2; Incorporated Societies Amendment Act 1930, s 2. The history of the statutory provision for branches to be incorporated is noted in the Court of Appeal decision in Federated Farmers of New Zealand Inc v Federated Farmers of New Zealand (Northland Province) Inc [2005] NZCA 165 at [85] – [89]).

Given the problems associated with incorporating branches under the Incorporated Societies Amendment Act 1920, a structure not relying on the Act may have been preferable as that avoided the problems inherent in relying on an inadequate statutory framework in the now repealed statute. The Law Commission noted in its 2013 Report, A New Act for Incorporated Societies (NZLC R129, 2013) at 5, [4.33] – [4.50], and Recommendations 8 – 12, that:

Currently, the Incorporated Societies Amendment Act 1920 allows parent societies to incorporate a number of branch societies, and the members of the branches are automatically members of the parent society. We consider that these provisions are confusing and unnecessary. Societies can establish a parent and branch structure utilising the normal society model of incorporation. They may use contracts and the provisions of their constitutions to control the relationship between them.

Consistent with that statement, there is now no provision for the creation of new branch societies in the Incorporated Societies Act 2022, and some type of federal structure must now be devised. To address the issue of existing incorporated branch societies, the Law Commission recommended that “A grandparenting provision should be included in the statute and provide that branches incorporated under the Incorporated Societies Amendment Act 1920 will be described as societies from the commencement of the new Act, but ss 6 and 7 of the Incorporated Societies Amendment Act 1920 will continue to apply to each former branch and its parent society as if the Amendment Act had not been repealed.” As recommended by the Law Commission, branch societies incorporated prior to commencement of Clause 17, Schedule 1 to the Incorporated Societies Act 2022 continue to exist under a “grandparenting” provision in the Act 2022 (noting that this Clause may be brought into effect on a date appointed by Order in Council under s. 2(2) of the Act or otherwise on the “transition date” of 1 December 2025):

17 Incorporated branches and groups of branches
(1) This clause applies to a branch or group of branches of a society that, immediately before the commencement of this clause, was incorporated under the Incorporated Societies Amendment Act 1920.
(2) Sections 6 and 7 of the Incorporated Societies Amendment Act 1920 continue to apply to the branch or group of branches and to the parent society with all necessary modifications for the purposes of this Act as if those provisions were still in force.
(3) However, subclause (2) ceases to apply if the Registrar receives a notice, in the manner prescribed by the regulations, for the purposes of this subclause from both—
(a) the parent society; and
(b) the branch or group.
(4) In this clause, parent society means the society in respect of which the branch or group of branches was incorporated under the Incorporated Societies Amendment Act 1920.

While new branches of incorporated societies will no longer be able to be incorporated pursuant to a statutory power, the following information may have ongoing relevance where branch societies incorporated under the 1920 statute continue to exist under the new statute:

• The consent of the parent body and of the majority of members of the branch was required before a branch society could originally have been incorporated (Incorporated Societies Amendment Act 1920, ss 2 and 3).
• The provisions for the application for registration of a branch society and for the registration itself were similar to those for the original incorporation of any society incorporated under the 1908 statute (Incorporated Societies Amendment Act 1920, ss 3 and 4); and
• By virtue of Clause 17, Schedule 1 of the 2022 Act, a branch society incorporated under the 1908 Act continues to enjoy the benefits of incorporation (Incorporated Societies Amendment Act 1920, ss 4 and 5), while the members of each branch are members of, and remain subject to the constitution of, the parent incorporated society (Incorporated Societies Amendment Act 1920, ss 6 and 7).
• However, because Clause 3(2), Schedule 1 of the 2022 Act provides that “A reference to a society that is incorporated under the 1908 Act includes a branch or group of branches of a society that is incorporated under the Incorporated Societies Amendment Act 1920,” it follows that an existing incorporated branch society must re-register under the 2022 statute.

With reference to that last bullet-point, it is important to note that the members of branch societies formed after 5 April 2022 are no longer members of the “parent society” by virtue of any statutory provision equivalent to s. 7, Incorporated Societies Amendment Act 1920, which provided that “… every member of a local branch shall be deemed to be a member of the society and liable to all the obligations of membership.” The lack of that legislative provision means that societies considering new parent and branch structures now need to consider whether or not members of branches must or may also be members of the parent society (with relevant provisions in the constitutions of both societies), while also bearing in mind the requirement that the consent of every member to such membership (of both the parent society and the branch society) must be obtained under s. 76(1) of the Incorporated Societies Act 2022 (in this writer’s opinion, preferably a written, signed consent).

Mark Dadelszen is well-placed to advise on the implications of the Incorporated Societies Act 2022, and he advises societies and trusts throughout New Zealand, involved in a wide range of activities. Mark was a member of the Reference Group advising the Law Commission on the review of the 1908 Act, and was engaged by MBIE to advise on the proposed model constitution as originally recommended by the Law Commission and later he contributed to the development of the Ministry’s society constitution-builder. He made Submissions (both for the New Zealand Law Society but also personally) to the Parliamentary Select Committee considering the Incorporated Societies Act 2022. Apart from having decades of practical experience in governance of societies and charities (for which service he was awarded a QSM in 2012), Mark is the author Law of Societies in New Zealand (the only specialist text on the subject in New Zealand, with a 4th Edition to be published in early 2024), and he writes regular articles on issues relating to societies and charities (see https://nfplaw.co.nz/articles/). For specific advice relating to the issues discussed in this article, please contact Mark at mark@nfplaw.co.nz.