Incorporated Societies – Transitioning to the new Regime under the Incorporated Societies Act 2022

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1. Introduction

An article, “The New Incorporated Societies Act – Guide for Societies”, at https://nfplaw.co.nz/the-new-incorporated-societies-act-guide-for-societies/ sets out information about the reforms effected by the Incorporated Societies Act 2022 Act. This (rather long) article sets out in detail what I believe existing incorporated societies now need to do to re-register a society under the new Act which became law on 5 April 2022. Re-registration needs to be completed by 1 December 2025 – that may now seem to be a long way away, but that is no reason to delay action!

(a) While the Incorporated Societies Act 2022 is now law, the 1908 Act is still in force, and section 256 of the 2022 Act provides for the making of Orders-in-Council to bring the balance of the 2022 Act into force and to facilitate the orderly implementation of 2022 Act. In simple terms, there is no immediate change affecting existing and newly formed incorporated societies, but the Boy Scouts motto to “Be Prepared” should be borne in mind. Few people will be checking Orders in Council regularly, so my advice is that currently incorporated societies should commence the necessary processes to bring their constitutions up-to-date with the new Act.
Note: Versions of this article (prior to August 2022) contained a different explanation of the transitional period.

(b) Societies that are already incorporated should now develop an action plan identifying what needs to be done and the target dates for those actions (aiming to have everything completed well before 1 December 2025, so they are not working under the pressure of that deadline). My recommendations for an existing incorporated society are as follows:

(i) The society’s president, secretary and treasurer, in particular, should each become familiar with what is required under the new Act.
(ii) The society should establish a sub-committee to identify and manage all the required actions to re-register the society by 1 December 2025, including:

      • Identifying what must be included or altered in the society’s constitution to comply with the 2022 Act,
      • Establishing the timeline of the required actions by 1 December 2025, and
      • Informing the society’s members of what is being done to re-draft the society constitution to comply with the new Incorporated Societies Act.

(iii) Once the society committee has approved the initial draft new constitution, the committee should circulate it to society members for comments by a specified date – perhaps, within a month.
(iv) The sub-committee then considers the comments and suggestions of society members, and produces a further draft for approval by the society committee.
(v) It is possible that the processes set out in sub-paragraphs (iii) and (iv) may need to be repeated several times before a suitable draft is approved.
(vi) After the society committee has approved the final draft, the society circulates the draft new constitution to society members with notice of a General Meeting to adopt the new constitution.
(vii) The new constitution adopted by the members is then sent to the Registrar of Incorporated Societies with an application for re-registration of the society, and if the society is also registered as a charity under the Charities Act 2005 a copy of the new constitution should also be sent to Charities Services.

2. Practicalities

Listing the required actions in the above Introduction was not difficult, but no incorporated society should underestimate the time and detailed effort required (set out below) to get to the required end point (the society’s re-registration)!

(a) A currently incorporated society may be tempted to cease to be incorporated because of the difficulties associated with updating its constitution. In my opinion, becoming unincorporated would be most unwise:

(i) An unincorporated society is a voluntary organisation with or without rules, and, where there are rules, they may range from the inadequate to the very detailed.
(ii) Unincorporated organisations are governed entirely by whatever constitution they have and by legal principles developed by the Courts, although some specialist legislation (such as the Trusts Act 2019, Human Rights Act 1983 and the Health and Safety at Work Act 2015) may apply to them.
(iii) Most members of an unincorporated society typically never see or worry about any society rules.
(iv) An unincorporated society has major limitations:

      • It commonly operates without formal rules, and, where there are rules, they are often very rudimentary (a society constitution that complies with the Incorporated Societies Act 2022 is more likely to be comprehensive, even if writing it may not be easy),
      • Members of an unincorporated society (especially its officers and committee members) are very likely to be personally liable, individually and collectively, for the society’s debts,
      • An unincorporated society cannot legally own or lease property or borrow in its own name (it will usually have difficulty providing security to lenders),
      • An unincorporated society does not have perpetual existence independent of its members, and
      • Dissolution of an unincorporated society is fraught with problems.

(b) Most lawyers who advise incorporated societies learned what they know through practical experience (not in the course of their law degree studies). Much of that advice has, in the past, been provided pro bono (at no cost), but many lawyers may not be prepared to be so generous in the future, particularly as the 2022 Act is far more detailed and prescriptive than the 1908 statute. It will also take time for most lawyers to “come up to speed” with the new Incorporated Societies Act.

(c) Larger and better resourced incorporated societies are likely to be able to manage the transitional process under the new Incorporated Societies Act more readily than smaller community incorporated societies. Those smaller societies should seek to find ways to overcome their disadvantages, for instance:

(i) Where a smaller society has an “umbrella” (e.g., national or regional) organisation that “umbrella” organisation might provide template constitutions for the smaller associated societies, or
(ii) If there is no formal “umbrella” organisation, smaller societies might form local, regional or national groups to co-operate in drafting a “model” society constitution for each smaller society to adapt to its own needs, or engage a lawyer prepared to produce the required draft “model” constitution.

(d) Whatever the size of an incorporated society it may be able to obtain grants to assist it to engage a lawyer to draft its new constitution.

3. Introduction to the Incorporated Societies Act 2022

(a) Legislation for the incorporation of community societies is an almost exclusively Australasian phenomenon. The first statute providing for the incorporation of societies was the Associations Incorporation Act enacted in South Australia in 1858, followed by Western Australia in 1895, and in the same year New Zealand enacted the Unclassified Societies Registration Act 1895, containing just 18 sections. That Act has been described as the “trailblazer when it came to the statutory recognition of incorporated associations” (in Law of Associations, G. E. dal Pont, 2018, LexisNexis Australia, para 4.4). Our 1895 Act was amended in 1906, and then replaced with a more refined version in 1908 which served us remarkably well for 114 years, but was definitely overdue for replacement.

(b) Our 1895 and 1908 statutes were enacted when typewriters were still relatively rare other than in offices (and word-processors, computers and photocopiers had not been invented), calls by telephone (if people had one) were often on party lines, and mobile phones, teleconferencing and videoconferencing were the stuff of science fiction.

(c) A Law Commission review of the 1908 Act commenced in 2011, and the new Act was passed by Parliament on 31 March 2022, and received the Governor-General’s assent on 5 April. The new Act will be challenging, not only for incorporated societies and their members, but also for most lawyers who may be asked to provide advice about the new Act:

(i) The work lawyers will be asked to do will require them to learn what is in an Act radically different from the 1908 statute, and to develop appropriate, new and completely different template documents for societies.
(ii) While the new Incorporated Societies Act contains many provisions similar to sections in the Companies Act 1993, there are fundamental differences between for-profit companies and not-for-profit societies.
(iii) Because of the more specialised work required and the more complex provisions of the new Incorporated Societies Act, many legal firms will, inevitably, have to limit the amount of this work they will do without charging for their services.

(d) I have been a member of many society committees since the mid-1960’s, and I was closely involved in the processes leading up to the new Act for over ten years (starting as a member of the Law Commission’s advisory group). As a result, I have clear views about what currently incorporated societies need to do now that we have a new Incorporated Societies Act. In this article my recommendations are identified in bolded italics.

(e) The new Act contains new requirements for the governance of all incorporated societies (with the imposition of greater accountability on those in governance) the most significant being:

(i) The need for members to consent to becoming society members [section 76],
(ii) The imposition of statutory duties of care and diligence on committee members [sections 54-61],
(iii) The requirement that conflicts of interest be recorded and managed [sections 62-64, 73(2), and 86(1)(c)], and
(iv) More stringent annual reporting obligations for incorporated societies [sections 102- 109].

(f) The 1908 Act is finally repealed by section 268 on 5 April 2026. Schedule 1 to the 2022 Act sets out detailed transitional provisions that apply in the interim (the following summary is not comprehensive):

(i) Part 1 of Schedule 1 sets out the process by which an existing society can become an incorporated society under the Incorporated Societies Act 2022:

      • Clause 4 of Schedule 1 provides that an application for incorporation may no longer be made under Incorporated Societies Act 1908. That means that all new societies seeking incorporation must submit applications and society constitutions that accord with the requirements under the new Act.
      • Sections 11, 12 and 13 of the Act provide that the Registrar must refuse incorporation if Registrar considers that:
        • A society’s name does not comply with statutory requirements,
        • The society’s purposes do not comply with Act,
        • The name of the society does not comply with requirements in the Act, or
        • The submitted society constitution does not comply with Act.

(ii) Part 2 Schedule 1 sets out other transitional provisions for existing incorporated societies, and the following should be noted:

      • The provisions in the 1908 Act continue to apply while an existing society continues to be registered under that Act (Clause 20),
      • Clause 17 provides that, where a branch or group of branches of a society were incorporated before the enactment of the 2022 Act under the Incorporated Societies Amendment Act 1920, sections 6 and 7 of the Incorporated Societies Amendment Act 1920 continue to apply to that branch or group of branches and to the parent society with all necessary modifications for the purposes of the 2022 Act as if those older provisions were still in force.

4. Opting in or out of the regime under the new Incorporated Societies Act

(a) As indicated at the beginning of this article, the 2022 Act provides for a transitional period, during which every existing incorporated society (whether currently incorporated under the Incorporated Societies Act 1908 or under the Charitable Trusts Act 1957) must check that its constitution complies with the requirements of the new statute and decide whether or not to retain its incorporated status by seeking re-registration. That transitional process for incorporated societies is as follows:

(i) A society incorporated under the Incorporated Societies Act 1908 continues to be subject to that 1908 Act until it reregisters under the new Act, which it must do before the “transition date” of 1 December 2025 (Schedule 1, Clause 2(a)(i)). This transition date is referred to on numerous occasions in the rest of these notes. A number of things must be done by an incorporated society by the transition date, or the society will find itself deregistered!

      • Before the transition date, an existing incorporated society must, as required, amend its rules to comply with the new Act, and make other arrangements to facilitate the transition to becoming an incorporated society under the new Act (the application is made in accordance with Schedule 1, Clause 5), and an existing society will be reregistered if it meets the requirements for incorporation under the new Act.
      • Schedule 1, Clause 12 provides that, if a currently incorporated society fails to reregister under the 2022 Act by the due date, it will cease to exist as an incorporated society. However, Clause 13 provides that a society may be restored to the register in accordance with the new Act, but if the society is not restored, its surplus assets must be distributed in accordance with the provisions in the new Act {not to its members!).

(ii) The transitional process for societies incorporated under the Charitable Trusts Act 1957 is as follows:

      • Section 8, Charitable Trusts Act 1957, inserted by section 266, Incorporated Societies Act 2022, prevents new charitable societies being registered under the 1957 Act (but charitable trusts will continue to incorporate under the 1957 Act), and
      • The Law Commission Report recommendation that all charitable societies incorporated under the 1957 Act should automatically transition to being incorporated under the new Incorporated Societies Act was not adopted. Existing charitable societies may choose to reregister under the new Incorporated Societies Act or may continue to be subject to the 1957 Act indefinitely (s30A, Charitable Trusts Act 1957, inserted by section 266, Incorporated Societies Act 2022), and, in consequence, avoid the stricter provisions under the new Incorporated Societies Act relating to, for instance, the statutory obligations of committee members relating to conflicts of interest and the new financial reporting requirements (noting, however, that Courts have long been held society committee members accountable for any failure to comply with society constitutions and fiduciary duties).

(iii) The processes for other new and existing societies under the Incorporated Societies Act 2022 are as follows:

      • Clause 4(1) of Schedule 1 prevents new societies from applying for incorporation under the Incorporated Societies Act 1908 (the 1908 Act) from a date which will be fixed by the Governor-General by Order in Council.” While that date has not yet been fixed, I strongly recommend that new societies “bite the bullet” and incorporate using a constitution that complies with the 2022 Act – this will reduce the hassles that will inevitably be associated with the transition process. Section 8, Charitable Trusts Act 1957 (inserted by section 261 of the 2022 Act) now prevents charitable societies from applying for incorporation under the Charitable Trusts Act.
      • The transitional provisions for a society that is already incorporated under the 1908 Act or Charitable Trusts Act are as follows:
        • The society continues to be subject to the 1908 or 1957 Act until it re-registers as a society under the new Act or until the transition date (clauses 2(2) and 2(4) of Part 1 of Schedule 1).
        • During the period before the transition date (clause 9 of Part 1 of Schedule 1), a society can amend its rules and make other arrangements to facilitate a transition to becoming a society under the new Act, and this includes ensuring that:
          • the society’s proposed constitution will comply with the requirements of the new Act, and
          • the society’s officers are qualified to be appointed (clause 2(2)(b)(ii) of Part 1 of Schedule 1).
        • The society may apply to be reregistered as a society under the new Act before the transition date (clause 5, Schedule 1 of the 2022 Act), and the society will be reregistered if it meets the requirements for incorporation under the new Act.
        • Section 30A, Charitable Trusts Act 1957 (inserted by section 266 of the 2022 Act) now provides that an existing charitable society incorporated under the 1957 Act may either continue to exist under the regime of the Charitable Trusts Act or transfer to the register under the 2022 Act.

N.B. If most of the 24,000 or so incorporated societies leave the necessary revision of their constitutions until too late in the transition period many will, inevitably, fail to complete the process in time or will have their applications for re-registration rejected because the replacement constitutions they submit do not comply with the new statute.

(iv) Now that the new statute has been enacted, all incorporated societies should embark upon and complete the re-registration process under the new Incorporated Societies Act as soon as possible because the 1908 Act is repealed no later than the transition date, and if an incorporated society is not reregistered under the new Act by then Clause 12 of schedule 1 to the 2022 Act provides that:

      • The society ceases to exist on the transition date (but may later be restored to the register),
      • If the society is not restored, its surplus assets after the payment of all costs, debts, and liabilities are disposed of to one or more not-for-profit organisations nominated in its constitution or, in the absence of any such rule in its constitution in accordance with specific provisions in the new Act, and
      • If the society continues to operate after the transition date its members and especially its committee may be held personally responsible for the society’s debts and for the consequences of failing to distribute its surplus assets.

(v) The re-registration process involves making critical decisions:

(i) Whether to remain incorporated by re-registering under the new Act, or whether to cease to be incorporated (I do not favour the latter), and
(ii) If a society decides to re-register under the new Act there are a number of critical decisions to be made, as discussed.
Inertia is NOT an option!

Note:
The new Act will not allow a previously incorporated society to continue in existence as an unincorporated society (see Schedule 1, clause 12(2)(a) of the 2022 Act – “If the existing society has not reregistered under this Act before the transition date, – (a) the existing society ceases to exist at the start of the transition date …”).

(vi) Section 2(3) of the 2022 Act states that “Section 8 of the Charitable Trusts Act 1957 (the 1957 Act) prevents new societies from applying for incorporation as a board under Part 2 of that Act.” Section 2(4) of the 2022 Act states:

The general scheme and effect of the transitional provisions for a society that is already incorporated as a board under Part 2 of the 1957 Act is as follows:
(a) the society may choose to reregister as a society under this Act:
(b) the society may continue to be subject to the 1957 Act indefinitely if it chooses not to reregister.

(vii) No society should underestimate the work it must do before the transition date. Therefore, I strongly recommend that societies should commence the process to alter their constitutions and to adapt their governance practices to comply with the new Act no later than the beginning of 2023 (see the next sub-paragraph).

(viii) Existing incorporated societies need to establish what needs to be done to remain incorporated, and when and how to comply with the critical dates for meeting deadlines set out in the new Act:

      • First, a society needs to decide whether or not to retain its incorporated status. I strongly recommend that an incorporated society should retain its incorporated status, in the majority of cases, for a number of compelling reasons:
        • Unincorporated societies are voluntary organisations, with or without rules, and, where there are rules, they may range from the most basic to the very detailed. In my book Law of Societies I have referred to an unincorporated society as existing in an undesirable state of “voluntary uncertainty.”
        • If a society is already well-governed, the new obligations should not be unduly onerous (conversely, the new obligations may introduce some desirable rigour to a society’s governance),
        • While incorporation imposes new statutory duties on those who govern a society, incorporation protects those in governance from most potential personal liability,
        • Especially once the new Act is in force (section 2(2) provides that most of the “… Act comes into force on a date or dates to be appointed by the Governor-General by Order in Council, and 1 or more Orders in Council may be made appointing different dates for different provisions and for different purposes“), incorporation of a society provides those who deal with and provide funds to an incorporated society (and also its members) with some assurance that the society is or should be well-governed and that it is an ongoing, viable organisation,
        • The new obligations imposed on an incorporated society in respect of record-keeping and compliance with the new Incorporated Societies Act should result in good (better) governance, and
        • The members of a previously incorporated society cannot lawfully use its assets if it continues in existence as an unincorporated society, as those assets must be distributed under section 116 to one or more not-for-profit entities.
      • Next, every incorporated society proposing to remain incorporated needs to review its constitution to discover what changes will be required (the requirements for the content of incorporated society constitutions under the 2022 Act are detailed, as set out in paragraph 5(a) below, and competent legal advice is strongly recommended).
      • A timeline of actions from commencing the revision of the existing constitution through to the adoption of the new constitution at a General Meeting of members needs to be established (see section 10.0 below).
      • A sub-committee should be appointed to drive the revision process through to adoption of the new constitution, and to recommend the necessary changes to the society’s governance and administrative record-keeping to comply with the new statute.
      • The 1908 Act is repealed no later than the transition date (i.e. 1 December 2025), and if a society is not reregistered under the new Act by then, the consequences are as follows:
        • The society ceases to exist as an incorporated society on the transition date, but may later be restored to the register,
        • If the society is not restored, its surplus assets must be distributed to 1 or more not-for-profit organisations under section 116 as noted above, and a previously incorporated society’s assets must not be distributed to its members nor used by its members by what becomes an unincorporated society. This may be a critical consideration when deciding whether or not an existing incorporated society should re-register under the 2022 Act.

5. Incorporated society constitutions

(a) Essential provisions in an incorporated society constitution
Section 6 of the Incorporated Societies Act 1908 required a society’s Rules to cover a number of essential points, but section 26 of the new Act will require much more. The differences are briefly outlined below; the most section 26 significant new provisions are italicised:

Incorporated Societies Act 1908, section 6 Incorporated Societies Act 2022, section 26
(a)  the name of the society, with the addition of the word “Incorporated” as the last word in that name (a) the name of the society including at the end the word “Incorporated”, “Inc”, or “Manatōpū” (or 2 or more of those words) (see section 11)
(b) the objects for which the society is established (b) the purposes of the society (see section 12); 
(c) the modes in which persons become members of the society (c)  how a person becomes a member of the society, including a requirement that a person must consent to be a member (see section 76)
(d) the modes in which persons cease to be members of the society (d) how a person ceases to be a member of the society
(e) arrangements for keeping the society’s register of members up to date (see section 79)
(e) the mode in which the rules of the society may be altered, added to, or rescinded (i)  the method by which a society’s constitution may be amended (see sections 30, 31 and 35)
(f)  the mode of summoning and holding general meetings of the society, and of voting thereat  (k) arrangements and requirements for society general meetings (see sections 84-93), including— 

(i)  the intervals between general meetings; and 

(ii) the information that must be presented at general meetings; and 

(iii) when minutes are required to be kept; and 

(iv) the manner of calling general meetings; and 

(v) whether and, if so, how written resolutions may be passed in lieu of a general meeting for the purposes of section 83; and 

(vi) the time within which, and manner in which, notices of general meetings and notices of motion must be notified; and 

(vii) the quorum and procedure for general meetings, including voting procedures and procedures for proxies (if any); and 

(viii) the arrangements and requirements for special general meetings under section 26(1)(viii).
(g)  the appointment of officers of the society (f)  the composition, roles, functions, powers, and procedures of the committee of the society, including— 

(i)   the number of members that must or may be on the committee (section 26(1)(f)(i)); and 

(ii) the election or appointment of officers (section 26(1)(f)(ii)); and 

(iii) the terms of office of the officers (section 26(1)(f)(i)ii); and 

(iv) the functions and powers of the committee (section 26(1)(f)(iv)); and 

(v) grounds for removal of officers from office (m section 26(1)(f)(iv)); and 

(vi) how the chairperson (if any) will be elected or appointed and whether that person will have a casting vote if there is an equality of votes section 26(1)(f)(vi)); and 

(vii) the quorum and procedure for committee meetings, including voting procedures section 26(1)(f)(vii));
(g) how the contact person or persons will be elected or appointed (section 26(1)(g)).
(h) the control and use of the common seal of the society Section 23(1) provides for various means for a society to enter into contracts, and section 124(2 provides that

“A society may, in addition to complying with subsection (1), affix its common seal, if it has one, to the contract or document containing the enforceable obligation.” 
(i)  the control and investment of the funds of the society Section 26(1)(h) “how the society will control and manage its finances”
(j)  the powers (if any) of the society to borrow money
(k)  the disposition of the property of the society in the event of the society being put into liquidation Section 26(1)(l) “the nomination of a not-for-profit entity, or a class or description of notfor-profit entities, to which any surplus assets of the society should be distributed on a liquidation of the society or on, or to enable, the removal of the society from the register (see section 5(3) and subpart 5 of Part 5).”
Section 26(1)(i) “the method by which the constitution may be amended (see sections 30 and 31).”
Section 26(1)(j) “procedures for resolving disputes, including providing for how a com‐ plaint may be made (see sections 38 to 44),” including procedures for investigating and dealing with complaints and grievances.
(l)   such other matters as the Registrar may require to be provided for in any particular instance Section 10 Registrar has discretion about nature and extent of consideration of application 

(1) The nature and extent of the consideration that the Registrar gives to an application for incorporation are at the Registrar’s discretion. 

(2) Nothing in this Act limits the Registrar’s power to consider or reconsider at any time whether— 

(a) any of paragraphs (a), (b), and (d) to (f) of section 11(1) apply to a society’s name; or 

(b) the purposes of a society comply with this Act; or 

(c) the constitution of a society complies with this Act.

It is very clear that the new Act will require that society constitutions be far more detailed than was previously the case, and they will also need to be more carefully crafted to suit the differing needs of each particular society.

(b) Crafting an incorporated society’s constitution to meet its needs
In the past many lawyers had a “boiler-plate” constitution which could readily be recycled for new societies. A society constitution must, obviously, contain the bare minimum required by section 26 of the new Act (see section 5(a) above). Some of a society’s unique characteristics will be revealed in the course of complying with section 26 (in particular, by spelling out its purposes), but most society constitutions will now need to be drafted to meet the particular and different requirements of each individual society while ensuring that every society will comply with a new and far more complex Incorporated Societies Act.

6. Incorporated society governance

(a) The 1908 Incorporated Societies Act had virtually nothing to say about the governance of an incorporated society, apart from section 6(1)(g) which required the constitution to provide for “the appointment of officers of the society.” The 2022 Act contains a number of specific provisions relevant to governance (many of which were referred to in paragraph 3(e) above).

(b) The operation and affairs of every incorporated society must be managed by, or under the direction or supervision of, a committee consisting of a minimum of three officers (sections 45-46) qualified to hold office under section 47. Every such committee member must consent in writing to be an officer and not be disqualified from being an officer under section 47– the most common grounds of disqualification are being less than 16 years of age, being an undischarged bankrupt, being disqualified from being a company director or from being the officer of a charity, and being convicted and sentenced within the previous 7 years of various serious offences.

(c) Every society committee member will now owe certain specific statutory duties to the society:

(i) “… when exercising powers or performing duties as an officer, must act in good faith and in what the officer believes to be the best interests of the society” (section 54(1)),
(ii) “… must exercise a power as an officer for a “proper purpose” (section 55),
(iii) “… must not act, or agree to the society acting, in a manner that contravenes this Act or the constitution of the society” (section 56),
(iv) “… exercise the care and diligence that a reasonable person with the same responsibilities would exercise in the same circumstances …” (section 57),
(v) “… must not— (a) agree to the activities of the society being carried on in a manner likely to create a substantial risk of serious loss to the society’s creditors; or (b) cause or allow the activities of the society to be carried on in a manner likely to create a substantial risk of serious loss to the society’s creditors” (section 58),
(vi) “… must not agree to the society incurring an obligation unless the officer believes at that time on reasonable grounds that the society will be able to perform the obligation when it is required to do so,” (section 59), and
(vii) “… when exercising powers or performing duties as an officer, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by” specified people and subject to some conditions (section 60(1)).

While that list may seem frightening to some, it reflects what should be common sense. Furthermore, the reality is that the list merely codifies what Courts have long considered to be the duties of society committee members, as discussed in Court decisions such as Stratford Racing Club Inc v Adlam [2008] NZCA 92, [2008] NZAR 329, Pine Rivers, Caboolture and Recliffe Group Training Scheme v Group Training Association Queensland and Northern Territory [2013] QCA 358, and In the Matter of the Order of AHEPA NSW Inc [2019] NSWSC 1329.

(d) In addition, the new Act provides (in section 62-73) that a society committee member has a conflict of interest, which must be disclosed, in particular where that committee member (or a closely related person or organisation) “may obtain a financial benefit from” a matter, or “may have a financial interest in a person to whom the matter relates,” and, generally, the committee member must not have any involvement in any decision-making or documents relating to the matter, but may be included in the quorum, may take part in discussion on the issue. Every incorporated society will be required to maintain a conflicts register (register of disclosures), and at every AGM notice of the disclosures, or types of disclosures, since the previous AGM (including a brief summary of the matters, or types of matters, to which those disclosures relate) must be presented. These provisions are complex, and this paragraph does not fully describe the effect of these sections.

(e) A society officer ceases to be an officer on death, resignation or otherwise as specified in a society constitution, but “remains liable … for past acts, omissions, and decisions made whole that person was an officer” (section 51(1), subject to section 51(2)).

(f) The Registrar of Incorporated Societies must be advised of changes in a society’s officers (section 52).

(g) The Act requires every incorporated society, at all times, to have between one and three “Contact Persons” “whom the Registrar can contact when needed” (sections 112 and 116), who is “at least 18 years of age” and “ordinarily resident in New Zealand”), and “The position of contact person may be held separately or in conjunction with any office in the society.” In most societies the contact person is likely to be either the secretary or the president’s deputy.

7. Incorporated society members

(a) Minimum number of members of an incorporated society

Under s 4(1) of the 1908 a society had to have a minimum of 15 members on incorporation, and but the minimum is now 10 members (with a body corporate being treated as equivalent to three members under section 14). Section 74(1) provides that “A society must continue to have at least 10 members,” but section 74(2) provides that “An act of a society or the transfer of property to or by a society is not invalid
merely because the society does not have at least 10 members.” Under section 75 of the 2022 Act a society with fewer than 10 members could be liable to liquidation (noting that under section 14 a corporate organisation counts as 3 members). Section 74(2) provides that “An act of a society or the transfer of property to or by a society is not invalid merely because the society does not have at least 10 members.”

(b) Joining an incorporated society

Section 6(1)(c) of the 1908 Act merely required a constitution to provide for “the modes in which persons become members” of a society. As already noted, section 76 of the new Act provides that “A person must consent to become a member of a society,” and this is a new and very significant requirement. To avoid future disputes, I recommend that the consent should be in writing and be retained with a member’s membership records. The new Act expressly provides, in section 29(2), as follows:

(2) The constitution of a society is binding, in accordance with its terms, as between—

(a) the society and each member; and
(b) each member.

(3) The constitution of a society is binding, in accordance with its terms, on each officer.
(4) Subsections (2) and (3) are subject to the rest of this Act.

While it may be a member’s obligation to obtain, read and understand a society constitution, in my view a responsible, well-governed society will provide every new member with a copy of the current constitution when they join, and a copy of any amendments to all members once they are adopted (not a huge burden with modern technology). Apart from any other reason for doing this, no member can claim ignorance of the contents of their society’s constitution if they are kept up-to-date as to its contents.

(c) Register of an incorporated society’s members

Under section 79(2), the register of members must record the names and contact details of society members and the dates when they became members plus their “contact details” (which, according to section 5(2), includes “at least … a physical or an electronic address” and “a telephone number at is used by the person”). I recommend that society constitutions should require members to provide a physical address as it is easier to dispute the delivery of communications to an electronic address.

(d) Member access to society general information

Section 80 and 81 provide as follows:

80   Information for members
(1) A member may at any time make a written request to a society for information held by the society.
(2) The request must specify the information sought in sufficient detail to enable it to be identified.
(3) The society must, within a reasonable time after receiving a request,—

(a) provide the information; or
(b) agree to provide the information within a specified period; or
(c) agree to provide the information within a specified period if the member pays a reasonable charge to the society (which must be specified and explained) to meet the cost of providing the information; or
(d) refuse to provide the information, specifying the reasons for the refusal.

(4) Nothing in this section or section 81 or 82 limits information privacy principle 6 set out in section 22 of the Privacy Act 2020.

81   Grounds for refusing request
(1) A society may refuse to provide the information if—

(a) withholding the information is necessary to protect the privacy of natural persons, including that of deceased natural persons; or
(b) the disclosure of the information would, or would be likely to, prejudice the commercial position of the society or of any of its members; or
(c) the disclosure of the information would, or would be likely to, prejudice the commercial position of any other person, whether or not that person supplied the information to the society; or
(d) the information is not relevant to the operation or affairs of the society; or (e) the request for the information is frivolous or vexatious.

(2) Subsection (1) does not limit the reasons for which a society may refuse to pro‐ vide the information.
(3) However, the constitution of a society may negate subsection (2) (with the effect that the reasons for which a society may refuse to provide the information are limited to those in subsection (1)).

Under section 82, a member may withdraw request if there is charge for information. Those sections echo similar provisions in the Companies Act 1993. The information sought may include items as diverse as member contact details, reports to and minutes of annual and special general meetings and committee meetings, information on the society’s conflicts’ register, etc.

Section 83 provides that a member can seek Court orders relating to information.

While few societies will anticipate a flood of requests for information held by a society, I recommend that it would be wise for societies to anticipate the prospect of such requests, and to have policies and processes in place to respond to the requests which will, almost inevitably, eventually be received.

(e) Member access to financial statements and minutes of general meetings

In addition to sections 80-83, under section 88 certain information must be presented at an incorporated society’s annual general meeting:

86   Information to be presented at annual general meeting
(1) The committee must, at each annual general meeting, present the following information:

(a) an annual report on the operations and affairs of the society during the most recently completed accounting period:
(b) the financial statements of the society for that period:
(c) notice of the disclosures, or types of disclosures, made under section 63 (disclosure of interests) during that period (including a brief summary of the matters, or types of matters, to which those disclosures relate).

(2) The annual report must contain the information prescribed by the regulations (if any).
(3) In subsection (1)(c), matters has the same meaning as in section 62.

While section 86 does not expressly specify that the information must be provided in writing it might be argued that this is implicit. Clearly, providing the required information in writing will save time and avoid disputes as to the nature and content of the supplied information, and a wise and diligent secretary will maintain a detailed record at every committee meeting of the disclosures made, who made them, and the nature of each disclosure in terms of section 86(1)(c), especially having regard to section 88, which provides members with a broad right of access to a society’s financial statements and minutes of general meetings:

88   Right of access to financial statements and minutes of meeting
(1) A member may, at any time, make a written request to the society for either or both of the following:

(a) the financial statements of the society that were presented at the most recent annual general meeting of the society:
(b) the minutes of the most recent general meeting of the society.

(2) The society must, within a reasonable period after receiving the request and without charge, provide the requested information to the member.
(3) Sections 80 and 81 do not limit this section.

(f) Internal disputes – complaints and grievances

The Incorporated Societies Act 1908 did not refer to the issues relating to internal disputes about the rights of members or about member conduct, with the result that such issues were, more often than not, handled very poorly. The Law Commission and now the 2022 Act categorise disputes as either “complaints” (concerning the alleged misconduct or discipline of members) or “grievances” (relating to members’ rights and interests as members).

Section 38 defines what is now referred to as a “dispute” and a “complaint”:

(1) A disagreement or conflict is a dispute if—

(a) it is between—

(i) 2 or more members; or
(ii) 1 or more members and the society; or
(iii) 1 or more members and 1 or more officers; or
(iv) 2 or more officers; or
(v) 1 or more officers and the society; or (vi) 1 or more members or officers and the society; and

(b) the disagreement or conflict relates to an allegation that—

(i) a member or an officer has engaged in misconduct; or
(ii) a member or an officer has breached, or is likely to breach, a duty under the society’s constitution or bylaws or this Act; or
(iii) the society has breached, or is likely to breach, a duty under the society’s constitution or bylaws or this Act; or
(iv) a member’s rights or interests as a member have been damaged or members’ rights or interests generally have been damaged.

(2) A member, an officer, or a society makes a complaint if, in accordance with the society’s constitution,—

(a) the member or officer starts a procedure for resolving a dispute in accordance with the constitution; or
(b) the society starts a procedure for resolving a dispute in accordance with the constitution (for example, the society starts a disciplinary action against a member or an officer in relation to an allegation referred to in subsection (1)(b)(i) or (ii)).

(3) In this section, a reference to—

(a) a member is a reference to a member acting in their capacity as a member:
(b) an officer is a reference to an officer acting in their capacity as an officer.

The proposals are quite complex, and this paper makes no attempt to explain them. However, it is worth noting that section 42(1) provides as follows:

Constitution may provide for types of dispute resolution
(1) A society’s constitution may provide that all or certain kinds of disputes must or may be submitted to any type of dispute resolution, including—

(a) consensual dispute resolution (for example, mediation, facilitation, or a tikanga-based practice); and
(b) determinative dispute resolution (for example, arbitration under the Arbitration Act 1996 or adjudication).

A society’s processes when dealing with complaints and grievances must comply with the principle of natural justice – see sections 39-44 and Schedule 2 to the new Act.

8. New statutory sanctions

(a) Banning people from serving as society officers
The new Act, sensibly, in my opinion, provides in sections 168-173 for the banning of people from serving as society officers, with sections 168 and 169 providing as follows:

Court may disqualify officers
(1) A court may make a banning order against a person (A) if—

(a) A has been convicted of an offence under subpart 6, or has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or
(b) A has, while an officer of a society and whether convicted or not,—

(i) persistently failed to comply with this Act or, if the society has failed to so comply, persistently failed to take reasonable steps to obtain compliance with this Act; or
(ii) been guilty of fraud in relation to the society or of a breach of duty to the society; or
(iii) acted in a reckless or an incompetent manner in the performance of A’s duties as an officer; or

(c) A has become a mentally impaired person who, in the opinion of the court, permanently lacks wholly or partly the competence to manage their own affairs.

(2) A banning order may, permanently or for a period specified in the order, prohibit or restrict A, without the leave of the court, from doing either or both of the following:

(a) being an officer of a society:
(b) being concerned or taking part in the management of a society in any way (whether directly or indirectly).

169   When order may be permanent or for period longer than 10 years
The court may make an order under section 168 permanent or for a period longer than 10 years only in the most serious of cases for which an order may be made.

(b) Additional powers of the Registrar
The Registrar has various functions and powers under the new Act, including to “remove or omit from the register any information that relates to a society if the Registrar considers, in the public interest, that the information should not form part of the register” (section 234(1)), to maintain the Register as previously (section 241(b)), and to undertake inspections (sections 244-248).

(c) Offences
Section 160(2) sets out a number of infringement offences, for failing to notify the Registrar of amendments to a society constitution, failing to notify Registrar of elections or appointments and other changes relating to officers, failing to maintain a society’s register of members, failing to call society annual general meetings, failing to hold, and keep minutes of, annual general meetings, failing to send copy of passed resolution in lieu of meeting to certain society members, failing to register financial statements, failing to register an annual return, failing to have registered office, and failing to give Registrar notice of change of contact person.

9. Timeline to adoption of a new or revised society constitution

Every society that has incorporated status on enactment of the Incorporated Societies Act 2022 needs to make a fundamental policy decision; “Will the society retain its incorporated status and the benefits of incorporation or become unincorporated?” That question covers a range of subsidiary questions and actions, and the article discusses the priorities and the need to establish a timeline of actions. Those are discussed in a separate article, “The New Incorporated Societies Act – Guide for Societies” (see https://nfplaw.co.nz/the-new-incorporated-societies-act-guide-for-societies/).

The author of this article

Mark Dadelszen is well-placed to advise on the implications of the new 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. In 2021 he made Submissions (both for the New Zealand Law Society and also personally) to the Parliamentary Select Committee considering the new Incorporated Societies Bill. 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 late 2022). 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.

This is one of a series of articles on societies and charitable trusts by Mark von Dadelszen, a lawyer and author of Law of Societies and Members’ Meetings (4th Editions of both books should be published in 2022 following enactment of the Incorporated Societies Act 2022.