What should supplement a constitution?
In my article, “Responsibilities of those in Governance,LINK” I mention the need for those governing a community organisation to be aware of what is in the organisation’s “constitutional documentation, including any policy, strategic and regulatory documents.” Many trust deeds and society rules are cluttered with material that need not be there, but should be in supplementary documents (such as bylaws, regulations and policies) which can be changed more readily than the constitution.
What should a charitable trust’s deed or a society’s rules contain?
The Incorporated Societies Act 1908 (section 6) sets out certain minimum requirements to be included in a society’s rules for registration (the replacement Incorporated Societies Act will almost certainly be far more prescriptive), but the Charitable Trusts Act 1957 fails to specify any basic essentials. I suggest that the following basic, core requirements should be specified (the Incorporated Societies Act sections are shown in brackets):
- The name and purposes of the organisation (section 6(1)(a)-(b)) – but the purposes should, preferably, not be expressed in unduly restrictive terms which leaves the entity with little room to develop its mission with experience,
- Given the theme of this article, provision for the making of policies, regulations or bylaws,
- How the organisation is to be governed, with any powers and limitations on governance powers clearly set out,
- How people join, resign from and can be removed from membership (section 6(1)(c)-(d)), and details concerning any subscriptions, membership rights and obligations, and complaint procedures,
- How meetings of the entity are called, held and chaired (section 6(1)(e)), what specific things must be done at annual meetings, and how deadlocks are resolved,
- How those in governance are elected or appointed (section 6(1)(g)), including any powers of co-option,
- How meetings of the governing body are called, held and chaired (section 6(1)(f)), whether and how decisions may be made without a meeting being held, and how deadlocks are resolved,
- The extent to which postal and electronic forms of voting might be adopted for elections, changing the constitution, and making decisions outside of general meetings,
- Responsibilities of the secretary and treasurer (including, as required by section 6(1)(i)-(j), the “control and investment of the funds of the society” and the “powers (if any) of the society to borrow money”),
- How conflicts of interest are to be managed,
- How the entity’s contracts are to be signed (including, under section 6(1)(h), the “control and use of the common seal” – both s 6(1)(h), Incorporated Societies Act 1908 and s 13, Charitable Trusts Act 1957 require common seals),
- Appointment of staff (if any),
- How the constitution can be changed (section 6(1)(e)), and
- How the organisation can be wound up and, in that event, how its assets are to be disposed of (section 6(1)(k)).
Societies being formed now, or revising their constitutions now, are well-advised to anticipate the provisions which are likely to be in the new Incorporated Societies Act (see Overview of Proposed New Incorporated Societies Act LINK and Be Prepared – Incorporated Societies Law Reform LINK). The new statute will require far more to be included in society constitutions, so it makes good sense to place subsidiary material in regulations or bylaws rather than in a constitution.
Keeping constitutional content to the minimum
Many practical and operational issues often specified in a constitution can better be dealt with in subsidiary (strategic, policy and regulatory) documents formulated, adopted and amended by the committee or trustees. Permitting such flexibility avoids the need to change the constitution every time some minor tweak is required to such provisions. Furthermore, constitutional amendments are often not handled correctly; for instance:
- Amendments are supposedly made without following due process,
- Inadequate notice of what is proposed is given to members,
- Because of the expense, professional assistance is frequently not obtained, and
- Changes are not registered with the Registrar or with Charities Services (where applicable).
It therefore makes practical and economic sense to restrict the content of a constitution to the minimum required. However, careful consideration needs to be given to those things members generally should decide upon and those things in which they do not need to have the same involvement.
Strategic Plan
In another article (“Strategic Planning for Societies and Charities” LINK) I discuss the need for community organisations to engage in strategic planning and to have a clear and concise strategic plan. I will not repeat what was in that other article other than to point out that any strategic plan should be consistent with the constitution and should be a blueprint explaining how the purposes of the entity set out in its constitution will be realised.
Policies
What policies may be required depends on the entity, but some general, generic policy issues include governance, financial delegations, a code of conduct for governance members, external communications, information security, communications, and reimbursing to members for expenses. All policies should record the date of their adoption, the date when they should be reviewed, and the primary manager of the policy. Other regularly recurring governance issues where a consistent approach is desirable should be the subject of a policy.
Regulations and bylaws
While policies tend to be generalised statements, regulations or bylaws are likely to be more detailed and precise. Some society rules go into great detail about categories of membership, admission processes for membership applicants, and the rights, privileges and obligations of different classes of member. Subject to statutory requirements, an omnibus Rule might delegate to the committee the power to prescribe such detail in bylaws or regulations, making such issues a governance issue, and the committee can amend them without the formality of having such issues considered by a general meeting.
Are constitutional documents up-to-date?
There are still constitutions that have not been updated for 40-50 years. That is concerning, not least because it probably means they are scarcely ever consulted and it is likely that many of their provisions are being ignored. If all notices to members are still required to be given to members by mail or by publication in the public notices column of a daily newspaper, it is clear that the benefits (mostly) of email are being ignored and the costs of expensive notices to members perpetuated (and with fewer people buying daily newspapers, fewer members will be reading such notices, and, with mail deliveries becoming more intermittent, mail may be received many days after letters are posted).
I suggest that, as a rule of thumb, subordinate constitutional documents should be subject to regular review:
- Strategic plans – every 3-5 years,
- Policies – at least once every two years, and
- Regulations and bylaws – every 5 years.
For specific advice about any of the issues discussed in this article, please contact Mark at mark@nfplaw.co.nz.