On 6 April 2022 the Incorporated Societies Act 2022 (Act) came into force. The Act replaces and modernises the Incorporated Societies Act 1908 which had been in operation for 114 years. The Act codifies the underlying principles of the current law that have been built from case law over the last 100 plus years and fills in some of the gaps.

If you are:

• a member of one of the 24,000 incorporated societies already in existence in New Zealand,
• considering converting an entity into an incorporated society, or
• creating an incorporated society,

then there are some important changes that you need to be aware of.

Reregistering under the Act

Existing societies must re-register under the Act before the “transition date” of 1 December 2025.

Societies are now required to have a constitution which complies with the rules and requirements of the Act. Societies will need to review their rules and ensure that they comply with the Act well in advance of the transition date, and should not underestimate the time this will take.

Basic duties for members and officers

A number of new duties placed on officers have been included to reflect the significance and responsibility of societies taking on financial obligations. These duties are modelled on the duties that directors of companies have. It is important for people stepping into officer roles to be clear on what the role entails before making this commitment. The duties act as a guideline to help officers understand the law and expectations regarding their conduct.

Officers have a duty to:

• Act in good faith and in the best interests of the society;
• Exercise their powers for proper purpose;
• Comply with the Act and the society’s constitution;
• Exercise powers and duties with care and diligence, taking into account the nature of the society, the decision, the position of the officer and the nature of their responsibilities;
• Not allow or agree to activities which pose a substantial risk of serious loss to creditors; and
• Not incur obligations without believing, on reasonable grounds, that the society will be able to perform the obligation.

Financial Reporting Standards

Societies will be required to keep accounting records and financial statements. These must be prepared and registered in accordance with generally accepted accounting practice standards and must be audited regularly.

Small societies have a lower standard of reporting required of them and will not need to be audited, reflecting the cost and expertise that can be associated with reporting.

Procedure for dealing with disputes

A procedure for dealing with internal disputes must now be included in every society’s constitution. A model procedure has been provided in the Act. This is important for keeping disputes away from the courts, and allows societies to instead focus their time and efforts on serving their purpose.

Access to information

The Act requires information on a society’s finances and meeting minutes to be available on request to officers and ordinary members and to be presented at AGMs.

Proposed Timeline

We recommend commencing the reregistration process no later than the beginning of 2023, using the following timeline as a general guide:

• Draft the new constitution to circulate within your committee – allow 6 months;
• Draft any changes to circulate to all members – allow 3 months from the completion of the above;
• Revise the new draft constitution and refer back to committee for final approval – allow 3 months from the completion of the above;
• Adopt new constitution – allow 4 months from the completion of the above; and
• Send to Registrar of Incorporated Societies (and Charity Services if necessary).

If you have any questions or would like some assistance with your Tennis Club or other Incorporated Society, please do not hesitate to contact Matthew Hastings, Solicitor (03 343 8582 / matthew@mmlaw.co.nz) or Emily Hughes, Law Clerk (03 343 8452 / emilyh@mmlaw.co.nz).