The Incorporated Societies Act 2022 was passed on 5 April 2022 and replaces the Incorporated Societies Act 1908. Incorporated Societies must reregister under the new 2022 Act and will continue to operate under the old 1908 Act until they have reregistered. Reregistration opens on 5 October 2023. If Incorporated Societies do not reregister by the beginning of April 2026, they will cease to exist. If they cease to exist, they must distribute their surplus assets to a not-for-profit entity. Once they reregister, they will be subject to the provisions of the new Act.

The 2022 Act provides for various changes to the operation of incorporated societies. This includes the following:

Minimum number of members

• A requirement to have 10 or more members at any one time.
• Membership cannot drop below 10 while the incorporated society is operating.
• A requirement for all members to consent to be a member.

Committee requirement

• A requirement to have a committee as the governing body.
• The committee must consist of at least 3 people who are either elected or appointed.
• Each person on the committee becomes an officer.
• A majority of the officers on the committee must be members of the society.
• There may be other officers who are not part of the committee, including people who have significant influence over the management or administration of the society.

Officers’ duties

The new 2022 Act imposes duties on an incorporated society’s officers, including:

• A duty to act in good faith and in the best interests of the society;
• A duty to comply with the new Act and the constitution;
• A duty to exercise reasonable care and diligence;
• A duty to not create a substantial risk of serious loss to the society’s creditors; and
• A duty to not incur an obligation the officer does not reasonably believe that the society will be able to perform.
• A duty to disclose to the committee an interest in a matter if a conflict of interest arises.

These duties are owed to the society. An officer will be personally liable for any breach of duty.

Constitution

Under the new 2022  Act, an incorporated society is required to have a constitution. The constitution must contain:

• The name of the society;
• The purposes of the society;
• How a person becomes a member of the society, including a requirement that a person must consent to be a member;
• How a person ceases to be a member of the society;
• Arrangement for keeping the society’s register of members up to date;
• The composition, roles, functions, powers and procedures of the committee;
• A contact person;
• How the society will control and manage its finances;
• The method by which the constitution may be amended;
• Procedures for resolving disputes;
• Arrangements and requirements for general meetings (such as Annual General Meetings which are required under the Act); and
• The nomination of a not-for-profit entity to which any surplus assets of the society should be distributed when the society is liquidated, removed from the register or otherwise ceases to exist.

The constitution may contain:

• Ways in which a dispute determination may be appealed;
• Any limitations on a committee’s ability to act;
• Specific qualifications to be an officer;
• Specific ways in which an officer can be removed or vacated;
• Limitations on an officer’s obligation to disclose an interest;
• Limitation on a member’s liability;
• Rights for delegates or representatives to attend an AGM;
• A requirement to give a meeting notice;
• How a meeting is assembled;
• Passing a resolution in lieu of a meeting;
• Manner of approval of a resolution;
• Provision for proxies, postal votes, electronic votes;
• An indemnity clause for officers;
• A right to change the address of the registered office;
• Provision for a common seal; and
• A right to appoint an attorney.

Auditing requirements

The new 2022 Act also imposes extra financial reporting requirements. This includes the following requirements:

• Annual returns to be filed annually.
• Financial statements to be filed within 6 months of the society’s balance date.
• Larger societies to report using the External Reporting Board (XRB) accounting standards.
• Small societies to choose whether to adopt XRB standards.
• Financial statements to be audited if their expenditure exceeds the threshold set by regulations.
• Charities under the Charities Act 2005 to have their financial statements audited if they meet the expenditure thresholds.

Dispute Resolution Process

Under the new 2022 Act, an incorporated society must provide for a dispute resolution process in its constitution. This process must be consistent with the rules of natural justice. The constitution may include:

• Procedures for managing disputes between the members of the society.
• Procedures for managing disputes between a member and the society itself.
• A formal process for filing complaints.

Liability

The new Act creates six offences, including:

• Making false statements;
• Fraudulent use or destruction of property;
• Falsification of register, records, or documents;
• Operating fraudulently or dishonestly incurring debt;
• Improper use of “incorporated”, “inc” or its te reo version “Manatōpū”; and
• Contravention of a banning order.

As referred to above, officers may also be personally liable for any breach of the officer’s duties under the new Act.

Fitness for purpose

Incorporated societies will need to consider whether they are willing and able to undertake the increased obligations under the new 2022 Act. We recommend that incorporated societies consider:

• The purposes of the incorporated society;
• The current structure of the incorporated society and any changes that must be made to comply with the new Incorporated Societies Act 2022;
• The membership structure, including how membership is recorded and whether they can maintain the minimum membership requirement;
• The information that is required in a constitution, and the information that the society may wish to include in their constitution;
• The nomination of a not-for-profit entity that will receive the society’s surplus assets if the society ceases to exist; and
• Whether the incorporated society will be cost effective with extra compliance requirements.

If societies are unable or unwilling to reregister under the new 2022, they may consider:

• Winding up the incorporated society; or
• Amalgamating with another incorporated society.

If you have any questions about the Incorporated Societies Act 2022, how it may affect your incorporated society, or whether your incorporated society is still fit for purpose, please contact us on 0800 RSM LAW (0800 776 529).