The Incorporated Societies Act 2022 – has finally arrived!

Good things take time – would be a fitting introduction to the new Incorporated Societies Act 2022. 

The Incorporated Societies Act 2022 has been enacted and took effect on 5 April 2022 – under the Act all existing incorporated societies will have a transitional period of approximately three and half years within which they must re-register with the Registrar of Incorporated Societies and accompany their application with the filing of a constitution that is compliant with the requirements of the Act.

The previous Incorporated Societies Act was first passed in 1908 and has remained essentially unchanged until the new Act was enacted in 2022. 

The New Zealand Law Commission commenced a reform process for the Act back in 2011, but after many years of delays, consultation and losing out to other priorities, the new Act finally received Royal Assent on 5 April 2022.

The new legislation will impact on a lot of entities. Similar to the large number of charities in New Zealand, there are approximately 23,000 entities registered as Incorporated Societies with the Companies Office on the Registrar of Incorporated Societies. Of that number, there are an estimated 9,000 incorporated societies that are also registered charities with Charities Services.

Why the new Act?

Apart from the distinction of passing its 100th birthday, since the 1908 Act’s inception the incorporated societies sector has grown considerably, and many now can be complex entities holding substantial assets and operate substantial businesses. The 1908 Act does not meet the present-day requirements of incorporated societies and provides limited practical guidance to society officers in relation to financial and operational matters.

The 2022 Act is intended to improve and modernise the governance framework for incorporated societies, codify case law into the Act and provide constructive options when disputes arise.

What are the key changes in the Act?

The 2022 Act makes a number of key changes to the current framework which will require all incorporated societies to take some action. Some of the changes include:

• The Act requires a number of things to be included in all Constitutions such as the composition, roles, powers, functions and procedures of the governing committee. All societies will need to check if their Constitution is compliant with the new Act.
• Under the 1908 Act, it required 15 members to form a society. This has now been decreased to 10 members, however the society must have at least 10 members at all times.
• All societies now require a governing committee of at least 3 officers. The new Act is more explicit about both who can be an officer as well as what their duties are. Officers must disclose any conflicts of interest and there needs to be a clear process for managing these.
• The Act codifies officer duties by prescribing that all officers must:
  • Act in good faith and in what the officer believes to be the best interests of the society
  • Exercise their powers for proper purposes
  • Exercise the care and diligence that a reasonable person would in the same circumstances
  • Not agree to the society incurring an obligation unless the officer believes the society will be able to perform the obligation when required to do so
  • Not act, or agree to the society acting, in a manner that contravenes the constitution of the incorporated society or the 2022 Act.
• Incorporated societies must now have a clear disputes resolution process to be able to deal with member grievances and complaints. The Act specifies what is good practice and sets out minimum requirements. Any society can always go beyond the statutory minimum if they deem that helpful to the running of the organisation.
• The Act is more explicit around financial reporting for societies. Different financial reporting requirements are specified based on the size of the society. This approach seeks to improve transparency, understanding and comparability between societies by requiring them to adopt specified financial reporting standards. Larger societies will be required to be audited and to file these on the public register.

What do I need to do next?

The new 2022 Act requires that all existing incorporated societies will be required to re-register with the Registrar of Incorporated Societies by the later of:

• 1 December 2025; or
• The date that is 2 ½ years after the commencement of certain transitional provisions contained in the 2022 Act (some provisions of the Act come into force progressively)

An application for re-registration must be accompanied by a copy of the incorporated society’s constitution, which must also be compliant with the requirements set out in the 2022 Act.

Now is a very good time for incorporated societies to review their existing rules or constitution to ensure that they are compliant with the new 2022 Act, and if not, to take actions to make the necessary modifications.

We encourage all incorporated societies to understand the changes which arise under the new Act and plan appropriately to take action.

Lynch & Associates are well placed to assist you in establishing how the new Act will impact upon your society and to assist you through the re-registration process – please contact us if you need any help.

We’d love to hear from you!