Having originally stemmed from a review by the Law Commission in 2013, the Bill just requires its final Parliamentary reading and then assent to be enacted and it is now high up on Parliament’s agenda, so we expect to see the new legislation pass into law shortly.

The Bill seeks to replace the Incorporated Societies Act 1908 and to modernise the rules for incorporated societies and address some deficiencies. The current version of the Bill includes a number of amendments and clarifications recommended by Select Committee and picks up some other points.

The core provisions of the Bill remain the same, but some important changes have been made.

In our FYI on the first version of the Bill introduced to Parliament in March 2021, we covered the core provisions of the new legislation and existing societies’ transition to the new legislation.

The main changes that have been made since the Bill was first introduced are as follows:

• Clarification of the financial gain prohibition: The prescribed situations in which societies will not be considered to be in breach of the prohibition on operating for the financial gain of their members have been expanded. The Bill now clarifies that, amongst other things, paying hardship grants and education scholarships, or distributing funds to not-for-profit members to further a society’s purposes (eg “umbrella” societies distributing funds to affiliated/closely related not-for-profit member entities), will not cause a society to breach the prohibition.

• Allowing small societies to choose cash accounting: In order to simplify annual financial reporting requirements for small societies, small societies will be able to choose to prepare their financial statements on a cash accounting (receipts and payments) basis, rather than an accruals basis. This will assist small societies that wish to use the simpler cash accounting approach.

• Increased thresholds for “small society” status: The thresholds for “small society” status have been increased and non-current assets will not count towards the assets threshold. A society will be a “small society” if it has total operating payments less than $50,000 and total current assets less than $50,000 for each relevant accounting period (generally the two most recently completed financial years), and it is not a ‘donee organisation’ for donation tax incentive purposes. The monetary thresholds will also now be periodically reviewed by the Minister. Small societies that are registered under the Charities Act 2005 (Charities Act) will still need to comply with the separate financial reporting regime under that Act (which is also currently under review, and an amendment bill is expected later this year).

• “Large society” status to be determined by regulations: The size threshold for large societies, which must have their financial statements independently audited under the new legislation, will no longer be linked to the definition of “large” in the Financial Reporting Act 2013 (FRA), but will be set by regulations. The Select Committee viewed the thresholds in the FRA as too high for societies. Societies may, of course, be required to have their financial statements independently audited or reviewed under their constitutions and/or under other legislation (eg, under the Charities Act, for charitable societies that are registered and meet specified size thresholds under that Act).

• Independent committee members: The Bill now provides that a society’s committee, ie its board or equivalent governing body, must include a majority who are members of the society and/or representatives of body corporate members of the society. This is to facilitate the inclusion of a minority of independent committee members, who may bring additional expertise, impartiality, accountability and transparency to a society’s governance.

• Clarification of the dispute resolution provisions: The Bill has been amended to clarify that a society’s constitution may require or allow any type of dispute resolution, not just arbitration or mediation, and that a society’s constitution may provide for dispute resolution decisions to be appealed or reviewed. These changes reflect that societies have the power to self-govern and choose their own dispute resolution processes, which could include other methods such as facilitation and tikanga-based practices.

Apart from the main changes outlined above, a number of other changes have been made to the Bill. Other changes include, for example:

• express recognition that incorporated societies are private bodies that should be self-governing in accordance with their constitution and bylaws and also their own tikanga, kawa, culture and practice;

• provision for a society’s constitution to opt out of, or modify, the Bill’s requirements regarding conflicts of interest;

• more flexible provisions in relation to a society having a name similar to another society or entity;

• clarification that a society can keep its records and documents (including its constitution and any bylaws) in te reo Māori;

• recognition that a society’s constitution may provide for the society’s members to vote on matters by proxy, post and/or electronic means; and

• bolstered provisions in relation to the Registrar restricting public access to registry information.

Time to get ready for the new legislation

Once the new legislation is enacted:

• Orders in Council will specify the date for the commencement of registrations under the legislation, and for the discontinuation of registrations under the 1908 Act, and the MP in charge of the Bill, Hon Dr David Clark, has indicated that commencement may be around 18 months after enactment; and

• existing societies that wish to continue to operate will need to comply with, and reregister under, the new legislation by the later of 1 December 2025 and the date that is 2½ years after the discontinuation of registrations under the 1908 Act.

The transition period is critical for an existing society to review its position, determine whether it will reregister, and (if it intends to reregister) review and amend its constitution and ensure that its officers are qualified to continue under the new legislation. It will also give societies and their members, committees and officers time to familiarise themselves with the new legislation, including in particular the new officers’ duties outlined in our FYI on the first version of the Bill.

For many existing societies, including both individual societies and groups of societies (eg umbrella/parent societies and their branch societies), the new legislation may be the catalyst for considering whether restructuring or reorganisation, and in some cases winding up, would be appropriate.

Get in touch

Contact one of our experts for advice regarding the impact of the Bill and how best to ensure that your society and its members, committee and officers will be ready for the new regime.