The Law Commission has issued a Report recommending the repeal of the Incorporated Societies Act 1908 and replacing it with a modern Statute.
If approved, a large number of Indian and ethnic, religious and cultural societies currently operating in the community will be affected.
The Report states that New Zealand has over 23,000 incorporated societies, of which 45% are cultural, sporting and recreational bodies, and 55% comprise a broad range of community activities including social service providers, religious groups, development and housing bodies, educational and environmental interest groups, and business and professional groups.
These community organisations are known as ‘not-for-profit’ or as the ‘Third Sector.’
According to the Report, the new Statute should provide guidance that is common to other statutes including statutory duties for the officers of Societies, requirements for dealing with conflicts of interest, dispute resolution procedures in every constitution and a model constitution.
Ownership interest
It has also recommended reducing the minimum number of members from 15 to 10, a statutory officer and a committee of at least three members and that members should have no ownership interest in the society.
Among the other recommendations are charitable trust boards under the Charitable Trusts Act 1957 should remain outside new incorporated society’s legislation, but charitable societies should be brought under it.
The new Statute should provide that no act of the society is invalid merely because the Society did not have the capacity, the right or power to act. The Statute will also protect third parties dealing with the Society, who were unaware of any such incapacity.
The Statute requires a Society to have a committee of officers to make decisions and run its affairs (management and governance). The Commission thinks that it is in the public interest that the Society elects or appoints one person to be its statutory officer, who then has statutory obligations as the point of contact to the Registrar of Incorporated Societies.
Financial obligations
On the financial reporting obligations it concluded that incorporated societies should not be able to opt out of preparing and filing at least simple annual financial reports as this ensures that members receive financial information about their organisation each year and also allows the Registrar to ascertain that it has not ceased to operate.
The principles that guided these recommendations were (1) People join societies to achieve a shared purpose, not to personally profit financially from the activities of the society. Therefore, societies should not distribute profits or benefits directly to members (2) Societies, as private bodies, should be self-governing and free from inappropriate state interference (3) Since Societies are run by their members who hold it to account, a group without members should consider an alternative form of incorporation to hold it to account.
The Government will consider the recommendations and respond.
If the recommendations contained in the Report are implemented and a new legislation is enforced, every existing incorporated society must ensure that its constitution complies with the new Statute.
Gurbrinder Aulakh is a Barrister & Solicitor at George Bogiatto. He is also Deputy Chairman, Auckland Regional Migrant Services.
Website: www.aucklandcitylawyers.co.nz
