Incorporated societies

What is an incorporated society?

Incorporated Societies Act 2022, s 11 and Schedule 1

New legislation about incorporated societies

New legislation about incorporated societies was introduced in 2022. Throughout this resource: 

  • the Incorporated Societies Act 1908 will be referred to as the “1908 Act”, and 
  • the Incorporated Societies Act 2022 will be referred to as the “2022 Act”.  

An incorporated society is a membership-based non-profit organisation that is currently registered under the 1908 Act.  

By registering under the Act, the society becomes an incorporated body with a legal identity of its own, separate from the identity of its members. This means the society continues to exist as a legal entity (called “perpetual succession”) even though its membership may change. It also means the society’s members are not personally responsible for debts and other obligations that the society takes on. 

An incorporated society’s management committee is in charge of the administration, management and control of the society. 

The Incorporated Societies Act 1908 (the “1908 Act”) previously set out the rules an incorporated society needed to follow, but under the new legislation introduced in 2022 (the “2022 Act”) all incorporated societies have to apply to re-register with the Registrar of Incorporated Societies (the Registrar) by April 2026 if they want to continue to exist. If a society doesn’t apply to re-register by April 2026, it will stop being an incorporated society (“cease to exist”). 

Applications for re-registration will open in October 2023. More information about the application process will be set out in regulations that are due to be introduced later this year.  

The 2022 Act creates changes to the registration process, and creates different requirements for incorporated societies. This means that:  

  • if you are an existing incorporated society, until you re-register, your society continues to operate under the old rules from the 1908 Act.  
  • if you are an existing incorporated society, until you re-register, your society continues to operate under the old rules from the 1908 Act.  
  • if you are an unincorporated group looking to be incorporated before October 2023, you will have to apply to register under the 1908 Act, and you will then have to re-register under the 2022 Act once applications open.  
  • if you are a society-based charitable trust board already registered under the Charitable Trusts Act 1957, you have the option of:  
    • re-registering under the 2022 Act; or,  
    • you can continue operating under the Charitable Trusts Act 1957. If it’s a new registration, you’ll have to apply under the rules of the 2022 Act. No new society-based charitable trusts can register under the old legislation. 
       

Key people in an Incorporated Society

  • Committee: any society that incorporates or re-registers under the new Act has to have a governing body, which is referred to as the “committee” in the 2022 Act. There has to be at least 3 people on the committee. The 2022 Act refers to these people as “officers”. 
  • Officers: A society’s officers are the committee members. They are chosen by the society to manage, direct and supervise the society’s activities. Other people can also be officers even if they’re not part of the elected committee, if they hold a position which allows them to exercise significant influence over the management or administration of the society—for example, a CEO. Officers have specific duties, set out in the 2022 Act. 
  • Members: A society’s members are people who have consented to being part of the incorporated society, following the process set out in the society’s constitution. Unlike officers, members don’t have special duties under the 2022 Act. 

Registering as an incorporated society

Key requirements for registering or re-registering under the 2022 Act

Incorporated Societies Act 2022, s 26

When your group applies to register or re-register under the 2022 Act, it will need to provide a proposed constitution to the Registrar, which meets the new requirements set out in the 2022 Act. 

These requirements are a lot more detailed than what was set out in the 1908 Act. This means that most existing incorporated societies will have to amend their constitutions to meet the 2022 Act’s requirements.  

Tip: The Companies Office have created a resource called the Constitution Builder to help incorporated societies create a constitution in line with the 2022 Act. You can find this resource at the Companies Office website.  

The Act sets out a checklist for what your society’s proposed constitution must have. The key requirements are:  

  • Name of society (ss 11; 26(1)(a))—The constitution has to have the name of the society and the name has to meet certain criteria. For example, it can’t be misleading about the society’s purpose, it can’t be offensive, and it needs to be different enough from existing society names so it’s not confusing. 
  • Purposes of society (ss 12, 23, 24, 26(1)(b))—The constitution has to include the society’s purposes, and these purposes can’t be against the law.  
  • Not for financial gain (ss 22-24)—The society can’t make a profit with the intention of passing it on to the members (in other words, the society can’t “operate for financial gain”). Any profits have to be returned to the society to be used within the scope of its purposes. If a society breaches this rule with the permission or consent of an officer of the society, the officer can be fined up to $50,000. A society can recover a financial gain from a member, and the High Court can put a society into liquidation if it is carried on for the financial gain of a member.   
  • Membership rules (ss 8, 14, 26(1)(c), (d), (e), 76 and 79)—The constitution has to have rules setting out how a person becomes, and stops becoming, a member of the society. For example, a person may consent to being a member by filling out a form. It’s no longer possible for a person to become a member by default, for example, as a result of the suburb or street where they live. 
    • Minimum membership – The society has to have at least 10 members (this is less than the minimum of 15 members required under the 1908 Act). However, a member that is a body corporate, such as another incorporated society, counts as three individual members.  
    • Register of membership – Societies have to have a register of members and the constitution has to provide for arrangements for keeping the register up-to-date. The register must contain the name of each member, their last known contact details, the date on which each person became a member and any other information the regulations will require.  
  • Committee rules (ss 26(1)(f); 45-46; 50)—A society has to have a committee which is responsible for the society’s management (this is different than the rules under the 1908 Act). The constitution has to set out the composition, roles, functions, powers and procedures of the society’s committee. This includes how they are elected or appointed, and how they are removed (see: “Key people in an incorporated society” for more information). 
    • A society’s committee needs to have least 3 people, called officers. The majority of officers on the committee must be either members of the society, or representatives of body corporates that are members of the society.  
    • By default, a committee will have all the powers necessary for managing, directing and supervising the management, operation and affairs of the society. The constitution can place limits on these powers.   
    • The constitution has to set out how the chairperson (if there is one) will be elected or appointed and if they will have a casting vote. A casting vote is an extra vote given to a Chairperson when the votes on a matter are equally split. 
  • Contact person (ss 26(1)(g); 113 – 116)—A society has to have at least one contact person (but no more than three). The constitution has to set out how the contact person will be elected or appointed. The contact person has to be at least 18 and ordinarily resident in NZ. They may hold other positions in the society in addition to being a contact person. If the contact person resigns, the position needs to be filled within 20 working days. If their details change, the society has to inform the Registrar within 20 working days.  
  • Finances and recording (ss 26(1)(h); 99 – 109)—The constitution has to set out how the society will control and manage its finances—for example, who can sign cheques, and who will collect money owed to the society. (For more information about financial reporting requirements, see: “Financial accounts and statements”). 
  • How rules are amended (ss 26(1)(i); 30-33)—The constitution has to set out the method your group will follow to amend the constitution’s rules: 
    • General procedure – To make amendments to a constitution, the amendments have to be in writing, and either: 
      • approved at a general meeting of the society — the constitution might outline the specific majority required to pass a resolution. If it’s not specified in the constitution, the resolution must be passed by a simple majority of the members who are entitled to vote — or,  
      • if the constitution allows, amendments can be made by a resolution instead of a general meeting — if this is allowed, then the amendment may be made by resolution approved by at least 75% of the members entitled to vote (or a higher percentage, if that’s what is set out in the constitution). 
    • Minor amendments – The society does not have to follow the same process for minor or technical changes. Instead, the amendment can be made by notifying every member of the amended text and informing them of the right to object, provided that no objection is received within 20 working days (or any longer timeframe provided for in the constitution).  If a member objects, then the same procedure for other amendments must be followed.  
    • Notifying the Registrar – Following any amendment to the Rules, the society has to give the Registrar a copy of the amendment and the amended constitution.  
  • Dispute resolution (ss 26(1)(j), 38 – 44; Schedule 2, cl 2 – 8)—The constitution has to provide procedures for dispute resolution, including how a complaint may be made. The procedures have to be consistent with the rules of natural justice (that is, procedural fairness). There is an optional dispute resolution procedure that a society’s constitution may adopt (known as the “Safe Harbour” provisions). A dispute resolution process which adopts the “Safe Harbour” provisions will be deemed to comply with natural justice. 
  • General meetings (ss 26(1)(k), 64 – 67; 84 – 93)—The constitution has to set out arrangements and requirements for general meetings. A ‘general meeting’ is one where all members of a society are entitled to attend. This is different from a “committee” or “sub-committee” meeting, for example, where only officers attend. The constitution needs to include the following information about general meetings: 
    • the interval between annual general meetings (AGMs), which have to be held once per year 
    • information that must be presented at general meetings 
    • when minutes must be kept 
    • how general meetings must be called 
    • if written resolutions may be passed in place of general meetings  
    • the time within which meeting and motion notices must be notified 
    • the quorum and procedure for general meetings including voting procedures 
    • the arrangements and requirements for special general meetings. 
  • Nomination of not-for-profit entities (s 26(1)(l); 26(3))—If the society is liquidated or removed from the register, a society can’t distribute surplus assets to its members. Instead, it has to distribute them to a not-for-profit entity. The constitution has to name the not-for-profit entity (or a category or description of potential entities) that will receive the surplus assets. This is a key change from the 1908 Act, under which a society could distribute surplus assets among members. This requirement does not apply to racing clubs. 

Process for re-registering as an incorporated society

Incorporated Societies Act 2022, Schedule 1, cl 9, 10

Existing incorporated societies have two options for adopting a constitution that complies with the 2022 Act. They can:  

  • amend its existing constitution, or  
  • approve a new constitution altogether.  

In both cases, the amendment or new rules need to be in writing and signed by at least two members of the society. Depending on the rules set out in the constitution, this will either need to be: 

  • approved at a general meeting of the existing society by a majority of members who are entitled to vote, or  
  • approved following the rules for constitutional changes that is set out in the existing constitution.  

If a society chooses to amend its existing constitution, it can set out whether the constitution will come into effect before or after re-registration.  

Even if your society adopts a new constitution, your society remains the same legal entity. 

The society’s rules

Once your society is registered

Incorporated Societies Act 2022, ss 244 – 245

Once registered, the society has to has to operate within the scope of the purposes and rules set out in the constitution. If the society acts in a way that is outside the scope of a society’s purposes or rules, these actions might be challenged (for example, by judicial review).  

The Registrar is responsible for deciding whether a society or officer of a society is complying with the Act. They can require a person to hand over any registers, records or other documents to monitor whether the society is complying with the Act. A person who does not comply with the Registrar’s requirements can be liable for a fine of up to $10,000 . 

A society registered under the 2022 Act will have several reporting obligations: 

  • Annual financial statement (ss 102 – 105) – The society has to file an annual financial statement with the Registrar, including a statement of income and expenditure for the last financial year, a balance sheet of assets and liabilities, and a list of the securities affecting any of the society’s property, in line with XRB accounting standards. The financial statement needs to be filed within 6 months of the end of the society’s financial year. More information about which societies will need to be audited will be published under the regulations. Only a “small society” (see below) who is not registered as a charity is exempt from using XRB accounting standards.  
  • Annual return (s 109) the society also needs to file an annual return with the Registrar (although the requirements for filing annual returns will be made clearer in the regulations once they are introduced). 

Incorporated societies that are also charitable entities continue to have obligations under the Charities Act 2005 as well as the 2022 Act.  

What counts as a small society?

Incorporated Societies Act 2022, s 103

A society is a small society if:

  • in each of the two preceding accounting periods of the society, its total operating payments are less than $50,000;
  • as at balance date in those two periods, the total current assets of the society are less than $50,000; and
  • as at the balance date of the accounting period, the society is not a donee organisation.

Officers and management committee: Roles and responsibilities

Officers: Roles and responsibilities

An officer is defined in the Incorporated Societies Act 2022 as either:

  • a member of the committee, or
  • a person is occupying a position in the society that allows them to exercise significant influence over the management or administration of the society (for example, a treasurer or chief executive).

An officer has to:

  • be a natural person (not a body or group), and
  • consent to be an officer, in writing.

Typically, a society’s principal officers are its chairperson/co-chairs, treasurer and secretary:

  • The chairperson/co-chairs preside over and regulate the society’s meetings. Specific duties may include acting as spokespeople for the society in the community.
  • The treasurer controls income and spending, keeps the society’s financial records, and prepares the annual accounts.
  • The secretary is responsible for the overall administration of the society.

Who can, and can’t, be an officer

Incorporated Societies Act 2022, ss 47-48

An officer has to be a natural person, and they have to consent to being an officer in writing (see: “Key people in an Incorporated Society” for more information). They have to certify that they are not disqualified from being an officer according to the rules below.

Disqualifying factors will prevent a person from being an officer unless the factor is waived by the Registrar upon application. Disqualifying factors include:

  • being under 16
  • being an undischarged bankrupt
  • being prohibited from certain roles under the Companies Act 1993, Financial Markets Conduct Act 2013 or the Takeovers Act 1993
  • being disqualified from being an officer of a charitable entity under the Charities Act 2005
  • having been convicted and sentenced of specified offences within the last seven years (such as crimes involving dishonesty or money laundering)
  • being subject to specific orders (such as a banning order)
  • being subject to similar orders under another country.

A society’s constitution can also set out further disqualifying factors—for example, if a person lives outside of New Zealand.

Duties of officers

Incorporated Societies Act 2022, ss 54-59, 61, 63, 64, 68, 73

Officers have a range of duties: These are:

  • the duty to act in good faith and in the best interests of the society when acting as an officer
  • the duty to exercise power for proper purpose
  • the duty to comply with the new Act and the society’s constitution
  • the duty to exercise powers or perform duties using the care and diligence that a reasonable person would, taking into account the nature of the society, the decision, and the officer’s role and responsibilities
  • the duty not to agree to activities or cause or allow activities that are likely to create a substantial risk of serious loss to the society’s creditors
  • the duty to not agree to an obligation on the society’s behalf, unless the officer reasonably believes that the society will be able to perform the obligation when required to do so

These duties are owed to the society as opposed to members, meaning that the society alone has the ability to take action against an officer for breach of these duties.

The 2022 Act also has rules around conflicts of interest for officers:

  • Officers have a duty to disclose any interests.
  • The committee needs to keep and maintain an interests register for disclosures made by officers.
  • Where a member or officer is conflicted, they can’t vote or sign documents in relation to the conflict without permission from the committee. They may still take part in discussions of the committee and be present at the time of decision-making, and be counted for quorum purposes.
  • If a society enters into a transaction where an officer has a conflict of interest, they may be able to cancel (“avoid”) the transaction, unless:
    • it’s been more than three months; and/or
  • the society received fair value for the transaction (regardless of the conflict); and/or
  • to do so would affect the title or interest of a third party who did not have knowledge about the circumstances of the transaction (s 68).

Payment of officers

Officers can be paid for their role in the society, and may be eligible for prizes.

If the society has tax-exempt status as a charity, members can be paid for services only if the payment is reasonable and is no more than would be paid to a non-member.

The rules should be very clear about any right of committee members and officers to receive an honorarium or to be reimbursed for out-of-pocket expenses.

Offences under the 2022 Act

Incorporated Societies Act 2022, ss 22, 154-160, 246

If someone commits an offence under the Act, they can be liable for a fine or imprisonment. The offences are:

  • knowingly making false or misleading statements, which is punishable by up to 1 year in prison and/or a fine of up to $50,000,
  • fraudulent use or destruction of property, which is punishable by up to 5 years in prison and/or a fine of up to $200,000,
  • falsifying documents, which is punishable by up to 5 years in prison and/or a fine of up to $200,000,
  • defrauding creditors, which is punishable by up to 5 years in prison and/or a fine of up to $200,000,
  • improperly using the word “Incorporated” or the te reo word “manatōpu”, which is punishable by a maximum fine of $10,000,
  • breaching a banning order, which is punishable by up to 1 year in prison and/or a fine of up to $50,000,
  • obstructing a Registrar or person authorised by Registrar from exercising their powers of inspection, which is punishable by a fine of up to $10,000, and
  • authorising, permitting or consenting to a society being carried on for the financial gain of any of its members, which is punishable by a fine of up to $50,000.

If a society breaches one of the infringement offences set out in the Act, the society will have to pay the infringement fee specified in regulations, or a fine not exceeding $3,000. This is different from where an individual is liable, as set out above. The offences are:

  • failing to notify the Registrar of amendments to the constitution
  • failing to notify Registrar of elections, appointments or other changes relating to officers
  • failing to maintain a register of members
  • failing to call annual general meeting
  • failing to hold, and keep minutes of, annual general meetings
  • failing to send copy of passed resolution in lieu of meeting to members, as required by the society’s rules
  • failing to meet the financial requirements around reporting, statements and returns
  • failing to register an office
  • failing to give the Registrar notice of change of contact person

Winding up an incorporated society

An incorporated society stops being incorporated if it is removed from the register or liquidated. These processes bring an incorporated society and its activities to an end. If the society is liquidated or removed from the register, a society can’t distribute surplus assets to its members. Instead, it has to distribute them to a not-for-profit entity. The constitution has to name the not-for-profit entity (or a category or description of potential entities) that will receive the surplus assets. This is a key change from the 1908 Act, under which a society could distribute surplus assets among members. This requirement does not apply to racing clubs.

If the society has charitable status, any surplus assets have to be distributed to other charitable organisations within New Zealand that have similar aims. If a charity is deregistered, there will be a tax on its net assets (see “Charities and charitable status / Removal from the Charities Register”).

The information below sets out the provisions for removal or liquidation under the 2022 Act.

Voluntary removal or liquidation

Incorporated Societies Act 2022, ss 175, 228-229

If a committee wants to being an incorporated society to an end, they have to give written notice to every member of the society to initiate the process of a society’s removal from the register, the distribution of its surplus assets, or the appointment a liquidator. The notice must be given at least 20 working days before the general meeting at which the resolution is to be submitted, or within the timeframe set out in the constitution, if it is less or more than 20 working days.

The notice has to provide the time and place of the meeting, the nature of the business to be transacted at the meeting, and the text of the resolution to be submitted.

The resolution is only effective if it is approved by a simple majority (or, a higher majority, if this is set out in the rules).

Compulsory liquidation by the High Court

Incorporated Societies Act 2022, ss 175, 212

The High Court can put an incorporated society into liquidation if it believes the society is no longer operating; or if there has been a material breach of the society’s duties or the Act – for example, if the society is unable to pay its debts, or its membership falls below 10, or the society is carried on for an illegal purpose or financial gain.

An application to the court to have a society put into liquidation may be made by the society itself, a member, a creditor of the society, or the Registrar.