Sue Barker, Director of Sue Barker Charities Law, joins Legalwise to unpack the recent seismic shift affecting charities law in New Zealand. Sue Barker shares her Insights into the key fundamental changes and the actions necessary for charities, that are also incorporated societies, to remain on the Incorporated Societies register. Given 2.5 years to register under the new legislation, Sue offers a summary of the 4 key actions societies need to take, before time runs out.
Thursday 5 October 2023 was a big day for charities in New Zealand, particularly for the 8,000 registered charities that are also incorporated societies.
Both the Incorporated Societies Act 2022 and the Incorporated Societies Regulations 2023 have now come into force, and give existing incorporated societies 2 ½ years (from 5 October 2023 to 5 April 2026) to reregister under the new legislation if they wish to retain the benefits of incorporation. A society that has not reregistered by 5 April 2026 will be automatically removed from the incorporated societies register, and will therefore cease to benefit from the incorporation status it provides. If this scenario eventuates, the society may be able to continue to operate as an unincorporated body, but this would have significant legal and practical consequences for those involved. For example, members will run the risk of being personally liable for the society’s debts. Any decision about how best to move forward in light of the new legislation should be made proactively by a society’s membership at a general meeting, and should not be allowed to occur by default through failing to take action by 5 April 2026.
There are 4 key actions societies need to take before reregistering under the new regime:
(i) Societies must ensure they have a constitution that complies with the requirements of the 2022 Act. The new legislation is considerably more prescriptive than the 1908 Act, which means that a society’s constitution may well be longer than has previously been the case. However, length is not necessarily a bad thing if it results in increased clarity. It is important that societies take the time to ensure their constitution meets their needs because the new legislation contains provisions that will make it considerably easier for a society’s constitution to be enforced.
(ii) Societies must ensure they have a committee of 3 or more natural persons, who have consented in writing to be an officer, and certified that they are not disqualified from being an officer of an incorporated society. In principle, a majority of the committee members must be members of the society. However, there is a transitional exemption that allows societies to have a majority of (or even all) independent committee members if their constitution expressly so provides, and they notify the Registrar. This transitional exemption only applies to 5 October 2028 (see regulation 6 of schedule 1), and may or may not be extended after that time.
(iii) Societies must ensure they have 1-3 contact persons whom the Registrar can contact when needed.
(iv) Societies may also need some new processes, such as for collecting member and officer consents, recording declarations of interest, dealing with requests for information, notifying certain changes etc.
Once reregistered, incorporated societies will have increased ongoing obligations, for example, in relation to record keeping, financial reporting (with an exception for very small societies), filing annual returns, and notifying changes in officers and contact persons. The particulars of the annual return for incorporated societies that are also registered charities are not yet clear: Charities Services is currently consulting on the annual return forms for registered charities, with consultation closing on 24 October 2023. More information on Charities Services’ forms consultation can be found here: https://www.charities.govt.nz/charities-act-hub/consultation-on-form-changes/.
For those starting new incorporated societies, incorporation must now be sought under the Incorporated Societies Act 2022. There are some exceptions for certain types of society (such as the Agricultural and Pastoral Societies Act 1908), but the ability to incorporate a society under the Incorporated Societies Act 1908 and the Charitable Trusts Act 1957 has now been removed.
There appears to be a lot of confusion about the impact of the new legislation on the Charitable Trusts Act. Up until Thursday 5 October 2023, there were 2 pathways to incorporation under the Charitable Trusts Act: the trustees of a charitable trust could incorporate as a charitable trust board, or 5 members of an unincorporated society could incorporate as a “charitable society” (which is confusingly also referred to as a “charitable trust board” once it has been incorporated). The latter option of incorporating a society under the Charitable Trusts Act has now been removed (although existing charitable societies will be able to remain indefinitely). However, this change does not affect the ability of the trustees of a charitable trust to incorporate under the Charitable Trusts Act. In other words, charitable trusts are not affected by the Incorporated Societies Act 2022.
However, all charities that are registered under the Charities Act 2005 will be affected by the Charities Amendment Act 2023, most of which also came into force on 5 October 2023. In case it might be of interest, Seed the Change | He Kākano Hāpai, Community Foundations of Aotearoa NZ | Hei whakahaka i ngā hāpori o Aotearoa and others have very generously supported the production of a booklet setting out what charities need to know about the changes. The booklet can be found here: https://www.seedthechange.nz/charities-reform. We also have a number of hard copies of the booklet to give away – please let us know if you would like some.
Sue Barker is the director of Sue Barker Charities Law, a boutique law firm based in Wellington, New Zealand, specialising in charities law and public tax law. Since its founding in 2012, the firm has won a number of awards, including Boutique Law Firm of the Year at the New Zealand Law Awards. Sue is a member of Charities Services’ Sector Group and a member of the Core Reference Group for the review of the Charities Act. Sue is also a co-author of the text The Law and Practice of Charities in New Zealand (LexisNexis, 2013) and a contributor to a number of texts, including Charity Law: Exploring the Concept of Public Benefit (Routledge, 2022) and Regulating Charities: the Inside Story (Routledge, 2017). In 2016, Sue was made an Honorary National Life Member of the National Council of Women of New Zealand Incorporated for her work assisting the Council with charities law issues. In 2019, Sue was awarded the New Zealand Law Foundation International Research Fellowship Te Karahipi Rangahau ā Taiao, New Zealand’s premier legal research award, to undertake research into the question “What does a world-leading framework of charities law look like?”. Her report Focus on purpose was released in April 2022 making 70 recommendations for charities law reform in Aotearoa New Zealand”. More information about Sue and the research can be found at www.charitieslaw.co and www.charitieslawreform.nz
Contact Sue at susan.barker@charitieslaw.co or connect via LinkedIn