In this series we have talked about how all societies will need to reflect on and update their constitution as part of their transition to the Incorporated Societies Act 2022 (the “new Act”). We are encouraging societies to use this opportunity and consider whether their current constitutional processes reflect what actually takes place in practice. Additionally, with the new Act and all it entails, now is a great time for societies to consider whether their legal structure is fit for purpose. Follow the series here.
Part 5. What to consider when considering legal structure
When purchasing a car we think about how it will be used – do we need a seven seater to fit all the kids in, or a convertible to look cool around town? Similarly, the ‘legal vehicle’ we use to achieve our purpose may need updating occasionally. Some incorporated societies have existed nearly as long as the Incorporated Societies Act 1908 (the “old Act”) and since then have shrunk, grown, or even pivoted in their purpose.
By nature, incorporated societies are democratic. Incorporated societies rely on member participation for elections and decision making. Additionally, officers are accountable to members. The downside is incorporated societies can become politicised and less flexible, as there are more voices at the decision making table.
As a contrast, charitable trusts are governed by a select few trustees who are appointed in the manner set out in their trust deed. Trustees are not accountable to a wider group, instead they operate in accordance with the trust deed to advance the charitable trust’s purposes. This often makes a charitable trust a more stable and flexible structure, as decisions are made by a select few trustees.
We have set out the benefits and drawbacks of incorporated societies and charitable trusts in a table here. There is a place and a need for both incorporated societies and charitable trusts, but now is a great time for incorporated societies to consider whether their legal structure is fit for purpose.
Should an incorporated society stick with their legal structure, they will still need to update their rules and reregister under the new Act before the transition date (likely April 2026 according to Companies Office guidance). If an incorporated society choose to transition to a charitable trust, they can keep their registered charity number and tax donee status. However, the new charitable trust taking on the legacy and continuing the purpose of the incorporated society would be a new legal entity, meaning all contracts, employees, leases and so forth would need to be moved across to the charitable trust before the incorporated society is wound up.
In this series of articles on the new Act we have given an overview of the timeline of the new Act, reregistration, some of the key changes to membership and governance, along with what to consider when considering legal structure. These articles have only scratched the surface and we will go into more detail around the changes in the Act and what a society’s constitution must contain during the upcoming Legalwise programme Incorporated Societies: Requirements Post the New Act.
For more information we have an Information Hub that is updated regularly and includes articles, webinars, FAQ and other resources.
Steven is a partner at Parry Field Lawyers based in their commercial team and actively supporting clients across the country. He has 20 years’ experience practising in New Zealand, England, Australia and Japan and often helps start-ups, investors, tech companies, charities and purpose driven businesses. He has a focus on empowering impact and often helps clients get their legal structures right.
He published the book: “Social Enterprises in New Zealand: A Legal Handbook” and another called “Laying Foundations for Reimagining Business”. To educate and grow the impact ecosystem he hosts a weekly podcast “Seeds” www.theseeds.nz interviewing inspiring people with more than 310 interviews and more than 155,000 listens. He is also the host of Board Matters, a governance focussed podcast released by the Institute of Directors of New Zealand.
Steven is an Edmund Hillary Fellow and frequent writer for publications like Stuff and Spinoff. He grew up in Christchurch and graduated from Canterbury University. He currently holds a practising certificate for New Zealand but is also qualified in England & Wales and New South Wales. After 3 years working at a national law firm in Wellington, Steven spent 11 years overseas working for international law firm Norton Rose Fulbright in Tokyo (4 years), London (3 years) and Sydney (4 years) before returning to New Zealand at the start of 2016. He brings a unique perspective and proactive approach to issues faced by clients. He works with both New Zealand and international companies with a strong focus on those investing here.
Steven is currently on a few boards and has some other involvements, such as:
- Member of Charities Services Sector Group;
- Chair of Community Finance (recently raised $95 million for social housing);
- Member of XRB Advisory Panel;
- APAC Regional Chair for Global Alliance of Impact Lawyers;
- Facilitator for IOD legal portion of Company Director Course;
- Trustee of Whanau Whenua Whare Trust
Connect with Steven via email or LinkedIn 
Sophie works in our purpose driven team assisting many charities, for purpose organisations and companies. She works with Steven Moe on impact driven clients and enjoys doing meaningful work that helps clients such as assisting to review rules for Incorporated Societies, considering structure options or setting up charitable trusts. Sophie joined Parry Field Lawyers having graduated from the University of Canterbury with an LLB with first class Honours and BA with a double major in French and European & European Union Studies. Connect with Sophie via LinkedIn
