Date posted: 30/10/2024 5 min read

New rules for New Zealand’s incorporated societies

New rules for New Zealand incorporated societies present an opportunity for NFPs to re-evaluate their purpose.

In brief

  • Existing incorporated societies will need to revise their constitutions and re-register before 5 April 2026, or they will technically cease to exist.
  • While that deadline might seem far away, key decisions need to be made sooner rather than later.
  • Accountants, many of whom are already involved with the not-for-profit sector as employees or volunteers, are actively advising incorporated societies on their choices.

New Zealand has about 23,000 incorporated societies – and for almost 130 years their creation and operations have been covered by legislation that is no more than three pages in length.

All that will change from 5 April 2026: the deadline for incorporated societies to take action on the Incorporated Societies Act 2022. The new Act replaces legislation created in 1895 and updated in 1908. Now coming in at more than 130 pages, it carries forward many provisions of the original Act and codifies relevant case law.

What incorporated societies will need to do

New Zealand incorporated societies span sporting and recreational clubs, social and cultural groups – and about a third are registered as charities. They will need to revise their constitutions and re-register under the new Act, or they will technically cease to exist.

Sport New Zealand, the umbrella body for sporting organisations, advocates that incorporated societies start planning well before the deadline. Key decisions may require a vote at an annual general meeting (AGM), and there are likely only two AGMs during the transition period.

The organisation says that while the process “sounds daunting,” an incorporated society should begin with understanding what kind of structure it should have. Factors such as the size of the club, potential for growth, funding, financial monitoring, accountability, and liability all play a role.

How do we re-register?

The process of re-registration, according to lawyer Steven Moe, is more than just a compliance exercise: it is an opportunity to “more clearly articulate their purpose” and adopt a structure that better suits their needs.

“Many societies are reflecting on dwindling memberships and low engagement, realising that an incorporated society may no longer be the best legal entity,” says Moe, a partner at Parry Field Lawyers.

“We are seeing many societies transitioning to charitable trusts, which focus more on purpose than membership.”

This shift raises a fundamental question: Is the incorporated society structure still the right fit, or would another type of entity be more appropriate?

“Society itself has moved away from member-led volunteer groups,” Moe adds.

Re-registration options

Sport New Zealand acknowledges that not all incorporated societies will want to re-register under the new Act and advises weighing the pros and cons carefully.

There is also a hybrid option where a previously incorporated society could cease to exist independently and become a committee or special interest group within a larger incorporated entity.

The advantages of incorporation include creating a separate legal entity with perpetual existence, the ability to own property and enter contracts, and protection from personal liability for members.

However, incorporation also brings responsibilities for greater transparency and accountability.

The role of CAs

Accountants play a key role in helping incorporated societies transition, especially in educating clients about the upcoming changes, says Moe.

Many accountants are already involved with charities and not-for-profits. A recent CA ANZ survey, Counting For a Cause, found that 20% of respondents work in paid roles within these organisations, and more than half also undertake voluntary work. A further 59% provide voluntary support outside their regular employment.

Moe explains that if incorporated societies transition to charitable trusts, accounting advice will be essential.

Under the new Act, many incorporated societies must use External Reporting Board (XRB) accounting standards to prepare financial statements.

Additionally, societies with operating expenses exceeding NZ$3 million for two consecutive years must have their financial statements audited by a qualified auditor.

Revisiting your constitution

Zowie Pateman FCA, CA ANZ’s deputy reporting and assurance leader, advises that if the incorporated society structure remains appropriate, the constitution must be revised to comply with the new Act. This includes adding dispute resolution procedures and specifying how surplus assets will be distributed upon winding up.

“It’s not just about making the constitution longer,” she explains, “but about streamlining it and removing unnecessary requirements. For example, now is a good time to reconsider whether audit requirements need to be specified since the law now covers these comprehensively.”

The Companies Office offers a Constitution Builder tool to help societies draft compliant constitutions.

An opportunity to reflect and improve

Moe and Pateman, who both serve on the XRB’s External Reporting Advisory Panel (XRAP), say that many accountants are actively supporting incorporated societies during this transition.

Moe points out that collaboration between lawyers and accountants is helping societies go beyond reporting “figures on the page” by also highlighting their achievements and goals.

He describes the transition as a “unique moment in time” and an opportunity to “reinvigorate” structures and purposes.

“The new Act, by requiring more robust constitutions, will help improve governance standards,” Moe says. “It is an opportunity for officers and members to understand what is required and why it is necessary.

“Upskilling people in governance will also enhance the performance of New Zealand’s charitable sector.”

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