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New Incorporated Societies Legislation

Background
The new Incorporated Societies Act 2022 supplements the most recent iteration of the Act which was passed in 1908. The new Act is intended to reflect the changes our society has experienced in the last 100 years. The Act is much more stringent and detailed than the 1908 Act. The 1908 Act will continue to be in force until the end of the likely transition period of October 2023 to April 2026.

All incorporated societies will be required to meet the requirements of the new Act. In particular, Incorporated Societies will be required to review their constitutions within the transition period. This may seem like plenty of time but to ensure it is not a last minute rush, we recommend establishing a sensible timeline.

Some currently Incorporated Societies may choose not to review their constitutions and will therefore cease to be incorporated (not a good option, as we explain below).

In particular, the new Act obliges Incorporated Societies to follow governance and membership requirements. The governance requirements echo the requirements of the Companies Act 1993 (the 1908 Act said little about governance).

Briefly, the new obligations include:
- Incorporated societies must now have a minimum of ten members (a corporate member is treated as three members).
- Every member must consent to be a member – written consent kept with the society’s records is recommended.
- Incorporated Societies have an obligation to keep an up to date register of members including the names, contact details and the date each member became a member.
- A member may make a written request to an Incorporated Society for information held by the Society and the Society must within a reasonable time, provide the information or advise why it will not do so (and may decline to provide information if the request is “frivolous” or “oppressive”).
Minimum Incorporated Society committee size is three.
- Every committee member must consent in writing to serve as a committee member.
- Committee member requirements – minimum of 3 members.
- Committee members’ fundamental duties are now codified along with conflict of interest requirements.
- New statutory requirements for legislation including dispute resolution, financial management and meeting requirements.

What should current Incorporated Societies do and by what date?
Although the new Act came into law on the 5th of April 2022, there is a transition period for current Incorporated Societies to decide whether they will continue to be incorporated under the new Act. The deadline to transition will likely be April 2026, but there has not been a set date established yet.

There is no obligation for current Incorporated Societies to register under the new Act, but if they choose not to register and meet the requirements of the new Act before the transition date, they will no longer be an Incorporated Society after the transition period.

Current Incorporated Societies should seek legal assistance to review their current constitutions and incorporate any statutorily required provisions in order to comply with their obligations under the new Act.

Once a new constitution has been drafted, the Society should send it to the Registrar of Incorporated Societies to record the Society as incorporated under the Act. If the Society is currently incorporated under the Charitable Trusts Act 1957, they may choose to stay incorporated under that Act rather than register under the new Incorporated Societies Act. Further, if a Society is registered with Charities Services under the Charities Act 2005, they must send their new constitution to Charities Services but will be incorporated under the new Incorporated Societies Act.

What happens if an Incorporated Society is no longer incorporated?
If a Society chooses not to register under the new Act and becomes unincorporated at the transition date, they will no longer be able to operate as an “Incorporated Society”. This brings a few changes to how they can operate and how the Society will be recognized under the law.

The consequences of this being that the operating members of the Society will be personally liable for any of the Society’s debts; the Society will not be able to borrow under its name or lease property as it is not a recognized legal entity; and the dissolution of the Society will be difficult. It is not recognized as a separate legal entity in perpetual existence without its members. Finally, without being incorporated under the Act, the Society will be bound to legal principles developed by the courts rather than having the ability to set formal, enforceable rules of their own accord.

For these reasons we consider that the advantages of incorporation far outweigh the disadvantages.

What are the penalties for non-compliance?
The registrar holds power to prosecute or issue infringement notices where a society or its officers do not perform their statutory duties. The Registrar may also undertake inspections of Incorporated Societies. It will be interesting to see how pro-active the Registrar becomes.

Infringement offences include:
o Failing to notify the Registrar of amendments to the constitution.
o Failing to hold meetings and keep minutes.
o Failing to register financial statements.

Serious offences under the Act include:
o Providing false statements.
o Fraudulent use or destruction of property.
o Falsification of records.
o Operating fraudulently or dishonestly incurring debts.

Will a lawyer be required to ensure compliance?
Although Societies should be able to operate administration tasks and keep records on their own or under a sub-committee, a lawyer may be required to ensure compliance with the new Act.

Lawyers will be required to review constitutions and incorporate any of the statutory requirements and can also assist with detailed legal advice to ensure that the Society and its officers are aware of their obligations under the new Act. Otherwise, Societies will be able to manage their duties without continued legal assistance.

Some grants may be available for Societies that do not have the ability to pay legal costs for reviewing their constitutions.

June 2022
Disclaimer: This article is an information piece only and not intended to be a substitute for legal advice.

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