The Incorporated Societies Act 2022 (“new Act”) and the Incorporated Societies Regulations 2023 came into force on 5 October 2023. These replace the Incorporated Societies Act 1908 (“1908 Act”), although a transitional period prolongs the existing regime until 5 April 2026. The new Act introduces a raft of changes that aim to modernise the legal and governance framework relating to incorporated societies. With the law governing incorporated societies having remained largely unchanged for over 100 years, the new Act does not come before time.
Requirement to Reregister
With the new Act is a requirement that existing incorporated societies must reregister under the new Act by 5 April 2026. Until an existing society does reregister, it will continue to be subject to the 1908 Act. With the new Act now in force, any new societies must be registered under the new Act.
If an existing society incorporated under the 1908 Act fails to reregister by 5 April 2026, it will cease to exist – though it may be restored to the Register. If the society is not restored its surplus assets must be distributed to a not-for-profit organisation, in accordance with Part 5 of the new Act. If a society continues to operate after 5 April 2026 but does not reregister, it will be operating as an unincorporated body, and its members and the committee may be held personally liable for the society’s debts.
Outlined below are the timeframes and key requirements imposed by the new Act and what societies need to do to reregister.
Key Requirements
For an existing society to reregister, it must submit a constitution that complies with the new Act and otherwise comply with requirements relating to its composition, operation and governance.
Membership
The new Act reduces the minimum number of members from 15 to 10 and requires all members to consent (in writing) to being a member. The society must keep an up-to-date register which must include the names of members, the date each member became a member, and the last contact details of each member.
The new Act also improves accountability on incorporated societies by providing mechanisms around access to information (including, for example, financial information and the results of any audit) by members. There are also limited grounds upon which a society may withhold information (for example, preservation of privacy and commercial sensitivity).
Incorporated societies will need to have good record-keeping and ensure they respond to requests for information by members within the timeframes specified under the new Act.
Details in the Constitution
The new Act expands on the content required to be included in the constitutions of incorporated societies. Constitutions are required to include, amongst other things:
- the name and purpose of the society;
- how a person becomes a member (including a requirement that a person consents to being a member) and how a person ceases to be a member;
- the composition, roles, functions, powers and procedures of the committee of the society (such as the election, appointment or removal of officers);
- how the society will control and manage its finances;
- how the constitution may be varied;
- procedures for resolving disputes, including how a complaint may be made (as outlined in detail below);
- arrangements and requirements for general meetings (as outlined in detail below); and
- the nomination of a not-for-profit entity, or a class or description of not-for-profit entities, to which any surplus assets of the society should be distributed.
We anticipate that any existing constitutions which have not been deliberately prepared to comply with the new Act will require amendment. In many cases, this may be an ideal opportunity to give a constitution a full review and refresh.
Committee
Committees are mandatory under the new Act and must be made up of at least three committee members, with persons who are bankrupt or who have been convicted of dishonesty offences within the last seven years being disqualified from appointment.
The new Act imposes various duties on officers in favour of the society, which codifies existing case law. Such duties are akin to those imposed on directors under the Companies Act 1993. Officers are required to, among other things, act in good faith and in the best interests of the society, exercise reasonable care and diligence, exercise powers for a proper purpose, and comply with the new Act and constitution. The new Act also asserts a process for dealing with conflicts of interest, which can require conflicted committee members to abstain from committee votes.
General Meetings
The new Act sets out various requirements for general meetings, which must be set out in the society’s constitution. Some of the requirements are as follows:
- Annual general meetings (AGM) must be held no later than six months after the society’s balance date, and no later than 15 months after the previous AGM (except for newly created societies, which are required to hold an AGM within 18 months of its incorporation); and
- Certain information must be presented at an AGM, including an annual report on the operations and affairs of the society during the most recent accounting period, financial statements, and notices of the disclosures of interests made during that period.
Dispute Resolution Procedures
The new Act requires the constitution to include procedures for resolving internal disputes (including disputes between members, and disputes between members and the society), and how complaints may be made. This is a change from the 1908 Act which was silent on how such disputes should be dealt with. Such procedures must be consistent with rules of natural justice and the new Act provides some dispute resolution procedures that societies may opt to include (in part or in whole) in their constitution. The new Act also gives incorporated societies discretion as to whether disputes are to be submitted to a certain type of dispute resolution (for example mediation, arbitration or a tikanga-based practice).
Distribution of surplus assets
Upon an incorporated society being wound up, any surplus assets must be distributed to one or more not-for-profit entities, and these entities must be specified in the constitution. This is a change from the 1908 Act under which surplus assets could be given to any party (including former members).
Enforcement
The new Act empowers the court to, upon application, make various orders enforcing the requirements of the new Act. For example, the court may make an order where the operations or affairs of a society are oppressive, unfairly discriminatory, or unfairly prejudicial to a member. Such applications may be made by the society, its members, former members, or officers, or by the Registrar (provided it is in the public interest to do so).
The new Act provides several new criminal offences relating to dishonest and fraudulent behaviour as well as infringement offences for less serious breaches.
Reregistration – Act Now
Existing incorporated societies should now review their constitution to ensure they meet the requirements of the new Act and to ascertain whether any amendments are required. Existing incorporated societies should prepare for reregistration sooner rather than later, so that any issues can be identified and ironed out early on and the proper process for effecting a constitutional change can be followed. Existing incorporated societies may also wish to consider whether the society is to remain incorporated or whether a different structure is preferable.
If an existing incorporated society intends to reregister under the new Act, the steps to be taken and a timeline should be agreed upon at a general meeting. As a starting point, we would recommend the following measures be taken to prepare for reregistration:
- Establishing a sub-committee to take responsibility for the reregistration process;
- Implementing a review of the contents and structure of the existing constitution, most likely involving specialist legal advice;
- Preparing any necessary amendments to the constitution which can be approved by way of a resolution of members;
- Ensuring the eligibility of committee members who may be appointed following reregistration;
- Updating membership records to ensure the incorporated society holds all information as required by the new Act and has a process in place to ensure consent forms and the required information are obtained from new members following reregistration; and
- Reviewing financial management structures and the keeping of financial records to ensure compliance with the new Act.
Key Takeaways
If an incorporated society fails to reregister under the new Act by 5 April 2026, it will cease to exist as an incorporated body and costly and inconvenient action may be required to reinstate it to registration. Members may also be held personally liable for the society’s debts. It is our recommendation that incorporated societies get on top of the reregistration requirements well before that final deadline. This process can be started any time from now on.
The team at Hamilton Locke is well equipped with experience and expertise to assist incorporated societies to transition to registration under the new Act smoothly, mitigating any of the pitfalls which may present themselves along the way.
For more information, please contact Paul Chambers.
