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New Rules for Incorporated Societies: Bill Introduced

Posted on 30/03/2021
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The purpose of this Bill is explained as including these “broad policy objectives:

  • members of a society have the primary responsibility for holding the society to account; and
  • a society should promote the trust and confidence of its members; and
  • a society should be self-governing; and
  • a society should not distribute profits to its members.”

“In particular, the Bill puts in place 6 broadly expressed duties on the officers of a society (modeled on directors’ duties in the Companies Act 1993) as follows: 

  • officers should act in good faith and in the best interests of the relevant society:
  • officers must exercise their powers for a proper purpose:
  • officers must not act, or agree to the society acting, in a manner that contravenes the Bill or the constitution of the society:
  • officers must show the care and diligence that a reasonable person with the same responsibilities would exercise in the same circumstances:
  • officers must not let the activities of the society be carried on in a way likely to create a substantial risk of serious loss to the society’s creditors:
  • officers should not agree to a society incurring an obligation unless they believe that the society will be able to perform the obligation when it is required to do so”

“While there are no such duties in the 1908 Act, the inclusion of these duties in the Bill codifies existing case law that officers have fiduciary duties to their societies. This will make it clearer to the officers of a society what their duties are.”

“The Bill also closes certain gaps in the 1908 Act by—

  • providing an express mechanism for societies to amalgamate with each other (based on a simplified version of what is included in the Companies Act); and
  • including civil law enforcement provisions that clearly state who may apply to a court for orders in respect of a society and the type of orders that the court can make.”
The Bill provides that most of the law comes into force 18 months after the Bill passes through Parliament and receives the Royal Assent. Schedule 1 provides that existing incorporated societies can apply to be re-registered under the new law.  Regulations will be being developed after the passage of the Bill.

The public can read the Ministry of Business, Innovation, and Employment (MBIE) disclosure statement and the Regulatory Impact Statements. To see the Bill and to find the links to these departmental documents at the end of the commentary section, follow this link to the Bill.

To follow the progress of the Bill, go here

ECO is interested in views on the Bill.  Please send your comments or those of others to us at eco@eco.org.nz with “Incorporated Societies” in the subject line.  Among other things, ECO wants to be sure that the new provisions do not stifle debate or protest, or prevent societies taking court action that comes with the threat of costs, or direct action.

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