Written by FMC Executive member Tony Walton, this article was originally published in the November 2022 issue of Backcountry magazine and now updated as at October 2023. We’ve reproduced it here as part of the Outdoor Community resource. If you’ve got extra tips or advice to give, then please get in touch.
At present all incorporated societies are registered under the Incorporated Societies Act 1908. During 2021 there was consultation on the creation of a replacement act, with this being passed into law in April 2022.
The new act requires all societies to re-register under the new Act, any time between October 2023 and April 2026. Two key requirements of this process are that societies must create a Constitution (i.e. Rules) that comply with the new Act, and larger societies that are not already reporting under the External Reporting Board (XRB) accounting rules for their financial statements will now need to do so.
There are a lot of requirements of the new Act which are not new and / or which are unlikely to have any significant impact on an existing society.
This article focuses on highlighting key changes.
A New Constitution?
There is a good chance that for many societies their current rules have been changed via an iterative process over many years, as specific needs arise. Creating a new Constitution will be a chance to establish a new well organised set of rules – time to remove anomalies, correct or remove rules that are now out of date, and create rules that are legally compliant and more future-proof.
The good news is that a society does not need to do this from scratch. The Companies Office website provides a Constitution Builder tool (CB) that takes you through a series of questions before generating a standard Constitution which you can then edit to make it directly specific to your club. The CB is available at this link.
An alternative could be to modify your existing Rules to implement changes as required by the Act, with Dispute Resolution potentially being an area that would require additions. However to go along this path requires a more detailed understanding of the requirements of the new Act to ensure that everything is covered – otherwise it could be an iterative procedure to get your revised Constitution approved in the re-registration process.
Key Membership Points
- There must be defined membership joining and exiting processes
Key Committee Points
- Each society must have a committee of at least 3 people, all of whom must pass a number of specified suitability criteria – the Act provides a list of disqualifications that a prospective committee member must confirm do not apply
- The powers and functions of the committee must be defined
- Committee meeting quorum and procedures, including voting, must be defined
Key Points Relating to Society Meetings
- A society must run an annual general meeting within a prescribed timeframe after the end of each financial year
- Information presented to the meeting must be an operational report, financial statements, and conflict of interest disclosure information
- Rules required for how resolutions can be passed in lieu of meetings – but the minimum participation threshold likely makes this impractical for most
- Rules required for meeting notice period, quorum, voting options and rules
Subsequent Constitution Changes
- Rules required for how substantive changes are made
- Rules can provide for a simpler change process for low impact changes
Dispute Resolution Process
This is potentially an area that is either new or requiring greater consideration by a society. This relates to both issues raised by the committee relating to a member or a member raising an issue with the society. For all disputes:
- Principles of natural justice must be applied
- Procedures for handling disputes should be defined – if none, default procedures in the Act will apply, but it is probably better for a society to define their own specific process
The Act only addresses complaints internal to a society, so the Constitution Builder tool has no mention of complaints from outside the society, such as a non-member complaining about not being able to join a trip organized by the society. However, having created a Dispute Resolution process, you may want to expand the default wording to also handle external complaints – refer to the two additional templates below for a suggestion of how to do this.
- On winding up a society, the rules for distribution of the remaining assets to specific or generic organisations of a similar nature must be defined.
- New XRB financial reporting standards will not apply to societies that:
- Are also charities, because you will be using the XRB standards already; OR
- Are “small” – currently defined as having annual operating expenditure less than $50,000 in the last 2 years and having total current assets less than $50,000 in the last 2 years.
- If your society does need to move to the XRB standards, then there are multiple reporting levels with asset / expenditure thresholds – the larger you are, the more detail needs to be provided. Your treasurer needs to understand the requirements, but you are not alone – do make contact with others who have already made the transition and obtain existing template financial statements.
- Some useful tips on how to go about this for your society are included in this document. The document also references more detailed information on the NZ Companies Office Incorporated Societies new financial reporting requirements page.
You Can Now Get Started
Be aware that this is going to take usually a very short time to draft, then time for review and approval by your Committee, and then time for review and approval by your members before and at your next Annual General Meeting. There is plenty of time – you have to be re-registered by April 2026, but it is recommended that you get started now and aim for re-registration during 2024, with 2025 as a backup.
There are four draft constitution templates available below that a standard club may find useful. However, before diving into these, it is strongly recommended that you also generate a standard draft document for background reference using the Companies Office Constitution Builder tool – that will give you a basic understanding of what is mandatory, what is optional, and where you can vary standard clauses to suit you, such as with the number of officers, number of days notice for communications, etc.
The Constitution Builder tool is available at this link – read the description provided at the page so as to understand the basics of the process.
Template draft constitutions:
- society that is a registered charity, no external complaints – link
- society that is a registered charity with external complaints – link
- society that is not a registered charity, no external complaints – link
- society that is not a registered charity with external complaints – link
Before your new constitution can come into an effect it must be reviewed and accepted by:
1. Your committee; then
2. Your members before and at a General Meeting; then
3. The Registrar of Incorporated Societies (when you submit you re-registration application).
This is not a complex process and is unlikely to need a crack legal team – the CB tool sees to that.
Do seek out advice, either online or from similar clubs – also feel free to contact me.
The Companies Office website is also useful.