Written by FMC Executive member Tony Walton, this article was originally published in the November 2022 issue of Backcountry magazine. 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chance to establish a new well organised set of rules – time to remove anomalies, correct or remove rules that are now out of date, and create rules that are legally compliant and more future-proof.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. Already for the current Act, the MBIE website provides a Constitution Builder that takes you through a series of questions before generating a standard Constitution. This tool will be updated for the new Act during 2023.
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 by MBIE.
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
- 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
Detailed Regulations are Work In Progress
The Act delegates detailed rules and definitions to “Regulations”. MBIE is working on getting these defined from now through to September 2023.
For most small societies in our membership, re-registration with a new / updated Constitution should be no more than a minor administrative process to work through. The good news is that there is no great rush, so you can schedule a thorough assessment of the impacts on your society, and ensure your new Constitution is scheduled for your members’ review and approval to a timeframe that suits.
As above, there will be a compliant Constitution Builder during 2023, and there may also be some template constitutions that you could consider using as a starting point.
Do seek out advice, either online or from similar clubs – also feel free to contact me.
The MBIE website here is useful – https://is-register.companiesoffice.govt.nz/law-changes-for-societies/