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Impact of the Incorporated Societies Act 2022
Understanding the New Legislation and Its Implications
Introduction
The Incorporated Societies Act 2022 represents a significant overhaul of the legal framework governing incorporated societies in New Zealand. Replacing the Incorporated Societies Act 1908, the new legislation seeks to modernize the governance requirements, enhance accountability, and provide clearer guidance for the operation of societies. We explore the key changes introduced by the Act and their potential impact on the sector, as well as the implications of failure to re-register within the deadline
Key Changes Introduced by the Act
Governance and Management
One of the major changes under the Incorporated Societies Act 2022 is the emphasis on stronger governance practices. The Act requires societies to have a clear governance structure, including defined roles and responsibilities for committee members. This aims to ensure that societies are managed effectively and transparently.
Constitutional Requirements
The Act introduces mandatory elements that must be included in the constitutions of incorporated societies. These elements include the society’s purpose, membership criteria, dispute resolution processes, and procedures for general meetings and decision-making. This change aims to provide greater clarity and consistency in the operation of societies.
Financial Reporting
Enhanced financial reporting requirements are another significant feature of the new Act. Societies must prepare annual financial statements that comply with generally accepted accounting practices (GAAP) and these statements must be audited if the society meets certain thresholds. This requirement is intended to improve transparency and accountability in the financial management of societies.
Dispute Resolution
The Act requires societies to have a clear process for resolving disputes among members. This includes provisions for mediation and arbitration, ensuring that conflicts can be managed in a fair and orderly manner. This change is expected to reduce the potential for prolonged and damaging disputes within societies.
Officer Duties and Liabilities
Under the new Act, officers of incorporated societies have defined duties similar to those of company directors. These duties include acting in good faith and in the best interests of the society, exercising reasonable care, and avoiding conflicts of interest. The Act also outlines the liabilities of officers, providing greater protection for the society’s members and assets.
Membership Rights and Obligations
The Act specifies the rights and obligations of members, including the right to access certain information about the society and the obligation to comply with the society’s rules. These provisions aim to enhance member engagement and ensure that all members are aware of their responsibilities.
Potential Impact on Incorporated Societies
Improved Governance and Accountability
The emphasis on governance and accountability is likely to lead to more professional and transparent management of societies. By clearly defining the roles and responsibilities of officers and requiring regular financial reporting, the Act aims to foster a culture of accountability within societies.
Enhanced Transparency and Member Engagement
The new constitutional requirements and provisions for member rights and obligations are expected to improve transparency and member engagement. Societies will be required to operate more openly, with members having greater access to information and a clearer understanding of how the society is managed.
Streamlined Dispute Resolution
The introduction of mandatory dispute resolution processes is likely to lead to more efficient and amicable resolution of conflicts within societies. This change has the potential to reduce the time and resources spent on disputes, allowing societies to focus more on achieving their objectives.
Increased Compliance Costs
While the new Act brings many benefits, it also introduces additional compliance requirements. Societies may face increased costs associated with auditing financial statements, updating constitutions, and implementing dispute resolution processes. Smaller societies, in particular, may need to invest significant resources to comply with the new legislation.
Opportunities for Professional Development
The Act presents an opportunity for societies to invest in professional development for their officers and members. By improving their understanding of governance, financial management, and dispute resolution, societies can enhance their effectiveness and sustainability.
Deadline for Re-registration Under the New Act
The new Act requires all existing incorporated societies to re-register under the new legislation. To comply with this mandate, societies must complete their re-registration by 5 April 2026.
Existing societies should begin the re-registration process well in advance of the deadline to ensure that all necessary updates to their constitutions, financial statements, and dispute resolution processes are completed in a timely manner. Societies should also consider seeking professional advice and support to navigate the compliance requirements effectively.
Independent Governance Services offers a cost-effective fixed fee service to review the constitutional documents, including proposing any changes as necessary to assist with compliance with the Act, as well as other governance support. Find out more here.
