New rules for winding up of incorporated societies
Did you know that your society members might no longer receive any assets when your organisation dissolves? The Incorporated Societies Act 2022 has introduced significant changes to the distribution of surplus assets when an incorporated society in New Zealand is wound up.
These changes require that surplus assets are used for public benefit rather than being distributed to members – a fundamental shift that every incorporated society in NZ needs to understand before the April 2026 reregistration deadline.
Key changes in distribution of surplus assets for incorporated societies
1. Nominating a not-for-profit entity (NFP) to receive society assets
Under the new law, incorporated societies must nominate one or more not-for-profit entities to receive any surplus assets upon dissolution. This can be a society incorporated under the 2022 Act, a charitable entity or any other organisation that is not carried on for private benefit and whose funds are used for benevolent, philanthropic, cultural, charitable, sporting or public purposes in New Zealand.
2. Prohibition on distribution to society members
Unlike the previous Incorporated Societies Act 1908, which allowed surplus assets to be distributed among members, the new Act prohibits this practice. This requirement poses a significant challenge for incorporated societies that wish to distribute any surplus assets (including property) to their members on liquidation.
3. Charitable purpose requirements for NZ societies
If the society is registered as a charity, the surplus assets must be used to further a charitable purpose or transferred to another organisation with a similar charitable purpose. This aligns with the broader public benefit focus of the new legislation.
4. Approval of asset distribution for dissolved societies
The society’s rules must include a provision for how surplus assets will be disposed of if the society is liquidated. The committee and society members must consider the purposes of the society when proposing a resolution to distribute surplus assets.
Impact on incorporated societies in New Zealand
These changes represent a fundamental shift in how surplus assets are handled upon the dissolution of an incorporated society. It’s a change that affects sports clubs, cultural groups and community organisations across the country.
Societies that previously had rules allowing for the distribution of surplus assets to members will need to amend their constitutions to comply with the new requirements before the reregistration deadline.
Incorporated societies are commonly used for social and sports clubs, cultural and religious groups, and it may be that their members will be willing to have the society’s surplus assets distributed to another not-for-profit on dissolution.
However, if your society’s rules previously provided for the distribution of surplus assets to its members, the requirement for its new constitution to remove this right represents a major change. It will be crucial to ensure all members understand these new asset distribution rules prior to any new constitution being adopted.
With the April 2026 deadline fast approaching, now is the time to review your society’s constitution and prepare for compliance with the new incorporated society liquidation requirements. Find out how IGS can help here
