Big Legal Changes Coming, Ready or Not (but not just yet)
Author: Garth Nowland-Foreman, LEAD Director
Most will be aware of the new Incorporated Societies Act 2022 that was signed into law on 5 April. And these are not just minor changes. It's a complex and extensive new Act with 261 clauses and four schedules and numerous regulations still to be written.
The new Act is much more prescriptive, and as a result significantly ratchets up compliance requirements, reduces flexibility and will have big implications for the operating rules of approaching 25,000 non-profits, which get their legal identity as Incorporated Societies.
If you are confused about when the new Act applies, it probably means you are paying attention!
The 1908 Act is still in force, with the 2022 Act coming into force in stages up until the transition date (either 1 December 2025 or 2.5 years after clause 4 commences, whichever is later).
An application for the incorporation of a society under the 1908 Act may not be made after the commencement of clause 4 of schedule 1 of the Incorporated Societies Act 2022. This clause will commence anytime between now and 5th October 2023 as per section 2 of the 2022 Act – so until then you have no choice if an new society you have to still incorporate under the 1908 Act (but it makes sense to write your constitution to comply with the 2022 Act – apart from the need to still have 15 members, and not yet doing away with a 'common seal', as you will be registering under the 1908 Act)
Under clause 2 of schedule 1 of the 2022 Act, a society which does not register under the new Act by the transition date will cease to exist from that date – so while you will have until at least 1 Dec 2025 to re-register with a compliant constitution, it makes sense to do it as soon as possible – remember you need to follow your existing rules on ‘amending’ your constitution/rules (and it is likely to be a complete re-write for many incorporated societies).
These are the current estimated actual dates from the Companies Office:
The best way to keep up to date is to stay in touch with the Companies Office (in the Ministry of Business, Innovation and Employment MBIE) Law changes for incorporated societies | Incorporated Societies (companiesoffice.govt.nz). You can subscribe to updates at Get updates on the Incorporated Societies Act changes (confirmsubscription.com) so you don't have to keep checking back to the website and won't miss any official developments.
The next key step to look out for is the Regulations being drafted by MBIE. These will cover items such as what information a society must provide the department when applying to register (or re-register), which societies will need to have financial statements audited, and the levels of fines that can be imposed on societies.
MBIE are currently promising a period for public consultation, with the first, "high-level" consultation documents due out this month. Based on feedback, they currently expect to draft a full set of regulations around April 2023. The regulations must be finalised by October 2023 at the latest, but they can be decided anytime before then.
Particularly significant is likely to be regulations around auditing. Financial reporting requirements in the new Act already look like they will impose nearly identical obligations, as currently apply to Registered Charities, except for perhaps the smallest micro-organisations. This will be a significant and largely unnecessary ratcheting up of compliance costs - without the tax benefits of Registered Charities. It is likely to further accelerate the large-scale swing of organisations from Incorporated Societies to Charitable Trusts, or at the very least to applying to register as a Charity.
While all Incorporated Societies will need to re-register under the 2022 Act before April 2026, you can’t do so before October 2023. Up until that time, new societies registering or existing societies amending their rules/constitution will need to do so under the 1908 Act.
Look out for more information in our future newsletters, on what you can do before October 2023 to help you prepare.