The New Incorporated Societies Act

The Incorporated Societies Bill passed its third reading in Parliament on 31 March 2022 and received Royal Assent on 5 April 2022. Practically speaking, key provisions in the Act come into force on 5 October 2023 (unless otherwise prescribed by the Governor General through an order of Council to come into force earlier) with certain deadlines for compliance under the Act following that date.[1]

Summary

Among other things, the Act modernises the way incorporated societies (“Societies”) deal with internal disputes, clarifies the duties of officers, provides further requirements for a Society’s constitution, and prescribes accounting standards for larger entities.

All existing Societies will now have a transitional period ending in April 2026 to re-register with the Registrar of Incorporated Societies and file a constitution which is compliant with the Act.

The new requirements of the Act can also extend to trusts incorporated as boards under the Charitable Trusts Act 1957 and a range of entities incorporated under other statutes.

Key Changes

The Act makes several key changes to the current governance framework for Societies.  Some of these key changes are:  

1. Maintenance of Minimum Membership:  The previous minimum requirement of 15 members for a Society has decreased to 10 members.

2. Contact Person: Every Society will need a contact person the Registrar can communicate with.

3. Clarification of corporate capacity:  Subject to its constitution, the default position is that a Society must have full capacity and powers to pursue its purpose(s).

4. Regulation of Boards/Committees and Officers:

   1. The Act imposes a number of duties on the officers of a Society, such as a duty to act in good faith and in the best interests of the Society. These duties imposed on officers are similar to those imposed on directors under the Companies Act 1993.

   2. The Act also defines the level of expected governance and operating processes that should be followed in a Society.

5. Qualification of officers: Every officer must be a natural person and the Act introduces provisions similar to those in other legislation preventing undischarged bankrupts and those convicted of certain dishonesty offences or subject to other disqualifications from being appointed as officers.

6. Conflicts of interest: Officers have an obligation to disclose conflicts of interest and the Act provides for a clear process for managing these.

7. Reporting Standards:  The Act prescribes tiered (size-based) requirements for financial statements that must be prepared and filed by all Societies.  Large Societies (i.e. those with $60,000,000 in assets or $30,000,000 in annual revenue) will be required to have their financial statements audited.

8. Constitutions Required and must be Compliant:

   1. The Act requires Societies to have a constitution (rather than setting out default constitutional provisions) and Societies’ constitutions will need to comply with much more prescriptive requirements in relation to their content.  For example, a dispute resolution provision must be included in every constitution to deal with both member grievances and complaints.

   2. The Act also provides minimum procedural requirements for disputes and Societies can develop these procedures to meet their needs, but they must satisfy the requirements under the Act for ‘natural justice’. 

9. Right to Information: The Act introduces a new mechanism for members to obtain information from officers to allow for improved accountability of officers.

10. Amalgamation:  An amalgamation regime is introduced which is a simplified version of what is provided for in the Companies Act 1993.

11. Enforcement:  There are new provisions:

    1. for members and the Registrar to apply to the court for orders to enforce the constitution; and

    2. for certain criminal offences such as officers’ dishonestly providing false or misleading statements (knowing them to be so), or fraudulently using Society property and falsifying records, documents on the Incorporated Societies Register.

What Next?

All existing Societies must re-register with the Registrar of Incorporated Societies by April 2026.

An application for re-registration must be accompanied by a copy of the Society's constitution, which must be compliant with the requirements set out in the Act.

Given the above requirements, Societies should immediately start the process to either:

1. Review their existing constitutions to make sure they will be compliant with the requirements of the Act and, if not, to take steps to make the necessary modifications to their constitution. At the same time, consideration should be given as to whether the current officers are qualified to be appointed under the new Act; or

2. Review their organisational structure and determine whether it is more appropriate to restructure, reorganise or wind up the Society.

 How We Can Help

Saunders Robinson Brown has considerable experience acting for Societies of all different sizes, in particular a large number of sporting organisations.  We have the expertise to assist officers to comply with the new requirements of the Act and to redraft their constitutions.

Disclaimer

The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.

[1] There are certain minor provisions of the Act which will be in effect as at the date of the Royal Assent.