This document is to explain of the effect of the Incorporated Societies Act 1908 on a society and its members once that society is incorporated. It also offers advice on matters that are not covered by the Act.
Once registered, a society has a separate legal identity as a body corporate with perpetual succession. This means that the society can sign documents by way of its common seal and will continue to exist irrespective of the turnover of its members. Providing the rules and objects permit, the society is capable of undertaking any lawful activity.
To ensure that societies operate as required by the Incorporated Societies Act 1908, members will find it helpful to purchase a copy of the Incorporated Societies Act 1908 and amendments (available from any Government Bookshop) and to familiarise themselves with its contents.
It is important to remember, however, that everything must be done in accordance with the rules and it is expressly forbidden by the Act for a society to carry on any activities that are not permitted by its objects. It is also expressly forbidden to engage in operations involving pecuniary gain. If in doubt, seek legal advice.
Normally, members have no liability for the contracts, debts or other obligations of the society. The only occasion when members can incur liability is if they are involved with the society in operations involving pecuniary gain.
What is pecuniary gain? No definition is provided in the Act, but for our purposes we can say that pecuniary gain is making a profit with the intention of passing this profit on to some or all of the members of the society. If the society itself retains the profit, this is acceptable. The Act sets out some situations that at first look as though they may breach the rule against pecuniary gain, but are in fact allowed.
It is permissible:
· "That the society itself makes a pecuniary gain, unless that gain or some part thereof is divided among or received by the members or some of them.
· That the members of the society are entitled to divide between them the property of the society on its dissolution.
· That the society is established for the protection or regulation of some trade, business, industry, or calling in which the members are engaged or interested, provided it does not engage or take part in any such trade, business, industry or calling, or any part or branch thereof.
· That any member of the society derives pecuniary gain from the society by way of salary as the servant or officer of the society.
· That any member of the society derives from the society any pecuniary gain to which the member would be equally entitled if not a member of the society.
· That the members of the society compete with each other for trophies or prizes other than money prizes." (Section 5).
Should the society be found to be engaging in operations involving pecuniary gain, both the society and the members are liable to be fined. In addition, all members involved in these operations can be personally liable for the debts and obligations incurred by the society in such operations.
The Incorporated Societies Act 1908 does not set down any direct requirement for a society to hold meetings. However, two sections of the Act (section 6(1)(f) and section 23(2)) make it clear that societies can and should hold meetings.
There are three types of meetings that can be held:
· general meetings
· committee or sub-committee meetings
· other or ordinary meetings.
The basic difference between these types of meetings is as follows:
General meetings are the meetings that are required by the rules of the society to be held periodically or on special occasions. These are the annual general meeting and special general meetings. The annual general meeting usually deals with the presentation of the society's accounts, the election of officers and rule changes. Special general meetings are usually held only when there is a need to consider some urgent or important matter that cannot wait until the next annual general meeting.
A common practice is for a society to hold an annual general meeting once a year to consider the finances and operation of the society, and to elect new officers.
Committee or sub-committee meetings are the meetings held by society officials or other nominated people to run or administer the society or its activities. Committee meetings are held as frequently as the rules require.
Other or ordinary meetings are the weekly, fortnightly or monthly meetings where members gather to participate in the activities for which the society exists. Other or ordinary meetings are also held as specified in the rules.
If the rules do not specify how often the society or its committees should meet, then it is usually up to the society's officers to decide. Each society has its own activities and needs and it is not necessary for a particular number or certain types of meetings to be held. The requirements of the Act are satisfied if an incorporated society has one annual general meeting each year.
There is no one right way to conduct meetings although there are a number of procedures which are generally accepted as being good practice. If your society's rules do not specify how meetings are to be conducted, you may wish to adopt one of these procedures.
The rules of a society will set out how a notice of a general meeting should be given to members. The requirements for proposing resolutions and nominating people for election are also contained in the rules and must be followed at all times. If these rules no longer meet your needs, they can be amended. However, until the amendments are registered with the Registrar, the current rules must be followed.
Section 23 of the Incorporated Societies Act 1908 requires that "Every Society shall deliver annually to the Registrar, in such form and at such time as required, a statement containing the following particulars:
· the income and expenditure of the society during the society's last financial year
· the assets and liabilities of the society at the close of the said year
· all mortgages, charges, and securities of any description affecting any of the property of the society at the close of the said year."
Societies may also include:
· A Receipts and Payments Account which is a summary of all cash transactions for the year.
· An Income and Expenditure Account which compares revenue with expenses for the year.
· A Balance Sheet which shows assets, liabilities and accumulated funds.
In order to prepare a set of Annual Financial Statements it is recommended that, as a minimum, the following records and documents be kept:
· A numbered receipt book with a retained duplicate copy.
· A copy deposit book (used for banking money into a cheque account).
· All current and used cheque books.
· All bank statements.
· A folder or box containing all invoices and payment authorisations.
· A receipts and payments journal.
· A petty cash payments book.
All of these items can be purchased from your local stationery or book shop. The treasurer or any other person authorised by the society in its constitution should issue receipts for all money received and ensure money is banked promptly.
At the end of the society's financial year, the treasurer will need to prepare a set of accounts to be presented to the members at a general meeting. This would normally be an annual general meeting. The purpose of this is to obtain the members' approval as required by s.23(2) of the Act. From records kept during the year, the Receipts and Payments account, Income and Expenditure account and Balance Sheet are made up, audited if required and presented at the General Meeting for approval.
Once approved, one copy of the set of accounts must be sent to the Registrar of Incorporated Societies at the office where your society is registered.
These accounts must be accompanied by a certificate stating:
"I certify that the foregoing statement has been submitted to and approved by the members at (a general meeting/the annual general meeting) held on the ..................day of ................19............ at (Place)
Signed ..................................................................
An Officer of the Society"
The accounts should be typewritten or machine printed on one side of quality A4 paper. They should show the society's full name and the year and date to which they relate. If you require further information on keeping accounts, you may wish to refer to “Reference material” at the end of this publication.
Although the Act does not require a society to appoint an auditor, it is desirable for a society to have one. If your rules have a provision for the appointment of an auditor these should be adhered to. If not, you should consider altering the rules to allow for an auditor to be appointed. An auditor need not be a member of the Institute of Chartered Accountants of New Zealand, but a qualified person is preferable.
As a society is a separate legal entity, it can enter into a contract as if it were a natural (private) person. Section 15 specifies how each of three types of contract are to be dealt with. Summarised they are:
· If the contract is one that would have to be made by individuals by way of a deed, then it must be made in writing under the common seal of the society.
· If the contract is one that, if made between individuals, would have to be in writing and signed by the parties to be bound, then it may be made in writing and signed by a representative of the society.
· If the contract is one that could be made without writing between individuals, it may be made without writing by any representative of the society.
Societies may wish to consider the following when entering into a contract:
· Is the purpose of the contract authorised by your rules and objects? Your rules may allow you to borrow money but is the money going to be used for something not covered in the objects?
· Who is to be authorised to commit the society to contracts? The rules will contain provisions controlling the use of the common seal but may not specify who is authorised to enter into contracts in writing or other forms of contract. You may wish to add to your rules provisions specifying those persons authorised to enter into contracts.
Section 21 provides that "A society may from time to time alter its rules in the manner provided by the said rules but subject to the provisions of this Act".
In a society's rules are provisions that allow it to alter its rules by adding, changing, or removing rules or even replacing them completely. The manner in which these changes are discussed and decided upon is governed by your rules which should cover topics such as notices of motion, quorums, and required majorities.
The only restriction placed by the Act on the type of alterations made is that they must not conflict with any part of the Act (e.g. Section 6 or Section 13) and they must not conflict with the general law.
Note that a decision on the acceptability of the changes can only be given after a formal application has been received.
When making up a resolution to change one or more rules you must ensure that the resolution to be voted upon includes an explanation of what is to happen e.g:
“That rule 6(1) be amended by deleting ..."
“That rule 6(1) be amended by deleting ... and substituting ..."
“That rule 6 be repealed".
"That rule 6 be repealed and replaced by the following ..."
"That rule 6 be amended by adding as subsection 6(3) the following ..."
"That a new rule, rule 67,
be added as follows ..."
"That the existing rules be repealed and replaced by the following ..."
If the rules are being replaced completely, follow the instructions for amendments below. The procedure is the same.
Once a society has approved the rule changes, they must be registered before they have any legal effect. Please note this carefully. Until the Registrar accepts the changes, the old rules continue to apply. If you follow the new rules before they have been registered, your actions will have no lawful effect. You may even become personally liable for these unlawful actions.
The requirements for registering changes to rules are:
1. The amendments must be typewritten or machine printed on one side of quality A4 paper.
2. Two copies of the amendments are to be sent to the Registrar in whose office your society is registered. Carbon copies are not acceptable. One copy of the amendments supplied may be a photocopy if it is of good quality. Both copies must have original signatures.
3. Each copy of the amendments must be signed by at least three members of the society. When signing, each person should write beside their name that they are a member of the society and add any office or title they hold e.g., secretary or life member.
4. The amendments must be accompanied by a statutory declaration made by a solicitor or member of the society to the effect that the amendments have been made in accordance with the rules of the society. The form is called ‘Declaration of Adoption, Alteration of Rules’ (Comm Aff 4) which is available from the “Forms” section of this library or your regional Companies Office (see the “Contact Business & Registries” section of this library). Please note that this form can only be signed in the presence of a Solicitor, Justice of the Peace, Registrar of the Court, or another authorised officer. This includes the Registrar of Incorporated Societies.
5. Each copy of the amendments must be endorsed with an exhibit note signed by the person taking the declaration referred to in (4) above. Mark a capital ‘A’ on the top of the first page of each copy of the amendments and write or type the text of the following underneath, at the bottom of the amendment page, or in one of the side margins of the amendment page:
“These are the alterations (or
replacements) to the rules marked "A" referred to in the annexed declaration of
(full name of declarant) made before me this ...................day
of................l9.............. before me
.......................................
Signed by solicitor, JP or other authorised officer.”
As the society's objects form part of the rules they too can be altered. The procedure is exactly the same as for the alteration of rules. The only special requirements are those of s.21(4) which states:
"No alteration in the objects of a society shall be registered unless the Registrar is satisfied either that the alteration is not of such a nature as to prejudicially affect any existing creditor of the society, or that all creditors who may be so affected consent to the alteration."
A society's name is also part of its rules and this too can be changed in the same way as the other rules. The Registrar will determine whether or not the new name you wish to use is available at the time you lodge your rule change documents.
To pre-determine whether any similar names currently exist, you may wish to check the register at the Companies Office or at our Internet site – http://www.companies.govt.nz
The Registrar’s approval is required before altering the name of your society. See “Registering an Incorporated Society” in this library.
Section 18 of the Act requires any change in the location of the registered office of a society to be notified to the Registrar. This notification must be sent to the office at which your society is registered.
A form called ‘Notice of Change of Registered Office’ (Comm Aff 29) is available from the “Forms” section of this library or your regional Companies Office (see the “Contact Business & Registries” section of this library).
Section 22 of the Act requires that every society must keep a register of all its members. It must show the name, address, and occupation of each member, the date they, she or he became a member/member(s), and all subsequent changes. If required by the Registrar, a society must submit a list of all members giving their names, addresses and occupations plus a declaration by an officer verifying the list.
A society may experience problems or disputes about its policies or the way in which its rules are being interpreted and applied. These problems must be dealt with by the society itself. The Registrar is not empowered to intervene in disputes or provide interpretations of rules. The Act does give the Registrar certain powers of investigation but these relate to alleged breaches of the Act, not breaches of a society’s rules.
A society that has members in a number of regions may want to establish branch societies. The Incorporated Societies Amendment Act 1920 sets out the procedure for incorporating branches. This procedure is generally the same as the procedure for incorporating a new society.
A society may submit an application to incorporate just one branch, or a number of branches may be incorporated as a group. In either case there must be a minimum of 15 members, a majority of whom consent to the application for incorporation. Where incorporation is sought as a group, the majority of each branch within the group must consent to the application.
From time to time an incorporated society comes to an end. This can be because:
· It has achieved its purpose.
· It cannot pay its debts.
· It has ceased to operate.
· It is found to be making a pecuniary gain for members.
· A High Court Judge has ordered that the society be put into liquidation.
Section 24 to 26, and 28 of the Act cover the ways in which this happens. They are summarised as follows:
When members of a society feel that the society should be put into liquidation, they can pass a resolution appointing a liquidator at a general meeting. The resolution needs only a simple majority of all the valid votes cast by members at the general meeting. A simple majority is half the votes plus one. The rules cannot change the requirement for a simple majority as this is specified by Section 24(1A) of the Act.
If such a resolution is passed, a second general meeting must be called not earlier than thirty days from the first meeting to pass a resolution confirming the earlier decision to liquidate the society. Once again a simple majority is required to pass the resolution. If the resolution is lost, the earlier resolution lapses. If the confirming resolution is passed, the members must appoint one or more liquidators to liquidate the affairs of the society.
The procedure and requirements of the liquidation of a society are the same as those for the liquidation of a company under the Companies Act 1993.
The Registrar, a society or any member or creditor of a society may apply to the High Court to have a society put into liquidation.
This application can be made under one or more of the following circumstances:
· If the society suspends its operations for the period of a year.
· If the number of members falls below 15.
· If the society is unable to pay its debts.
· If the society carries on operations from which members make pecuniary gain.
· Any other circumstances which a High Court Judge considers acceptable.
Every application to the High Court to put a society into liquidation and every order from the High Court for the liquidation of a society is subject to the provisions of the Companies Act 1993 that apply to the liquidation of a company by the High Court.
If the Registrar of Incorporated Societies is satisfied that a society is no longer carrying on its operations or that it is defunct, the Registrar can declare that the society is dissolved. As from the date the declaration is published in the New Zealand Gazette the society ceases to be an incorporated society.
The Registrar will usually act on a request from a society to carry out a dissolution under section 28 if evidence is produced that the society has no liabilities, that its assets have been distributed and that its members want the society to be dissolved.
Once the liquidation or dissolution of the society is completed the surplus assets (i.e. the money and property remaining after the payment of all costs, debts and liabilities) are to be disposed of as specified in the society's rules. If this is not possible, the Registrar has the authority under Section 27 of the Act to direct how the assets shall be disposed of. Any surplus assets that are subject to trusts will be disposed of as directed by the High Court (where the society was put into liquidation by the High Court). In other cases, surplus assets subject to trusts will be disposed of as directed by the Registrar.
Anybody may inspect the file of an incorporated society in the office of the Registrar of Incorporated Societies at which the society is registered. The file contains the rules of the society and every financial statement lodged with the Registrar. There is no charge for inspecting the file. Copying facilities are available in all offices.
If certified copies are required of any documents on a society’s file, they can be obtained upon payment of a prescribed fee.
Alternatively, you can search registered information on an incorporated society at the Companies Office Internet Site http://www.companies.govt.nz.
See also ”A Guide to Searching Corporate Body Information”.
The publications listed below will be of considerable assistance to those involved in the running of an incorporated society.
· Incorporated Societies Act 1908 and Amendments
·
Incorporated Societies Regulations 1979.
These publications are essential reading for anyone involved in forming or
running an incorporated society. Both the president and secretary, as a
minimum, should have copies of the Act and its amendments to ensure that the
conduct of the society complies with the legislative requirements. Copies of
the Act can be purchased from any Government Bookshop.
·
The Law and Administration of Incorporated
Societies by T F Paul published by Butterworths Wellington (1986) (2nd Ed).
This is a comprehensive and professional approach to incorporated societies and
an excellent guide for a president, secretary or treasurer of a larger or more
complex society. Topics covered include secretarial and administrative duties,
accounts, taxation, conduct of meetings and the law of defamation.
The information contained in this document is for guidance only. We recommend you seek professional advice if you intend to register an incorporated society under the Incorporated Societies Act 1908.