Incorporated societies

The incorporated society is the second most popular organisational structure for New Zealand not-for-profit organisations, accounting for almost a quarter of all groups. An incorporated society is set up under the Incorporated Societies Act 1908. Once incorporated, it means a society can legally run its affairs as though it were an individual person. The New Zealand Companies Office which is part of the Ministry of Economic Development is responsible for administering the Societies and Trusts Register that registers incorporated societies.

Key features

An incorporated society:

  • has a set of rules that governs the way the organisation operates
  • has a minimum of 15 individuals or five corporate bodies such as other societies, charitable trusts or companies (each corporate body counts as three individuals), or a mix of both
  • can make profits and employ people, but may not distribute profits to members
  • has its income taxed although it may be eligible for a range of tax exemptions.

Rules

The rules (or constitution) of an organisation is its most important document, as it sets out the vision or purpose for which the organisation is being set up. It is the place to embed your kaupapa, or your guiding principles and values.

Section 6 of the Incorporated Societies Act 1908 sets out the minimum requirements that must be included in an incorporated society's rules. These are:

  • name
  • objects (or purposes)
  • how people become members
  • how membership is terminated
  • how rules are to be altered, added to, or rescinded
  • how to give notice of, and run, general meetings as well as voting methods
  • appointment of officers
  • the control and use of the common seal
  • the control and investment of funds
  • the powers (if any) of the society to borrow money
  • the disposition of property in the event of the society being put into liquidation.

 

Tip: As long as these minimum requirements are included, the group is free to include additional rules if it wishes. (More detail is given on each of these minimum requirements next).

 

Minimum Requirements

Name

There are some restrictions on the name that you can use. The society's name must end with the word Incorporated and it can't be the same as (or deceptively similar to) that of any other society, company or organisation.

Tip: If you want to register with Charities Services, you need to have a name that Charities Services believes is not offensive or likely to mislead the public.

 

Objects

The objects of a society is its purpose. The objects can be specific or quite general but they must be lawful and should include the society's main activities, activities it would like to do in the future, and a general statement allowing it to do anything else to further its aims. It's important that they reflect your mission, but are flexible enough to adapt to changes in the future. Note that any changes to your objects need to be approved by two-thirds majority of the members at a general meeting, and any change in the future may affect your charitable status (if this applies).

Membership

The rules must set out:

  • who can be a member
  • whether there are different types of members e.g. full members who are actively involved or associate members who are less involved (different types of members can also have different voting rights)
  • how many people can become members
  • how they become members e.g. apply in writing
  • how membership is ended, either by the individual or the society itself
  • You may also wish to include a rule to allow you to charge membership fees. And you must keep a list or register of members

Meetings

In addition to the mandatory rules about general meetings, you may also have rules relating to annual general meetings (AGMs or hui-a-tau) and special general meetings (SGMs) that also involve all the members.

General meetings

These provide a way for the membership as a whole to keep in touch. There is no set number of meetings that must be held but the rules may state a minimum. In a small society, general meetings are likely to be held regularly e.g. every month. In a larger society, where a committee does most of the work, these meetings may be held less often.

Annual general meetings (AGMs)

These are held once a year. You may want to state in your rules that it must be held within 14 or 16 months of the previous AGM. The AGM will elect the office holders and any committee, consider the financial statements, review the year's activities and plan for the year ahead.

Special general meetings (SGMs)

These may be called outside the normal general meeting times to discuss urgent business or to consider an important issue such as an amendment to the rules. The rules should set out how members can request a SGM (e.g. by giving written notice to the secretary) and whose job it is to organise it (e.g. the secretary).

Notice of meetings

Your rules should set out how notices of meetings are to be given to members. In the case of an SGM, the reason for calling the meeting should be included in the notice. Your rules must also state when the notice is to be received e.g. 14 days before the meeting.

Quorum

A quorum is a minimum number of members required to attend before a meeting can begin or continue. If the quorum is not reached, the meeting cannot be held. The number of the quorum will depend on the size and circumstances of your group. It shouldn't be set too high or you may have difficulty holding a meeting. Nor should it be set too low, to avoid the risk of a small group hijacking the organisation.

Running meetings

Your rules must state who will run the meetings. Any additional details of how you want to organise your meetings can be added.

Decision-making

Decisions can be made either by consensus or by voting. The rules must set out the voting procedure. They should cover whether all or only certain types of members can vote. You will need to state how a vote is to be held, e.g. by voices, by show of hands, or in writing. You will also need to state how a decision is passed and how many members need to be present. You will have to decide if you want all votes to be exercised in person at the meeting, or whether you will allow postal votes or proxy voting (where someone can vote on behalf of another member). A proxy vote should be in writing and signed by the member who cannot attend.

Committees

You don't have to have a committee as your group can be run solely by general meetings. However, if the group has more than 20 people, you will find a committee an advantage as it can streamline the decision-making process and you can also establish sub-committees to attend to particular projects or tasks. The committee will be appointed or elected at the AGM. Your rules should set out:

  • the number of committee members (there is no maximum or minimum required)
  • who is to convene the committee e.g. the society's chairperson or rotated amongst members
  • how often the committee is to meet during the year
  • how decisions are made and voted on at committee meetings
  • whether the committee can co-opt extra members
  • whether the committee can form sub-committees.

 

Tip: Your group should decide how wide the committee's powers will be e.g. whether it has the power to borrow money or the power to co-opt non-members to form subcommittees but it's important to allow the committee to function without the need to call constant meetings.

 

Officers of the society

Groups do not have to appoint officers. Some groups choose to operate as a collective, sharing tasks and responsibilities, sometimes on a rotating basis among members. It is also possible to draw on the assistance of people outside the group. If officers are appointed, there are usually three the chairperson, the secretary and the treasurer.

Tip: If you want to apply to register under the Charities Act 2005, officers (all trustees and all members of a board or governing body) will need to meet the qualification requirements of the Act. For more details, visit: http://www.charities.govt.nz/

 

Chairperson

The chairperson convenes meetings of the society and any committee it may elect, and ensures that the rules of the society are followed. The chairperson may also take on a leadership role in the activities and management of the group.

Secretary

The key roles of the secretary are:

  • to keep a register of members
  • to prepare notices for general meetings
  • to keep minutes of all meetings
  • to keep the official stamp or common seal of the society in safe-keeping
  • to handle incoming and outgoing correspondence.

Treasurer

The role of the treasurer (either alone or in association with an in-house financial administrator or outside accountant) is:

  • to keep proper financial records
  • to bank all money received by the society
  • to pay all accounts
  • to prepare annual accounts and file them with the Registrar of Incorporated Societies
  • to look after any taxation requirements e.g. PAYE and GST.
Tip: For further details on the role of the chairperson, secretary and treasurer see Introduction to governance.

 

Other officers

Other officers of the society may include: a patron or patrons, a fundraising co-ordinator, a publicity co-ordinator, and an education co-ordinator.

The common seal

A common seal is usually a rubber stamp that includes the name of the society and the words common seal. All societies must adopt a common seal on incorporation and the society's rules will set out when it will be used and how. Generally, it is used on legal documents and contracts that the society enters into.

Tip: Contact a commercial stationer for information about ordering a seal.

 

Finances

Your rules must state:

  • that proper accounts will be kept
  • who will control your funds e.g. sign cheques and make withdrawals (this will usually be your treasurer and one or two other people appointed by the committee)
  • that all funds are to be banked into the society's bank account
  • that any surplus funds are to be placed in secure investments.

Financial statements must be prepared and presented to the AGM each year. These must include:

  • your income and expenditure
  • your assets and liabilities
  • any mortgages, charges or securities over any of your property.

A copy of the financial statements must be sent to the Registrar of Incorporated Societies and an officer or solicitor of the society must certify that the statements have been approved by the members of the society at a general meeting. Financial statements only have to be audited if it is set out in the rules of the society.

Tip: It's best not to make auditing a requirement in your rules as you can still appoint an auditor if need be, e.g. when it's required by a funding body. 

 

Powers

The powers can be as wide or narrow as the group requires, but if you plan to borrow money, how it can be borrowed must be included in the rules. The rules should also cover the powers:

  • to invest money
  • to lease, buy or sell property
  • to employ staff
  • to sign contracts.

Surplus assets

Your rules must state what will happen to any assets after you've paid all your debts. You may want to distribute any surplus assets to another society or trust with similar aims to your own.

Tip: If the society is registered with Charities Services, any surplus assets will need to be distributed for charitable purposes.

 

Final tips on rules

  • Include your kaupapa, your mission, guiding principles and values in your constitution. This isn't required by law, but it provides a public statement about your organisation and what you stand for.
  • It's useful to have a general clause stating how any dispute between members or between members and the committee will be resolved e.g. by mediation. Don't be too prescriptive in the constitution – your policies and procedures will set out the detail.
  • Charitable status depending on the reason for your group, you may want to register as a charity with Charities Services and obtain the tax and other benefits of registration. The main things to consider are:
    • the purposes need to be charitable (see below)
    • no member can obtain any personal financial gain (pecuniary profit) from being a member of the group (although a member can be paid for work done as long as it is no more than a reasonable ‘open market value)
    • on winding up, any surplus must be distributed to other charitable organisations
    • alterations to the constitution cannot be made that would affect the charitable status.
Tip: To get some ideas, look at the sample set of rules or the rules of other incorporated societies available at Societies and Trusts Online http://www.societies.govt.nz/cms/incorporated-societies/rules-of-incorporated-societies

 

 

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