Do you need assistance setting up an incorporated society?
Contact our not-for-profit law expert, Peter Smith today for further advice.
11 November, 2021 | Peter Smith
The stakeholders in an incorporated society are its members. The members must be able to vote, in a democratic manner, for a committee or board that runs the day-to-day activities and finances of the society. The committee is accountable to the members.
The committee will usually have a chairperson, secretary and treasurer, plus committee persons.
Incorporated societies are entities that have separate legal status from their members – meaning that a society can lease, buy and sell property, rent, borrow money and sign contracts in the name of the society. Individual members are not personally obligated for contracts entered into by the society, although they still have obligations as members of the society to abide by the rules of the society.
To become an incorporated society an organisation must register under the Incorporated Societies Act 1908 (“the Act”). Incorporation gives the organisation its own legal identity. The application for incorporation is made to the Companies Office (part of the Ministry for Business Innovation and Employment (“MBIE”)).
Once registered with MBIE, an incorporated society will continue to exist as long as it complies with the requirements of the Act or until the members resolve to bring the society to an end. Creditors can also apply to wind up a society if the society becomes insolvent.
Incorporated societies must have a minimum membership of 15 people. The members of an incorporated society can change but the identity of the society remains the same. No single individual member of a society can have a personal interest in any of the society’s assets, as the property of a society is held by the society, rather than by its members.
An incorporated society must act in a lawful manner, within its own rules, and must not make money for the benefit of an individual member when carrying on any activity. There are legal obligations imposed on all incorporated societies, by their rules and by the Act.
The Act details the matters that should be covered by the rules of a society. These matters include:
All incorporated societies must meet their tax obligations (GST in particular). Depending on the turnover of the society, there are rules as to how the financial statements of a society are to be prepared.
Many incorporated societies are entitled to the first $1,000 of income tax as exempt income. Strictly amateur sports clubs are entitled to receive all of their income tax free.
Some of the activities of incorporated societies may require licencing or approval from local government. These activities may include:
Incorporated societies must not make money for the benefit of individual members. There are exceptions however to this rule. These exceptions include:
If a society is found to be engaging in business, which is not permitted, both the society and its members face prosecution and fines. Furthermore, members of a society may be held liable for any debts an obligations that are suffered by the incorporated society should the business activities lead to the bankruptcy or insolvency of that society.
To incorporate your organisation as an incorporated society or to make sure that it is complying with the Act, it is important that you be familiar with the Act which can be found here.
You should consult a legal professional to help you to set up an incorporated society and to assist with compliance with the law. Smith and Partners can help with all your queries and advice surrounding incorporated societies.
20 March, 2012 | Peter Smith