Law Society supports incorporated society law reform proposals
The New Zealand Law Society says it agrees with the Law Commission that the Incorporated Societies Act 1908 is overdue for reform. The Law Society also supports most of the reforms proposed by the Commission to the law on incorporated societies and charitable trusts.
The Law Society has released its comments to the Law Commission on the issues paper Reforming the Incorporated Societies Act 1908.
It says the 1908 Act and the Charitable Trusts Act 1957 are now “seriously out-of-date” and no longer provide an adequate an robust modern statutory framework for incorporated societies and charitable trusts.
“New Zealand has lagged well behind other similar jurisdictions, particularly the Australian States and Canadian Provinces,” the Law Society states.
In its comments, the Law Society acknowledges that a major challenge in drafting any new legislation will be in modernising it while making it adaptable to the considerable range of entities covered.
Challenges include ensuring a “one size fits all” approach is flexible enough to cover the distinction between volunteer-run small neighbourhood or special interest groups and large organisations with thousands of members, millions of dollars in assets and professional management.
It will also be important to appreciate that most local community organisations rely almost entirely on grass-roots volunteers whose qualifications, experience and skills vary considerably.
The Law Society says the majority of community organisations that rely on volunteers face considerable confusion in having to interact with multiple government agencies. It says a “users” perspective is required, and establishing one central agency for at least the core registration and regular reporting requirements and advice would be a major advance.
“Achieving a workable compromise is likely to be a significant undertaking,” the Law Society adds.
Considering the Law Commission views on the requirements relating to not-for-profits, the Law Society supports bringing all relevant legislative provisions dealing with the incorporation and governance of not-for-profit entities into one statute.
“This would not only make it easier to find the law, but would also establish consistent principles and processes (especially for registration, monitoring and compliance) applicable to all not-for-profit organisations in New Zealand,” the Law Society says.
“Lawyers advising community organisations and members of such organisations find little guidance in or assistance from the current legislation and the often inadequate constitutions of those organisations. The consequent difficulties in dealing with problems that arise disrupt the activities of those organisations, and cause stress and unnecessary cost.”
Looking forward to replacement of the current legislation, the Law Society says it would be sensible to have a transitional period which involves – like the Companies Act 1993 – re-registration of societies, with deemed re-registration of those that fail to act.
“That would give all societies the benefit of the reforms and minimise costs, and seems a workable approach.’
However, the Law Society says any reform will need to bear in mind the considerable variety of entities likely to be covered by any new statute and the practical problems faced by societies run by volunteers.