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Running an incorporated society is an exciting and often fulfilling role. Incorporated societies have a variety of aims in New Zealand and accomplish a considerable amount of good. However, certain legal obligations apply to the establishment and ongoing management of incorporated societies. There are certain restrictions and bounds that incorporated societies must follow.

This article covers three areas of legal obligations for your incorporated society in New Zealand, including:

  • the rules of the society; 
  • approvals and licences; and 
  • restrictions on the distribution of money. 

Your Incorporated Society’s Rules

The first obligation to note is setting certain rules to register with the Registrar of Incorporated Societies as an incorporated society. Following from that, there is the ongoing obligation to abide by those rules. Your society may encounter legal issues if it does not follow the rules that it has set out.

Importantly, you want to ensure your society is respecting its aims or objects. You may also detail other rules that are specific to your incorporated society. Under the law, you must cover at least the following, including how:

  • a person becomes a member of the society;
  • a person and stops being a member of the society;
  • general meetings are called and held;
  • voting takes place at general meetings;
  • society’s officers are appointed;
  • the society’s assets and funds will be controlled or invested; and
  • members may change the rules in the future.

Once you have established these rules, your incorporated society must follow them or change them through the set process. A society cannot unilaterally decide to do something contravening its rules unless it changes those rules through a formal process. 

Approvals and Licences

An incorporated society has a legal obligation to comply with any approvals or licences required to undergo its operations. Remember that while you may officially register your group as an incorporated society, it must follow New Zealand’s restrictions in conducting fundraisers, selling alcohol or organising casino games.

It is a good idea to do a regular check to ensure that the society has the correct legal permissions to conduct its activities. This is particularly the case if you are looking to raise funds involving food, liquor or gambling. In addition, you can inquire with your local authority to double-check that you have the proper approvals and licences in place for your incorporated society. For example, you can contact Auckland Council for incorporated societies based in Auckland.

Restrictions on Distributing Money

Incorporated societies can undoubtedly raise money to help advance their aims and objectives. However, there are certain limitations on profitable activities for distribution to members. For example, there is a difference between raising money for a specific charitable aim and giving money to members to use as if it were their own money. This is even the case if those members have charitable intentions. 

The law sets out specific examples of permissible activities exempt from this restriction on distributing money to members. These include when:

  • a society’s property is divided among members when the society is dissolved;
  • members receive a salary as an employee or officer of the society;
  • members of the society compete with each other at ‘members only’ society events for trophies or prizes (but not monetary prizes); and
  • a member may personally have financial benefit whether or not they were a member of the society.

Make sure to abide by these restrictions on distributing money. If your society is found to be engaging in profitable activities to distribute to members, a court can prosecute both the society and members. Members will also be held personally liable for the society’s obligations in this event.

Key Takeaways

In New Zealand, there are a range of legal obligations that your incorporated society must follow. These include having a set of rules that meets the minimum requirements to become an incorporated society. Likewise, it must ensure that all members adhere to and follow those rules on an ongoing basis. Other obligations include ensuring the society has the approvals and licences that it needs to undertake its activities, particularly fundraising activities. Note that you must take caution when distributing money. For example, it is generally unacceptable to distribute money to members to spend on their own account.

For more information about legal obligations for your incorporated society, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

How can an incorporated society change its rules?

An incorporated society must follow its own process for changing its rules. Likewise, the society’s rules should detail this process. Therefore, a society cannot unilaterally change its rules without following the right process.

Are incorporated societies exempt from needing licences?

No. An incorporated society must get licences and approvals like other entities to undertake certain activities. Such activities include managing gambling activities or selling alcohol.

Can incorporated societies raise money to give to their members?

Generally, incorporated societies cannot distribute money to members to spend on their own. However, incorporated societies can raise money to advance charitable purposes set out in their rules, such as financing a sports trip.

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