Incorprated Societies - a short introduction

A Brief Introduction to Incorporated Societies

Incorporation – some basic information

The information below is mostly sourced from the NZ Company’s Office web site – access the site using the link provided if you want further detail New Zealand Companies Office - About Incorporated Societies

The Hamilton Bridge Club is an Incorporated Society. The founders of the Club decided this so the Club was Incorporated in 1955 a few years after it was formed in 1952

So what is an Incorporated society –
An incorporated society is a not-for-profit legal entity. If a group has a common purpose or vision, the group can choose to formalise its structure by becoming an incorporated society. This gives the group its own legal identity, separate to that of its members. This means that while the membership may change, the society’s identity does not.
Being incorporated also means the members are not personally liable for the society's debts or other obligations BUT cannot have a personal interest in any property or assets owned by the society.

Who can become an Incorporated society
A wide range of organisations can become incorporated societies. These include sports and social clubs, cultural and religious groups, and special interest and activist organisations. Organisations that exist for a charitable purpose can also register as an incorporated society.
An incorporated society suits an organisation that exists for a purpose other than making a profit that’s likely to be operating for a long period. An incorporated society will continue to exist while it files certain documents with The New Zealand Companies Office, or until its members or a creditor decides to bring the society to an end.
Groups with 10 or more members can apply to be registered as an incorporated society. Members must consent to be members of your society.

What it means to be an Incorporated Society
There are benefits and obligations when registered as an incorporated society. Groups need to weigh these up and determine what’s right for your needs. If you're unsure whether incorporation is right for your group, you should seek advice from an accountant or lawyer before you decide ( for the Bridge Club this was decided for us in 1955 ).

Examples of what it means to be an incorporated society —

  • The society maintains its own separate legal identity even when its membership changes.
  • It can lease, rent, buy, and sell property, borrow money and sign contracts in its own name.
  • An incorporated society’s property (premises, money, trophies etc) is held by the society rather than by its members. No individual member can have a personal interest in any of the society’s assets.
  • Members aren’t usually personally responsible for the society’s debts or other obligations. But there are exceptions. Every member involved could be held personally liable, if:
    • they have undertaken activities to obtain money for profit that personally benefits those members.
    • they have undertaken unlawful activities.

Becoming incorporated

  • To become incorporated each society must have a constitution that complies with the Incorporated Societies Act 2022. The constitution sets out your society’s purposes, what it does and how it operates. This provides certainty and consistency in the way your society is run.
  • File relevant documents with the NZ Companies office and pay the required fees,
  • An incorporated society may be entitled to an income tax exemption ( applies to the Hamilton Contract Bridge Club )
  • An incorporated society can register as a charity under the Charities Act 2005, if its activities and 'objects' qualify.

What an incorporated society can do
For the Club to be registered as an incorporated society, any activity your society carries out:
• must be lawful
• must be permitted by its own rules or constitution
• can make money for the society (but must not make money for the benefit of individual members).

Legal obligations
A incorporated society must comply with the laws of New Zealand.
The Society must adhere to the Incorporated Societies Act and the Incorporated Societies Regulations.
Depending on the society’s activities, it may also have obligations under other pieces of legislation. For example, should the Club become a registered charity, it will have obligations under the Charities Act 2005, possible tax obligations with Inland Revenue and under the Health and Safety at Work Act 2015.

Complying with the society’s own rules or constitution
The society’s rules or constitution must include a section setting out its ‘purposes’ — what it intends to do or achieve — and all society activities should fall within this purpose.
The rules or constitution must also set out how the society will be run.

Restrictions on distributing money to members
The society can raise money to help achieve its purposes as set out in its rules or constitution BUT it can’t make money to distribute to its members.
For example a society can raise money to send a sports team to a tournament (if that’s in line with its purposes), but it can’t raise money and give it to its members to use as if it were their own.
Should our society employ people, including our own members, it can pay them for the work they do. Members can also be reimbursed for actual and reasonable expenses they’ve incurred on behalf of your society.

What if a society is not incorporated?
A society does not have to be incorporated to operate. Before your group decides whether to incorporate, you should consider the implications of operating without being registered, such as:
• Your society would not have a separate legal identity to that of its members. This means members could be held personally liable for debts or obligations (such as leases) owed by the society. Similarly, your society could not own property or sign any new contracts in its name.
• Your society couldn’t sue or be sued in court. Any court action would be taken by, or against, the members individually.
• The name your society uses will not have any protection – another group could incorporate using the same name. Your society can’t use the word ‘Incorporated’, ‘Inc’ or the word ‘Manatōpū’ as the last word of its name.
• Your society would not be required to have rules to govern it. This can become a problem if there are disputes about how the society is run.
• Gifting property (including money) to a society that is not incorporated can be a problem.