New Act, new register, new rules - comply or cease to exist
The Incorporated Societies Act 2022 (New Act) was enacted in April 2022 and introduces a number of governance changes for incorporated societies (for an overview see The Incorporated Societies Act 2022 - a long time coming). Existing incorporated societies now have a 2½ year period from 1 October 2023 until April 2026 to re-register as an incorporated society under the New Act. Existing incorporated societies that do not re-register under the New Act within that timeframe will cease to exist.
In order to re-register, incorporated societies will need to ensure that their rules meet certain minimum standards prescribed by the New Act. With that in mind, all existing incorporated societies should now be thinking about what changes might need to be made to their rules in order to ensure compliance with the New Act.
We appreciate that it may be daunting for incorporated societies to know where to start when it comes to updating their rules and how to make sure they get it right so that the re-registration process is both seamless and successful, when the time comes.
In advising our incorporated society clients in relation to the modification of their rules to ensure they are compliant with the New Act, we have been proposing two broad options - the surgical approach or the complete rewrite approach. Each has its own pros and cons and there is no right or wrong answer - the right approach will depend on the nature and circumstances of the particular incorporated society.
Option 1: The surgical approach
The surgical approach involves a line-by-line review of an incorporated society's existing rules to check for compliance with the minimum standards of the New Act. Any existing rules that do not comply with the New Act will need to be modified or removed and any requirements of the New Act that have not been addressed, will need to be included.
The benefit of the surgical approach is that it involves fewer changes - incorporated societies will have a contained list of rule modifications to show to its members and it will be a straight-forward exercise explaining to members why each change is necessary. The rules will largely look the same, subject to the required modifications, which some incorporated societies may find useful, particularly when officers and members are comfortable with the existing rules and do not have the appetite to navigate their way around a new and unfamiliar set of rules.
The key downsides of the surgical approach are that:
- It is a relatively complex task for incorporated societies to tackle unassisted, as they will need to both be acquainted with the New Act and its requirements in order to know what the requisite modifications to the rules are as well as have confidence that they can draft those modifications appropriately.
- It does not allow for a robust 'health check' of the rules to ensure that they remain fit for purpose and responsive to the changing needs of the incorporated society.
Option 2: The complete rewrite
While a complete rewrite might sound overwhelming, there will be real benefits for some incorporated societies in 'starting fresh' with their rules. Our observation is that many incorporated societies (possibly reflective of the limited guidance provided by the Incorporated Societies Act 1908 on governance matters), have rules that are unhelpfully brief and/or not particularly user-friendly.
There are two options for incorporated societies in proceeding with a complete rewrite of their rules, being:
- Bespoke rewrite: Preparation of a bespoke set of rules that incorporates those parts of an incorporated society's existing rules which work well but which is a more robust and user-friendly document for officers and members to refer to. While this will result in an individualised, modern set of rules, as with the surgical approach, it is a difficult task for incorporated societies to take on unassisted and is likely to require a more comprehensive explanation to members.
- Off the shelf rewrite: Creation of an 'off the shelf' set of rules using the Companies Office's Constitution Builder tool which prompts you to insert basic information specific to the relevant incorporated society and then automatically produces a set of rules. While this option will not require any in-depth knowledge of the New Act and will likely be more cost-effective than the other options, it does mean the existing rules of an incorporated society are entirely disposed of. As with the bespoke rewrite, it will also require a more thorough explanation to members.
How can we help?
Buddle Findlay is well-placed to advise incorporated societies on how the New Act may impact them. In particular, we can advise what rule modification option might be the best fit as well as provide guidance on, and assistance through, the re-registration process.
September 2023 regulations
A final word - regulations are being developed to support the New Act and the Ministry of Business, Innovation and Employment expects that these will be released in September, ahead of re-registration opening on 1 October. While the content of these regulations may impact the drafting of an incorporated society's new rules, we expect any impact will be minor. On that basis, we recommend that incorporated societies begin the process of considering how they would like to approach rule changes now so that they are well progressed when the re-registration process opens later this year.
This article was co-written by Rupert Rouch (partner), Julia Gabrielle (partner) and Manraj Singh Rahi (law clerk).
