Incorporated Societies

Freddy considers forming an incorporated society


As Freddy sits down to his morning coffee, he flicks through his emails and finds one from his friend Bob inviting him to join the board of an incorporated society to take over the running of the tennis courts at the local school grounds now that the school is closing. 

Freddy loves tennis so, later that day he started planning how the tennis competitions should operate.  When Pebbles walked in on her way home from work, Freddy said, “Bob and I are going to form an incorporated society”. 

“Dad”, says Pebbles, “there are a few things you need to know about how incorporated societies operate and what your responsibilities would be if you are a member of the board”. 

“Oh yeah Pebbles, I am sure there is a lot of formal stuff”, said Freddy, “but listen, here’s how the tennis competition is going to work”. 

“Dad”, said Pebbles, “you and Bob cannot set up an incorporated society on your own.  You need at least 15 people.  You also need a set of rules and you will have to go through the process for incorporating the society.  You need to think about your responsibilities as a board member.  It’s not just a matter of honing your tennis serve, you know, Dad”. 

“Oh Pebbles”, said Freddy, “you are taking all the fun out of it but I know that you know best.  Tell me, what do I have to do if I am going to be a board member of our incorporated society?”

“Well Dad, it is a bit like being a director of a company.  Your fundamental duties are to act in the best interests of the society and in accordance with the functions and powers set out in the society’s rules.  You must become well acquainted with the precise terms under which the society holds any property (for example, the land where the tennis courts are) and you must comply strictly with the terms of the society’s rules and the law, in particular the Incorporated Societies Act 1908”.   

“Board members have to make decisions for the society”, said Pebbles.  “Those decisions must be made in accordance with the processes set out in the rules and, when making decisions, board members must use the same diligence and care that a prudent and diligent person would use in managing their own affairs.  Whenever you do delegate your responsibilities to someone else (say, if you are away temporarily or you engage a lawyer to do a specialist task for the society), you are still responsible to see that the work is done properly”.

“Thanks Pebbles, I will try to follow your advice”, said Freddy.

“You know Pebbles, the way I am planning to run these competitions, I think we might even make a profit”, said Freddy. 

“Any profits will belong to the society”, said Pebbles.  “Members of an incorporated society must not make any personal profit out of the society’s activities.  The only money the society can pay to you is to reimburse you for any appropriate and reasonable out-of-pocket expenses.  The board must make sure that full and clear accounts are kept and that the society’s money is applied strictly in accordance with the rules”, said Pebbles. 

“I suggest that you look at the incorporated societies website http://www.societies.govt.nz/cms/incorporated-societies/starting-an-incorporated-society which will give you information about how to form the society”.      

“Ok Pebbles”, said Freddy. “But first, I think I’ll have a cup of tea and start thinking about who else we can get to join us to make up our 15 members”. 

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 

 

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Marie Callander