Submission on the Incorporated Societies Bill

The IoD has submitted on the Incorporated Societies Bill (the Bill). 

We welcome efforts to modernise the legal framework for incorporated societies and the obligations of those who run them. We are generally supportive of the Bill but include some additional recommendations. 

The changes proposed in the Bill are significant and it will be a challenge for many incorporated societies (particularly small societies) to transition to the new regime. It will be essential for the leaders of societies (and people considering those roles) to have sufficient guidance and support to ensure a successful transition for the sector and to ensure volunteers are not deterred from serving on committees and contributing to community activities.

Officer qualifications: The Bill sets out who will be disqualified from serving on governing bodies of societies (officers of committees). We have suggested that the Select Committee also give further consideration to other disqualifying factors (such as people who have been banned from being a company director overseas).

Officer duties: The duties are set out in the Bill and are broadly the same as directors’ duties (with some modifications) and essentially codify the position at common law. The IoD supports the expression of clear statutory duties for those who govern incorporated societies. We note that it will be important to communicate the nature and extent of these duties to those involved in the sector as part of any transition. It will also be important that if/when there are changes to directors’ duties under the Companies Act that (where applicable) any reforms flow through to other governance contexts such as incorporated societies.

Conflicts of interest rules: The Bill introduces extensive conflict of interests rules. The rules generally provide that a conflicted person can’t vote or sign documents relating to the relevant matter but can take part in discussions (unless the committee decides otherwise). There is an exception to this that allows a conflicted person to vote and sign documents where all members of a committee not interested in a matter consent. We note that from a good governance perspective, it is critical to ensure that the use of this exception does not become the norm by default or overuse, and the importance of this needs to be highlighted in guidance for leaders of societies.  

Financial reporting: Small societies only have basic minimum financial reporting requirements to meet under the Bill. “Small society” is defined as having less than $10,000 in operating payments and total assets of less than $30,000 (and they mustn’t be done organisations for tax purposes). We have said that this threshold is too low and should be increased. We have also suggested that the Bill should also include a mechanism that allows for further increases in the threshold over time (tracking CPI).

Also see our article Institute of Directors welcomes long-awaited Incorporated Societies Bill