Incorporated Societies Bill

Members, we come now to the Incorporated Societies Bill.

Point of order. Thank you, Madam Chair. I wonder, given the bill is uncontentious, has six parts, and a number of schedules, whether we could take all parts as one question, by leave?

Is there any objection? There appears to be none. The question is that Parts 1 to 6, Schedules 1 to 4, and clauses 1 and 2 stand part.

Like an individual, an incorporated society is born, and one day, eventually, dies. Its birth is the incorporation process, and its death is the winding up process. This bill will better regulate the birth of societies in Parts 2 and 5 respectively. However, the bill’s main impact will be felt between these two events, while the society is alive and well, and that’s dealt with in Parts 3 and 4 of the bill. The obligations in Part 3 and 4 covered in the bill are comprehensive. They govern the way a society is administered and will set out mechanisms for enforcing these obligations.

In this way, the bill brings the rules governing incorporated societies into the 21st century. We’re updating a law from 1908, and codifying law that’s been developed over the past 114 years, and also filling in the gaps where there isn’t case law or where we haven’t seen practice developed.

I do want to speak just at the outset on a Supplementary Order Paper (SOP) I’m tabling—primarily, it is addressing minor and technical changes. However, there are three changes that warrant mention. Before I do that, I do want to acknowledge the incredibly cooperative spirit in which this bill has been passed. Obviously, it’s been carried by successive Governments over a long period of time—well, there’s been input, should I say, under successive Governments—and the select committee itself that considered this made a number of suggested changes, and those changes were then adopted by the House. So the House is cooperating around this bill, and I do want to acknowledge the constructive way in which members have engaged on this bill so far.

But I want to say at the outset that I just want to speak to the SOP I’m tabling, to describe three of the changes which I think warrant mention beyond the kind of minor and technical changes within the SOP. First, if we consider the scenario where a company or other body corporate wishes to join an incorporated society, clause 72 of the bill, currently, requires that the body corporate’s consent to joining be confirmed by two of its directors. It’s become clear to me that such a requirement, which represents a change from the status quo, would represent, essentially, a disproportionate burden on companies and other bodies corporate, and it doesn’t gel with current practice, I guess you’d say.

The SOP thus proposes to amend clause 72 so that consent can be given on a body corporate’s behalf by a person acting under the body corporate’s express or implied authority. And that provision will align with section 181B of the Companies Act and will make it simpler for a body corporate to join in an incorporated society.

The second change that I want to mention in respect of the SOP is that under the bill, an incorporated society that qualifies as a small society will not, when preparing its financial report each year, have to follow the strict standards set by the External Reporting Board. Clause 96 sets out the conditions a society must meet to qualify as a small society for a given accounting period, and these include that total operating payments and total current assets not exceed a certain level in each of the two preceding accounting periods. That formula raises the question about a new society which doesn’t have two preceding accounting periods, and so, you know, how does it qualify as small, I guess, is the question that’s inevitably raised. In this regard, the SOP proposes amending clause 96 with the effect that for newer societies that do not yet have two accounting periods under their belt, total operating payments and total current assets will be assessed based simply on the current financial year for which they are preparing their accounts—you know, essentially, a simple fix for a pretty simple problem.

The third aspect of the SOP I want to mention is Schedule 3 of the bill. It sets out the process by which the existing 24,000 societies can re-register under the new regime. Under clause 7 of Schedule 3, the registrar will re-register an existing society once the society has sent in a “properly completed application”. The items that must be included in the application to make it complete are set out in clause 5. They include the name of the society, the name and details of the contact person, and the information prescribed by the regulations. Essentially, it’s important to minimise the disruption that existing societies endure when they’re going through that re-registration process. So in that context, given that some societies will inevitably make very small mistakes or omissions in their re-registration applications, the Supplementary Order Paper proposes to provide the registrar with the power to waive minor or technical non-compliance issues with applications, and a power to allow re-registration subject to conditions such as an obligation to provide certain information within a month.

Of course, there’s much, much more in this bill.

Andrew Bayly: Within a month?

Hon Dr DAVID CLARK: No. The member is already interjecting. I’ll repeat for the member, so that the member comes with the argument on this. Supplementary Order Paper 130 proposes to provide the registrar—I mean, it’s laid out in the SOP—with a power to waive minor or technical non-compliance issues with applications, and a power to allow re-registration subject to conditions. So subject to conditions, if it’s not compliant now, give them a month to sort things out. So I hope that will meet with the member’s approval.

The bill itself contains numerous parts and clauses, which we are taking as one. They had been well debated in the House, and, again, as I did at the outset, I do want to acknowledge the way in which the House has engaged on this legislation in order to make it acceptable for all parties. There has been some substantial change to the bill as it’s gone through. I think that’s appropriate. We’re updating it for the first time since 1908. It might be a while till it happens again. I respect the spirit in which people have engaged in making sure that we have legislation that is fit, hopefully, for the next hundred years.

Thank you, Madam Chair. Gosh, that was a very good summation by the Minister, and I thought he could have probably done it in about three minutes but, anyway, it was a good contribution.

This bill goes back a very long way. In fact, I note that the Law Commission first reported to the then Minister for the Law Commission, which would have been probably myself in 2013, on the need for this to be done, and what we’ve seen is that it is a bill that has the full support of the House, but it is also a bill that’s had a tremendous amount of input from those interested in incorporated societies. It’s relatively interesting to hear that there are 124,000 of those. Of those, many of them will be tennis clubs, they may be rugby clubs, or they might be volunteer groups. They are generally run by people who put a lot of effort into their communities, who add a lot of value, and the last thing they want is to be in a situation where they get themselves into trouble when they’re just trying to do the right thing. I think that’s why it’s really important to have their saving revisions in the bill that the Minister has referred to so that people can, in fact, continue with their voluntary work and contribute to their communities without feeling that they’re under the gun.

Of course, as with all societies, organisations, companies, there are going to be disputes, and so it’s very good to see the sort of level of dispute resolution that is being allowed for here. This is a bill that deals with the procedures for dealing with conflicts of interest, which back in 1998 was probably not something that people took that seriously. But obviously now they do, and rightly so. It’s a bill that is going to allow a difference of treatment depending on the size of the society in terms of their assets and also their income. I note that the balance date for each of the two preceding accounting periods—the current assets of a society less than $50,000 will, in fact, enable that society to be treated as a small society and therefore not have such stringent responsibilities. I think that’s a very sensible thing. No doubt a future Parliament will decide that that limit will need to be raised again, as we see it has been over the years where whatever figure that Parliament sets, we tend to end up having to revisit it not very long afterwards.

It’s really good to see that the whole of Parliament has worked so well on this. The select committee has clearly made the changes that the submitters have asked for and, at the same time, recognised that it is important that whenever anyone donates to such organisations, or they are part of them, they have a right to be able to have a say about what happens in the activities in those organisations. As a lawyer, I know I’ve acted for incorporated societies over the years before I came to Parliament. It was certainly, and is still, a very difficult piece of legislation to navigate under the 1998 Act, particularly in today’s world. Things have changed and it’s very good to see this sort of—right, let’s say cross-party agreement on being able to fix some of the things that need fixing.

It may also be—this long passage of the bill—something to do with the fact that it’s not particularly politically sensitive. That’s a shame, but the good thing is no one’s ever going to accuse Parliament of rushing this legislation through and no one’s going to accuse the Government of pushing it through under urgency. I’m very happy to support the bill. Thank you, Madam Chair.

Thank you, Madam Chair. It’s great that the committee is supporting this bill, but I think it’s actually the “Let’s Re-elect Dr David Clark to Full Cabinet Bill”. Because how many bills has he put forward? This bill has been sitting around for years, and I reckon since he’s taken over this portfolio he’s said to his officials, “Find me any bill that I can get back into the House so that I can be standing up there, seen to be driving through this legislation.” And, Holy Toledo, wasn’t it National that actually brought about this change back in 2015 under the auspices of the Hon Paul Goldsmith? And finally the latest Minister’s bringing this bill forward. So, look, Prime Minister, if you are listening, the Hon Dr David Clark is working hard for you, bringing together these very important bills.

So I suppose there’s a couple of questions about this bill. First of all, why has it taken so long to get to this stage? It was 2015 and we’re now in 2022. Why have you—and I’m talking to the Minister here—why has the Government been so tardy to bring this to the House? Because I think that there is a lot that should have been done over the last four years and hasn’t been progressed. Now, you may be tail-end Charlie, Minister, in terms of bringing it to the House, but it is something that should have come to the House earlier.

The second thing is: one of the key bits is that the 1908 Act is silent on a number of important issues, namely, about the role of the directors and the people running charities, the officials, the governance structures of those charities. And what I’d like to ask is: to what extent does this bill work within the confines of the Companies Act in terms of prudential controls and director controls? Are there any additional obligations or do we merely turn to the Companies Act to see what are the full prudential requirements and obligations of director of charities?

The other aspect I want to draw the committee’s attention to is: why do we have to have a Supplementary Order Paper (SOP), which on the first page and the second page is just full of a whole lot of changes? And I’ve got to say we’ve just not long debated another bill where the Minister put up a whole lot of amendments. It’s like it’s just a lack of—

Hon Member: Organisation.

ANDREW BAYLY: —care and organisation, someone I heard over there say. So it just seems strange that we’ve got these changes. The Minister has talked glowingly of these three changes and, of course, we understand there’s the first one around the financial audit requirements so if you don’t have records over two years, then there should be some rules around that.

But, for instance, “How an infringement notice may be served”. Wow, this is just unbelievable stuff. I’ve never seen it before, I don’t think! It’s like an infringement notice may be served by delivering it to the officer or employee of the society at the society’s head office. Wow, that’s unbelievably cutting edge, sending it to the society by prepaid post! Oh, another cutting edge change: sending it to the electronic address of the society! All these things about how to serve notice. Why in the dickens wasn’t that in the original bill? Why are you introducing this as a SOP?

So I’ve just got some questions here. We’ll obviously talk more about the three changes that you’ve made and the reasons why. I’d like to know why you’ve made those changes. They seem good on the face of it, but why at such a late stage? Why weren’t they introduced when it was going through the select committee before it came back into the House? I’m looking forward to the Minister’s responses.

Can I just remind the member and encourage him not to bring the Speaker into the debate.

Madam Chair, thank you. I thank the Minister for some of the clarity he’s given. The committee did a lot of work on this as the Minister and others have said—in fact, more work on this than many bills that come before the House. I actually want to recognise and praise the chair, Jamie Strange, for continuing to allow the Opposition to seek answers from officials so we could get it right. We, surprisingly, got a large number of submissions on this bill. Although there are many incorporated societies around New Zealand, most of them are very small and don’t know the legislation is going through. We heard the idea of an incorporated society with only a very few members, with hardly any income at all; and, actually, what was happening with the original legislation as drafted, they were being dragged from a bit of legislation from such a long time ago, kicking and screaming into, actually, something that was fit for very large corporations that had a large income or a large amount of assets. And unfortunately what this would have done is place unreasonable burden through regulation and, therefore, cost upon these small societies—many of them would not have been able to meet; they would have closed. And actually that was wrong.

The committee sought permission to delay consideration of this a number of times, and Jamie Strange had to go to the Minister and explain that we were working to improve it. I’m surprised, actually, that we were able to, because I think the many things that Andrew Bayly said—I agree that the Minister is in a rush to do some of these things, but, actually, I think we struck the right balance. And small incorporated societies now won’t have the same burden they were going to have, and the Minister’s come forward with a Supplementary Order Paper to add a little bit of clarity around a new incorporated society, which makes sense. They still have to be accountable; they still have to report. But it doesn’t make sense for them to report to the standard of a large organisation or incorporated society when, in some cases, they have only a few meetings and their purpose is specific and the cost of meeting those requirements with the audit would be greater in some cases than the income that they had. So those are the changes that we sought. I’ve heard, since we pushed for that, that many incorporated societies now believe they have been listened to by the committee.

I know many of them did make the case to Government and the Minister previously. The officials fought the corner on behalf of the Minister for a very long time as to why we couldn’t do the things we wanted to in the committee. They kept bringing forward reasons. We challenged their logic and turned it around, and I’ve got to say, Minister, I equally praise your officials because, when you said to Jamie Strange, “OK, let’s do this.”, officials came in and made it look like it was their idea—or at least your idea. But the good news here for the incorporated societies is that the committee dug in, we did the work that they asked us to do, and that is the reason this bill has support of all of the House—not because, actually, we just want to cooperate, but because, actually, it was improved to the degree that now it will achieve what it needs to. It will give a clearer set of rules for incorporated societies, but it will not overburden the smaller societies unreasonably, unnecessarily with cost.

This is possibly the first time in the last 4½ years under this Government that they are passing a piece of legislation that doesn’t unnecessarily burden business or incorporated societies—in this case, small incorporated societies—so I praise the Minister for that, albeit it only happened because the Opposition dug in and other members of the committee agreed and actually went to him and sought the changes. So I’m very happy to support that, and the sooner we get this into law, the sooner the incorporated societies can get on and do what we need them to do, which is to run their societies and not worry about this Government, as is the case for so many in the country at the moment. Thank you.

I just want to pick up some of the points raised in the debate so far. I do want to acknowledge the Hon Judith Collins’ gracious speech acknowledging National’s support for the bill and the bipartisan approach taken, and the way in which the Parliament can work together to pass good law for the benefit of incorporated societies—and, actually, for the benefit of the society that they serve.

In terms of the contribution by the member Andrew Bayly, perhaps—obviously the member’s new to the bill and perhaps encountering the Supplementary Order Paper for the first time, certainly, and maybe the bill as well. And I guess he highlights that perhaps I’ve been unnecessarily modest in terms of the bill. It is indeed actually me that brought it to the House. He raises the question, “Why has it taken so long?” Actually, the truth is the prior Government did not seem to progress this at great speed. Now, I don’t wish to introduce partisan debate here, but the actual process of considering what would make the bill better was progressed in the first term of this Government. And then, when I became the Minister—

Andrew Bayly: What happened then—four years ago?

Hon Dr DAVID CLARK:—very quickly it was introduced and it’s going through to law. So I’m only answering the member’s question. I was, in my speech, very careful to say that this was kicked off—the questions were kicked off—under a National Government. But since the member is actually asking, the actual grunt work of getting this done was done by my predecessor, the Hon Kris Faafoi, and through to the bill, which I then picked up and introduced to the Parliament and had brought through the legislative process. So I do want to acknowledge the Hon Kris Faafoi.

I still do also want to acknowledge right back when the Minister of Justice, Simon Power, made a referral in 2010 asking the Law Commission to review incorporated societies law. It slowed down a little after his time, perhaps, but this is perhaps part of why we have got a bipartisan approach in the House. This is something that the whole House is concerned about, and members of Parliament encounter incorporated societies with issues coming into their electorate offices. And it is time to put all of this right.

Todd McClay, also—I do want to acknowledge his contribution. There weren’t, perhaps, questions raised in there but there was an acknowledgement of the chair of the select committee, Jamie Strange, for his work. I want to acknowledge the Hon Todd McClay’s work on that committee. I understand it was a very constructive engagement between members of the Opposition and members of the Government to make that law the best it could be after hearing all the submitters and some of the concerns that were raised.

This is how the Parliament should work at its best—working together to get the very best law that we can together. And as Hon Todd McClay said, the sooner we can get this through, the better for these societies; the sooner we can get this law through the House, the sooner they can get on and be subject to a clearer law that supports them better in their endeavours in wider society.

Thank you, Madam Chair. The Incorporated Societies Bill—I looked at the Cabinet minutes from when the Minister put together the original framework. And it’s taken, obviously, a while to get there, and congratulations to the committee. The amendments seemed extensive and long, and at a practical level inside the societies themselves, it’s caused massive consternation in terms of a period of inertia, really, about what is coming up, what isn’t included, and, hopefully, this will go a long way to deciding that. The differentiation with sports societies, the All Blacks, your local rugby club, it’s going to take a while for this to bed through, and it’s going to take some time to actually be interpreted properly. It’s going to be difficult for a committee to interpret this without any external advisers, and it’ll probably fall on their accountants to take a view on this and to comply with the Companies Office, which I see there’s already a section up there to have them fulfil that and to do the paperwork.

So I just wanted to—it’s not often you go from 1908 to 2022, but that’s what’s happened here. And I think the acid test will be whether this causes more administration or it makes people happy. So I’d like to one day see a survey of that for people who have to use this legislation. But in the meantime, congratulations to the House and we’ll be supporting this bill.

The question is that the Minister’s amendments set out on Supplementary Order Paper 130 be agreed to.

Amendments agreed to.

The question is that Parts 1 to 6, Schedules 1 to 4, and clauses 1 and 2 as amended be agreed to.

Parts 1 to 6, Schedules 1 to 4, and clauses 1 and 2 as amended agreed to.

Bill to be reported with amendment.

House resumed.