Incorporated Societies Bill

I present a legislative statement on the Incorporated Societies Bill.

💬 DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Incorporated Societies Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider the bill.

I’d like to start with just a little bit of context for the bill. The bill speaks to about 24,000 incorporated societies in New Zealand. What we’re proposing to do right here is to replace an Act, the Incorporated Societies Act that was passed in 1908. As they say, good things take time.

Incorporated societies are governed through a democratic process. They tend to be hands-on organisations, and you could contrast them, say, with trusts, which are typically not so democratic. The trustees of a trust are obliged to work in the names of the beneficiaries, whereas an incorporated society has a democratic process, typically committees and the like. If you put a different cut on it and look at registered charities, around 6,000 to 7,000 of these are incorporated societies in New Zealand. In fact, over 55 percent, I’m advised, are trusts; only around 30 percent of the registered charities in New Zealand are incorporated societies.

Broadly, there are two types of incorporated societies. There are those which are focused on the interests of the members, and that’s things like sports clubs, cultural clubs, recreation clubs—some marae are incorporated societies—and they’re looking out for the interests of the members of that incorporated society. So that’s about 45 percent, I’m told, of incorporated societies. The other lot, about 55 percent, are there for the wellbeing of the greater good, broadly spoken. So they could be environmental protection societies. They could be animal welfare groups. They could be industry associations, political parties, trade unions. There are a lot of different kinds of incorporated societies.

The bill that we’re putting in place does retain the best of the 1908 Act. It codifies case law to make it more accessible and it fills in some gaps where the 1908 Act, and, indeed, the case law that followed, were underdeveloped. A lot of it’s modelled on the Companies Act, so it’s brought up really in parallel with the Companies Act—for example, conflict of interest declarations. Directors’ duties in this bill are called “officers’ duties”, but they look a lot like the ones in the Companies Act.

There are some major thrusts in there. The first is that we’re reducing the minimum number of society members from 15 to 10. We are introducing formal officers’ duties. As I said, they are very similar to the ones in the Companies Act, and with that comes, of course, responsibilities. Another one which members of this House will recognise, I am sure, is we are requiring that societies include procedures in their constitutions for resolving disputes. I hazard to say that many members of this House here today will have had constituents come to them with disputes from incorporated societies within their own electorate areas or broader interest areas, because where there are not dispute resolution processes within incorporated societies, this quickly escalates. They come and seek advice from MPs. Often they get legal advice from wherever they can get it, and often these things end up in the courts. So we are requiring that there must be procedures in their constitutions for resolving disputes. The other major thing that this does is, with the exception of some smaller incorporated societies, require that they keep financial statements in accordance with accounting standards that are issued by the External Reporting Board, the XRB. That is, I think, a prudent thing to do, particularly for bigger incorporated societies.

So, as I said at the outset, the 24,000 incorporated societies in New Zealand are commonly known as clubs, associations, or federations, and they operate for no financial gain for their members. They arrange the sporting events for our kids, the coaches in our clubs, the environmental petitions that they bring, and the enriching of marae with Māori cultural values around the country—so lots of things that we could recognise as very good for our society. It’s important to have up-to-date legislation in this area.

To illustrate, if I may, how out of date this legislation has become—I mean, I can tell you it’s 1908, but, to pick an example, the maximum penalty for the late filing of financial reports as recorded in the bill is, indeed, a shilling a day. That speaks, I think, to a different time. There’s also, in the Act, a fine of up to £100 for those seeking pecuniary gain from society members. So those kinds of things can be brought into the modern era. I think where these issues, though, really touch us most as members of Parliament is around the disputes aspect. A requirement to have a disputes resolution process, rules which meet national justice standards, will help keep disputes away from the courts, and that’s, I think, a good thing. Incorporated societies like Grey Power and Citizens Advice Bureau have shown support already for having such dispute resolution processes and for keeping things out of the courts.

I’ve spoken already, briefly, about the duties for officers that parallel those in the Companies Act, sensible moves to have financial statements that reflect the XRB, and so on. All of these things have developed in a process. There was a Law Commission report written in 2013 which covered off a whole lot of these issues, and I want to acknowledge the work that’s been done by Ministers since then. Most recently, of course, Minister Faafoi has pushed this issue along, and I do want to acknowledge his stewardship of this bill up until this point, making sure that it lands in a good place, and a place where I hope it will gather widespread support across the House.

In the time remaining, I do want to also acknowledge and thank the various incorporated societies across New Zealand. I asked my office to pull together a list of some incorporated societies, just to give a flavour of the kinds of organisations in our community, and so I’ll just mention a couple of these: the Otago University Debating Society Inc., the Otago Boating Club Inc., the Otago Badminton Association Inc., the Otago Deaf Society Inc., the Otago Rowing Club Inc., the Otago Country Music Club Inc., the Otago Electric Vehicles Society Inc., and the Otago Medical Research Foundation Inc.

💬 Hon Member: Anything further north?

I could go on. There are many. In this random sample, obviously, a few of them are close to home for me. I could go on to the Dunedin Kindergartens Inc., and the Dunedin School of Judo, and so on. But you get the picture: across New Zealand there are organisations, clubs, associations, societies that are contributing to the good in their society. The Hokitika Potters Society Inc. will be of interest to my good friend the Minister over there. The Gore Musical Theatre Inc., I’m sure, will be of interest to some across the House right there. The Christchurch Irish Society, Christchurch Women’s Refuge—I mean, many of these organisations are organisations that we know and deal with as MPs that support citizens across our society.

💬 Kieran McAnulty: What about Masterton?

I don’t actually have an example from Masterton in front of me, but I invite the member to suggest a few—

💬 Kieran McAnulty: There’s heaps.

—because there’s bound to be heaps of good local folk contributing there through those things. Bowls clubs, rugby clubs across New Zealand, bridge clubs—the Levin Bridge Club, Tennis Otago Inc., Nelson Netball Centre Inc.—all of these people are contributing to our society, and it’s appropriate that they have modern legislation to support them in their efforts, to make sure that the dispute resolution processes that they need are in place, to make sure that their financial statements meet certain standards. I should mention that for smaller outfits, they will not have the same requirements on them. But we do expect, of course, transparent reporting, none the less. The decision was taken not to include all societies because we recognise that some smaller ones will not necessarily have the ability to produce those high-level accounting standards, and I think that’s a reasonable way to approach this. Of course, all these things can get hashed out in select committee, and I do commend the select committee to this work, because I think it’s very important work.

As I say, 1908, it’s taken a while to mature into this new legislation, but I think it has been well worth waiting for. Thank you, Mr Speaker; I commend this bill to the House.

The question is that the motion be agreed to.

Mr Speaker, thank you very much. National will be supporting this bill to select committee, where we look forward to digging in a bit deeper to some of the provisions the Minister of Commerce and Consumer Affairs has spoken of. You can always tell a Minister is on top of his brief when, to get through his 10 minutes, he’s got to get his office to create a list of every single society in the area he’s from and to read them out. But that’s not because this isn’t important work—it is.

There are 24,000 incorporated societies in New Zealand and they are of greatly differing sizes, from the Rugby Union with more than $100 million worth of revenue, to some that will have a few thousand. So the most important thing that I think the committee will need to look at is to make sure that incorporated societies are not being burdened unnecessarily—because when there is more red tape and more bureaucracy, there is a cost to that—and that the changes that are being proposed by the Government actually are there to fix actual problems and to assist, and not merely to do some work because the Government didn’t have very much else to do at the time.

I’ve got to say that it has taken a long time for this legislation to come before the House. In 2010, the Government asked the Law Society to start doing some work, and it did so. It delivered that to us. Paul Goldsmith, as the then Minister, had a bill drafted and put it out to public consultation towards the end of 2015. It is important to consult on legislation, particularly when so many organisations can be affected. That work was done fairly quickly, and so it’s taken 3½ to four years of the Labour Government to get this here. I think the committee should get on with it quite quickly, because who knows how long it will take when we finish our work and we send it back to the House?

A couple of the parts of the proposal that have come through initially from the draft that we put together, I think, remain important. Yes, it does place duties upon officers of societies. I think it’s important to clarify this, but we should be careful not to be heavy-handed in doing so. The Minister recognised that for some of the smaller societies, not all of the provisions of the changes in the bill will apply to them, but we need to make sure that, actually, particularly for those smaller and medium sized societies that are there for public good more than anything else—the Minister mentioned rugby clubs or small rugby clubs or the organisations that help organise sport for our young people in our communities—they’re not being asked to do things that they were never intended to just because the original Act that they act under or that controls them is so very old.

Procedures for dealing with conflict of interest are important, but I’ll be looking forward in the committee to find out just how often this happens, because if you take that example over the Rugby Union, with over $160 million worth of income or turnover every year, they already will have procedures for dealing with conflicts of interest or dispute settlement, as opposed to some of the smaller societies that may never have to do so. But I do think it is a good provision that for the societies where there is a conflict of interest, board members of committees actually can declare that and then have an ability to still take part, rather than have to exempt themselves—particularly for some of those smaller ones—under certain circumstances.

When it comes to new societies, there was a suggestion earlier on of having a draft statute for them to govern them. Through the consultation procedure, I think it was clear that a number of organisations and advisers thought that that would be too prescriptive or restrictive, and now it is possible for new societies to draft up their own constitutions within the bounds of the Act to be specifically tailored to them. I think this is a good change or advance in the legislation.

The final note I’d like to make—because after the Minister’s speech, I don’t want to take too much of the House’s time. I’m eager for this to get to committee so we can get the changes in place as quickly as we can. But, ultimately, when it comes to financial statements and the proposed processes of the External Reporting Board, to bring those into line within the legislation—now, largely, this will be similar to the charities that exist in New Zealand and companies and other organisations, but, again, I want to stress that, actually, it is important that we make sure that the smaller societies are not overburdened with this. For some of them, the cost to do so and meet these standards may be greater, actually, than what they have left over in a year to use for a charitable or good purpose, and so the bill retains provisions where there are carve-outs for smaller societies. But we will want to make sure that this is done properly and that it actually is fit for purpose, and so we’ll look forward to submissions on that.

The final part I would note is there are a number of organisations that submitted during the consultation procedure, so the directors generally supported it with some suggested changes. They came through. There are others that came and spoke. Creative New Zealand said they supported the intended purpose of the legislation broadly, but they wanted to make sure there were some changes.

There will be organisations that will be concerned that it has a direct impact upon them more than others, and I see that the Minister already has made one change for one group of organisations. He must be open to a change for other organisations who find that, actually, the original Act is working for them, and there could be extra requirements or restriction placed upon them without a gain for them or the public. I hope the Minister will be open to that, because I do note that when the Council of Trade Unions submitted, they said that they were concerned that in the definition of “officer”, they would be captured by this, and they wouldn’t be able to do their work properly and it would create problems for them. The Minister conceded to their views and has a huge carve-out for trade unions.

We’ll want to look into it in the committee stage to see whether this is appropriate and why he did this for the unions and perhaps for the unions only, because others made suggestions that weren’t picked up. But there will be other organisations that aren’t unions and aren’t closely affiliated with a political party who will have issues, perhaps, with the new legislation. The committee must be open to hearing those and looking for solutions to them. Some of them will be purposefully built just for one society, perhaps, but at the same time, the Minister too should be open to those changes.

As I said, National will be supporting this to committee, and we look forward to digging in deeper to make sure there is not just burden being placed upon these societies, particularly small ones. We want a good regime that they can work in, but, actually, we should only pass laws because they’re going to help them, not just pass law for the sake of it. Thank you.

Thank you, Mr Speaker. I appreciate the opportunity to take a call on the first reading of the Incorporated Societies Bill. I’d like to acknowledge the Minister the Hon David Clark for bringing this to the House. The previous speaker from the National Party, Todd McClay, spoke about the Law Commission report coming back in 2013, and he had a little bit of a dig at this current Government for taking a few years to get to this bill. I would just like to remind the member that the National Party were in Government between 2014 and 2017, and that was even under the glory years of Key and English, but even under the glory years, they weren’t able to get this through. I’d just like to highlight that for those listening at home.

This is certainly an important piece of legislation, and I’d like to just put the context around it for those members who weren’t here in 1908. Just a couple of things: 1908, the first Model T car, the Henry Ford, came out—the first Model T car. In New Zealand, actually, in 1908, New Zealanders competed at the Olympic Games for the first time, as part of the Australasian team, which is fairly apt today with the announcement of the trans-Tasman bubble. But just to note that and to give that context, because it has taken quite a long time for us to do a review, a revision, of this bill, but certainly very important.

I’d also like to acknowledge the various societies and sports clubs that we have in our community.

💬 Chris Bishop: Are you ready for Friday?

They really are the fabric of our community—yes, and we do have a cricket match coming up, which the member opposite is alluding to, and there are many cricket clubs who are incorporated societies. In fact, my children play football, basketball, and are involved in gymnastics. I don’t try the gymnastics myself, but this is very personal for all of us in terms of our families being involved in these societies.

The Minister went into all the detail around the bill, so I really just wanted to highlight the aspect there around the key role these societies play. I commend this bill to the House, and I look forward to it coming through the Economic Development, Science and Innovation Committee. Thank you.

Thank you, Mr Speaker. It is a pleasure to rise in support of this bill. I’d like to commend the Minister for bringing this bill. He did actually say that good things take time. I just hope that the Minister doesn’t take another hundred years to actually bring in another good bill to this House while he’s actually here.

💬 Hon Andrew Little: What was that member’s party doing about it?

It was a joke. Jamie Strange sort of said he wasn’t going to have a go at the National Party, but he couldn’t resist. Let me actually say this: back in 2015, when this exposure bill was put out by Hon Paul Goldsmith, the hard work was already done. It seems typical that this Government likes to tinker, and so it has taken so long, a whole term of Parliament, and now we’re in the second term and it’s finally coming back. Just like—what was that called?—the Trans-Pacific Partnership that the Government decided to tinker with and called it the “CPTPP”; just changed a couple of letters at the front and the rest of the content was pretty much the same.

I digress, Mr Speaker.

💬 DEPUTY SPEAKER: You do.

I will get on with it. I guess there are many communities in New Zealand who actually incorporate societies to run, whether it’s hobbies or whether it’s actually a common interest or some real good that they want to do in their communities, and the very fact that this piece of legislation, this piece of law is so old—1908—and updating a law like this is much needed, and hence we are supporting this.

Earlier, the Minister, as well as my colleague Todd McClay, had actually said the duties of the officers in charge—the fiduciary duty of any officers in charge—whether it’s a company or whether it’s actually a trust, or even an incorporated society, are really, really important, in that they need to do what they’re required to do. And I think updating their responsibilities to make sure that it is aligned with, perhaps in terms of what those company directors have, the responsibilities that they are given as officers of incorporated society is actually a good thing. And it also provides penalties to deal with breaches of those duties, and I think it actually brings seriousness to their responsibilities when they are running incorporated societies.

In terms of the conflict of interest, one of the things that I questioned when I initially read the bill information was that, when anyone is involved in an organisation, whether it’s actually a company or a trust or anything, when there is a conflict of interest, they declare it; they actually declare the conflict. But preventing them from being involved in the decision-making process, if the committee or the board are not too worried about the conflict of interest because it doesn’t impact on the work, I think is necessary, and I think it’s probably a good move to get those people who are often in a very small grouping in an incorporated society. As the Hon Todd McClay actually said, there are some societies like rugby clubs that have humungous amounts of income versus some societies that only literally deal with hundreds of dollars or a couple of thousand.

I have also been involved in some of these incorporated societies where we were promoting films, or ethnic communities where they’re dealing with works of promoting cultural events, for example. The burden on some of these communities is that, when they need to do the accounting or the auditing, often the cost to actually deal with those are more expensive or even higher than any income that they might actually earn as a society for the work that they do as volunteers. The work that the Government has actually done in terms of changing the draft bill to where it is now I think is something where I look forward to the submission process. When small societies are not required to comply with the external reporting board accounting standards, I think it’s actually probably a good thing, but I will actually wait for the submissions process to see whether it’s actually going to work or whether it already causes a problem at the moment. But I know for a fact that, for the organisations that I was involved with, they would have much rather not have had the burden of those costs.

The very fact that this Act is over a hundred years old—I think it’s probably right to say, “Let’s get on with it.” I don’t really need to waste too much time of this House, and I commend the bill and I look forward to the select committee process, where we will hear from the communities who are affected.

It’s a great pleasure, just as a humble member of the House, to take a call on this, the Incorporated Societies Bill, because, after all, it’s the incorporated societies in our community that are really the engine room of civil society. They provide a very important level of cohesion and coherence for activities and for people to engage in those activities, and, at the same time, it’s providing some sort of legal protection for the participants in that particular activity.

Now, I’m surprised that the member who’s just resumed her seat, and no doubt other members, are commenting on the time that it has taken for this reform bill to come to the House, because it started pretty much at the beginning of the previous Government’s term in Government and it has taken this long to come to the House. So the question is, although the previous Government had seven years between 2010 and 2017 to do the reform, do the policy, bring the bill to the House, and pass it through, they’ve left it to this very busy, active, almost overloaded Government—because we’ve got so much on, doing so many good things, we now have to do yet more. So it is very pleasing to see this.

My story behind this bill is this: I was running an incorporated society, happened to be a trade union at the time, and I noticed that the original legislation was dated 1908. Of course, we know the significance of 1908. It was the Blackball dispute on the West Coast. It was very much the crucible of the Labour Party, one of the founding events of the great Labour Party that has contributed so much politically, socially, economically, and otherwise to this country. So that was 1908, and here we are now in 2021 and still we have the Labour Party contributing so magnificently economically, socially, politically, culturally, and otherwise. But the point I was making is that in 2010, I was running an incorporated society and a lawyer at the same time, received my notification through the Law Society that a lawyer—a very good lawyer from Napier: Mark von Dadelszen—had been commissioned by the Law Commission to do a review of the Incorporated Societies Act, and he put a call out to all the lawyers across the country, which at that time numbered about 9,000, might have been 10,000 then. And I was talking to him about this last week, and he told me, actually, that he got one response from that call, and it was from me. So I take great credit for the content of the bill and the policy that underlies it. I’m going on the word of Mark von Dadelszen—a very fine barrister in Napier. The issue that I particularly drew to his attention was actually about amalgamations, because we were a trade union, we had amalgamated with a number of trade unions that were also incorporated societies, and the palaver we had to go through to do that made it extraordinarily difficult and cumbersome. So I’m very pleased to see in the bill provisions for amalgamations of incorporated societies in a way that respects the wishes of the respective members of the amalgamated incorporated societies but doesn’t create too much of a hassle.

Two other points I just wanted to make. I’m very pleased to see the reference now for the provision of tikanga in constitutions of incorporated societies, and I think that’s going to be great. So many Māori organisations are incorporated societies, and they can actually write in the relevant tikanga for them, depending on what the kaupapa of the incorporated society is, and they are allowed to call themselves not just whatever it is incorporated; they can call themselves whatever it is mana tuku as well. So there’s a recognition in this piece of legislation for incorporated societies to carry a name that is relevant to those who are running it and the kaupapa that they are engaged in. That, I think, is a great step forward.

Finally, the point I wanted to make too that I think is very welcome is the dispute resolution clause, or the requirement that in constitutions there will need to be a dispute resolution clause. You know, the incorporated societies, most of them are reasonably modest and humble organisations, and they are a great training ground for people to learn about propriety of decision making and those sorts of things. But also when things go awry, when people fall out, when decisions get made that are unpopular, in some cases it can create this huge response that is completely out of proportion to the origin and the nature of the dispute. And people go off to court and do all sorts of things—although that mainly happens in the racing industry, it is true, but it can happen in other incorporated societies as well. This modernising bill that is the product of both the previous Government and this Government I think will give us the opportunity to provide something really good for incorporated societies. So the litigation risk is heavily minimised, and people can sort out their affairs and their disputes without too much drama. On that basis, I commend the bill to the House.

Tēnā anō koutou ki a koutou. [Thank you all again.] Community, voluntary, and tangata whenua sector organisations play many different roles, including direct provision of services to individuals, whānau, and groups but also to the environment, offering mutual provision of support and self-help by members to members, advocacy, education and resource, and community business.

The sector brings many benefits that are often unfunded but are just as important as the official roles they hold. These include the building of civil society; the strengthening of our democracy through the spreading of information; the discussion of topical affairs and taking action on those; contributing to the economy; supporting people who are affected by social, economic, environmental, health, or disability problems; job creation; skills development, research and development; and the building of culturally diverse and connected communities.

The Green Party envisages a strong and independent tangata whenua community and voluntary sector within Aotearoa that contributes in ecologically and socially sustainable ways to enhance our social, economic, cultural, spiritual, physical, mental, and economic wellbeing. We would hope that central and local government will play a constructive, enabling role and the sector is generally respected and valued for what it contributes to our society.

Describing the 1908 law as incomplete, inaccessible, and unclear is quite emphatic, but still quite an understatement. For those of us who have worked in the community and voluntary sector for many, many years, along with me you’ve probably written a whole tonne of convoluted constitutions and worked really hard to make it work within the Act that we’ve had to deal with. So the Green Party welcomes this new bill that will replace it and acknowledges the report from the Law Commission of 2013.

We support using the Māori legal frameworks—Māori? I slipped that in. “Modern”—modern legal frameworks, and incorporating the case law that has been built up over the years. But we’d just like to comment quickly on three kaupapa. Number one: we’re interested that a new legal provision also recommended by the Law Commission is that an incorporated society may express its tikanga now in the constitution. Now, many of us always have, and the Law Commission—I quote, “This express recognition of tikanga or culture in the statute will encourage the courts to give greater weight to it when they’re interpreting constitutions.” We note, however, that while targeted stakeholder consultation was done with Māori on this bill, no formal process for assessing whether the policies comply with Te Tiriti o Waitangi was done, and we’ll be encouraging absolutely our Māori organisations to be contributing that whakaaro during the select committee process.

Secondly, individuals, families, groups of people often come together to form organisations to carry out purposes not recognised by other institutions and that may oppose existing Government policy or social norms. The risk taking and innovation is a key characteristic of many community organisations. It puts them at the cutting edge of our social and political, economic and environmental development, and that’s really, really important. So we want to acknowledge the need for the independence of incorporated societies. No incorporated society should be penalised because they look out for and advocate for their members on the issues that they represent. Given almost every incorporated society will outlive the Government of the day, no organisation should have their funding or charitable status threatened because their advocacy challenges the policy of whoever happens to be in power at the time.

Thirdly, we welcome standardising transparent and clearer financial reporting for incorporated societies—absolutely. I have to say, my mother signed me up as a junior member of the Māori Women’s Welfare League when I was 15, and the first thing they did was make me the treasurer. I have been doing books for 40 years, somewhere or other, and depending on what organisation we were in and the scale of our operations, the intricacies and the accounting you need to learn or the money you had to pay for sometimes very—maybe, if you’re lucky—asset rich, but usually cash-poor organisations. So we still have a concern that financial reporting will still be a burden for some of those smaller ones, and we see that “small” has been defined as operating payments of below $10,000, assets of below $30,000, and that it is not a donee organisation under the Income Tax Act. We’re hoping that rather than the Minister using their powers to change these thresholds later via an order, we can do it this time; we can make it really, really sensible for those small organisations now. I am so very mindful of those thousands and thousands of volunteers out there who could do without the extra paperwork.

When this goes to select committee, again, we’ll be listening for the submissions from the legal and accounting sector to see how much of an actual concern or risk these small organisations are in the scale of things. The community, voluntary, and tangata whenua sector is the lifeblood of our country. They could do with an incorporated society Act that reflects this. So on that basis, I commend this bill to the House. Kia ora.

First of all, we’re not going to go back through the history of the bill; we’re just going to try and go forward. ACT’s going to support this bill on the first reading, so we have clarity about that, but there will be a few challenges in the select committee. We certainly agree with the Green Party member Dr Elizabeth Kerekere in terms of hearing from the legal profession.

What happens in the accounting profession, because a lot of people on these boards are actually doing it as professional accountants and lawyers but not really actually charging. But there’s one thing that we have observed which goes back to the society’s powers in an administrative and financial sense, and, you know, there’s some simple questions about what happens when you buy, sell, or exchange property, or you enter a lease. I think under this new format that’s not quite—the arc hasn’t quite been drawn where it matches up. That also begs the question is that surplus assets—if a club sells land, let’s say it’s got a car park or a building or a farm, then what is it that happens to that asset? At the moment, the law proposes it requires surplus assets to be pointed towards a charitable trust. I mean, that’s their property right and it should be respected. So in that sense, we see that as a step backwards because the individual society should be able to decide where money should go under its constitution.

So if you look at Part 3 Administration of societies and you look at the examples of the society’s powers in a financial sense, I don’t think the implications of that on a practical day-to-day level have really been thought through, and what the directors and executors and employees of those organisations would have to face in terms of trying to implement this document. So in the select committee we’re looking forward to hearing from the professionals around that area.

I also think that there’s a horses-for-courses scenario to be built into this, which is, you know, some of the examples that have been raised are very small or they’re very big, and there needs to be some more thought put into that particular part of the process.

So ACT will be supporting the bill on its first reading. But we look forward to a really rigorous analysis in the select committee stage. Thank you.

Thank you, Mr Speaker. I rise in this House extremely proud, actually, to be able to speak on this bill because I am a huge beneficiary of the Incorporated Societies Act. I recognise my colleague Elizabeth there, talking about her experience of joining an incorporated society at 15 years old and becoming the treasurer. I reflect on my own journey, especially to do with the music side of my life in terms of being able to join orchestras and choirs that were formed under the 1908 Act. I remember last time when I got up to speak in this House and I commented about how that particular Act was passed before I was born. I got quite a bit of flak from my colleagues about it and so today I can safely say that the Act is old enough to have been legislated before everyone in this House was born. I can say that without any controversy. But that just goes to show just how old the Act is.

As an MP and a candidate beforehand, I think we’ve all been privileged to build long-lasting and meaningful relationships with many incorporated societies in our respective electorates and communities and I, especially in the Chinese community, am no exception. Through my journey of interacting with these incorporated societies, I realise there are some very, very exceptional societies out there who do so much mahi for our community. They are a place where our community can gather, and especially for a migrant community, they are a source of information. People feel like they have a sense of belonging when they come together and meet every week or every month, and they also sense a collective voice so they can find some sort of strength and unity. But obviously we know through our experiences that not every day is a smooth-sailing day and sometimes incorporated societies do fall, and that’s where I think that this bill, in terms of the dispute resolution mechanisms that we are putting into it, is going to be extremely helpful so that we can actually spell out what happens when things aren’t always so right.

Just continuing on with the music analogy, I learnt when I was singing in a choir that we are only as good as our weakest singer. What that means, I think, in terms of our community as well is that this bill will ensure that the bottom line gets strengthened so that no incorporated society falls through and that, starting with this bill, there are mechanisms in there to make sure that we strengthen each and every society that gets incorporated under this bill, to make sure that they all have the facility and the knowledge to run themselves as very smooth societies.

I’ve always recognised that there is also a need for training, no matter whether it’s in the governance space or the leadership space. I think it’s really important that now that we’ve prescribed all of these inbuilt mechanisms to run a society properly, I really do look forward to popularising this bill, which will, hopefully, pass and become an Act, so that incorporated societies, through this upgrade of our law, will be able to upgrade their infrastructure internally, and so that their people will be trained to be better governors of these different organisations so that our community collectively will find strength. On that note, I commend this bill to the House.

I call Maureen Pugh—five minutes.

Thank you, Mr Speaker. I stand in support of the Incorporated Societies Bill tonight in its first reading. As we’ve heard from many of the speakers on this bill, most of us have had some experience in our own communities about being involved in incorporated societies. I do note the many examples that have been given tonight. But I’d just like to run through some of the 23,000—I’m not going to read them all—incorporated societies that do appear on the register. What they do is they represent sporting bodies like New Zealand Rugby—that has a reported income of $162 million a year—and then it ranges back to things like the war memorial societies, with maybe $5,000 or $6,000 income a year. This bill covers a huge range of activities—cultural, sporting, education, a lot of social services, incorporated societies, philanthropy organisations, emergency relief, environmental protection, animal protection, and religious. So when we’re talking about this bill, we’re actually talking about a huge influence that incorporated societies have in New Zealand.

It’s no secret, as the member who’s just resumed her seat, Naisi Chen, also said, that this Act is very old—1908. It does need modernising, and the language does need to be more appropriate for 2021. I note in it that it still refers to the fines that must be paid in shillings, and I would even hazard a guess that there would be some people in this House tonight who don’t even know what a shilling was, or never got to spend a shilling.

💬 Kieran McAnulty: What’s a shilling?

It’s a shilling.

💬 Kieran McAnulty: Is it the same as a threepence?

It’s more than a threepence.

💬 Kieran McAnulty: Is it?

Yes it is. It’s about four times more than a threepence. As you can tell, the language does need to be modernised.

I think one of the cautions that we need to have with a bill like this, too, is that we know that there are some financial responsibilities that people who hold the officer roles in these societies need to be responsible for. This bill seeks to put those in the same category as directors and have the same responsibilities as they do. But I think we’ve also got to be really careful that we find the balance between the responsibilities that directors have on companies versus the benefit that some of these smaller organisations have in our communities and that we don’t make it such an onerous process that we scare a lot of our volunteers away from being involved in these organisations, because, as many have said tonight, they are very core to some of our smaller communities and some of our bigger communities because of the role that they perform in those communities.

I think the select committee is going to have its work cut out for it as we progress this bill through the House in finding that balance between the fiduciary responsibilities and the ability for smaller organisations to be able to be maintained without the onerous obligations that may come with it, especially with organisations that have very small incomes that then have to be responsible for expensive audit fees.

So we will need to keep that in mind as we progress this bill. But there are some aspects of it that I think are very worthwhile, and, again, I think the select committee will turn its mind to the detail around the minimum number of members that must be involved. At the moment, the bill is proposing 10. Whether or not that’s going to suit a huge amount of smaller communities, I think the select committee process will flesh that out as it calls for submissions on this bill.

The House is in agreement, and no doubt that’s because we’re supporting it because it was actually initiated by the National Government a few years ago. It has taken its time to work its way through on to the Order Paper, and we certainly will be taking an active part in the committee process. I commend the bill. Thank you.

I call Arena Williams—five minutes.

E te Māngai o te Whare, tēnā koe. Ki te Whare e tū nei, tēnā koe. Ki ngā mema Pāremata i tēnei pō, tēnā koutou katoa.

[Mr Speaker, thank you. To the House that stands here, I acknowledge you. To the members of Parliament this evening, I greet you all.]

I rise with a sense of responsibility to take the call of the Māori Party, who are not here tonight.

💬 DEPUTY SPEAKER: Order! You cannot say that any member or party’s not here.

Aroha mai, Mr Speaker. In the absence of the Māori Party, I will be taking this call to speak on an issue which—[Interruption] sorry—is of great importance to many Māori organisations who organise themselves as incorporated societies when they become post-settlement governance entities. I’m talking, of course, about organisations which have gone through a process of representing their iwi and have become organisations which require a legal character, require a body, to represent those members or beneficiaries, and an incorporated society is a common vehicle for them to do this. This is a particularly important bill for ngā iwi Māori o te motu because of the way that litigation, because of these incorporated societies rules being out of date and not fit for purpose in the current governance environment, has created needless litigation, needless disagreements, between whānau and hapū and iwi Māori. It’s something which I think many governors and leaders within te ao Māori will be very keen to see progressed by the Minister of Commerce and Consumer Affairs, and would commend his efforts in this area.

I wish to make three points in my brief contribution, and the first is the power of bringing tikanga into the rules of the incorporated societies. The second is about clarification of the roles of governors in incorporated societies, and the third is in clarifying the need for dispute resolution provisions. But first I want to congratulate those Māori organisations which have organised themselves as incorporated societies who have brought us to this point, who have changed the law through case law, with time, with effort, with the effort of volunteers, and with a considerable amount of money, to clarify the rules in this space for everyone who uses incorporated societies—none more so than very sophisticated iwi organisations like Te Whakakitenga o Waikato, which through the years, between 2016 and 2020, saw a number of heavily litigated disputes which were of no value to the iwi itself but were born out of a piece of legislation which was not fit for purpose and hadn’t been properly clarified by Parliament to meet modern requirements of organisations which, through the development of case law in this area, have come to owe the duties akin to those of company directors to their members.

That litigation was sophisticated litigation. It required a number of hours to get to the heart of the issues in those cases, and this raft of measures would allow organisations in the position that Te Whakakitenga o Waikato was in at that time to progress these issues much faster and with much less time and effort and money spent, particularly with the introduction of the ability to include tikanga in the rules of the incorporated societies. This is something that I think the Minister should be commended on with action in this area, because it brings the ability for members to bring disputes about their rules within a tikanga Māori framework, which is so important for the iwi organisations that use these. It also provides an avenue for the courts to inquire into whether tikanga was perhaps followed, and that, on this side of the House, is something that we Māori Government members support and want to see the Minister interrogate further and the select committee do more work on at the select committee stage. That is why—and my apologies for my error in my introductory remarks—I commend this bill to the House.

Kia ora, Mr Speaker. I rise in support of the Incorporated Societies Bill, and I want to thank the Hon Dr David Clark for his work bringing it to the House, and also referring it to the Economic Development, Science, and Innovation Committee, which I am a part of. I can’t wait to get into the select committee process.

Like many of us, in fact probably all of us, we have been involved in incorporated societies. So I think we all have a lot of information and a lot of listening to do in our communities. I just want to speak briefly on three points tonight: I want to speak around the historic nature of the legislation that currently exists; I want to talk about the reach that incorporated societies have around our communities; and, I want to talk about modernising the bill. At the moment, it’s a bookend kind of piece of legislation. How do we actually modernise what we have?

We’ve been down memory lane already tonight several times, I know, but I have some more fun facts from 1908; I know a couple of you remember them well. The first train to travel on the main trunk line in the North Island—it was actually called the “Parliamentary Special”—so that was actually 1908. So appropriate—so appropriate.

The year 1908 was also when Ernest Rutherford was awarded the Nobel Prize in chemistry.

💬 Kieran McAnulty: Big Labour man.

That’s right, of course. So, you know, 1908, and we’ve heard lots of other information this evening around 1908; I’m sure all our history teachers are really grateful for the work they did educating us, with Google as well.

But, anyway, we’ve talked about the 24,000 different incorporated societies: this is everything from sports and education, health, Māori organisations and marae, you’ve got animal welfare groups, religious organisations, environmental, welfare services, music, theatre, the list goes on and on and on. I know for a lot of us, we’ve been on those types of incorporated societies. Where else would we have such a diverse and rich array of lamingtons and sausage rolls that our nation loves? It is because of the work of incorporated societies, I believe, but I digress.

So incorporated societies encompass all aspects of our society. They are so important for the work, for the fabric of our communities, as the Hon Andrew Little said earlier. So when the legislation was created in the year 1908, they very much focused on creating a society and they very much worked on how to wind up a society, but kind of the bits in between—they had the bookends right. So I guess we’re working with this piece of legislation to maybe put some books into that bookshelf for the bookends at each end. Because it left and it leaves, today, societies with the challenges of figuring out some of their own common rules, how to act in good faith, and looking at what they believe to be in the best interests of a society. We’re helping with that work as we take this through the House.

So, like I said, I look forward to being on the select committee, talking this through, working this through. I appreciate all sides of the House, all parties, so far have supported us going to select committee. I can’t wait to hear what our communities have to say, and for them to be heard, for them to be valued, and, hopefully, some lamingtons and sausage rolls on the way.

So this is a historic piece of legislation that’s about to be changed. This reaches into all parts of our community and this is around modernising the bill. I commend this bill to the House.

I rise to support the Incorporated Societies Bill in its first reading. As a number of speakers tonight have said, the Incorporated Societies Act is more than 100 years old and it’s silent on many important areas of governance. It no longer gives the right level of direction for governing and administrating a society in today’s conditions.

The proposed changes set out in this Incorporated Societies Bill will help ensure New Zealanders can better run their societies and give them greater certainty in the processes to use. It also sets out a framework for dealing with disputes and grievances, which the current Act does not do. Given the important role that incorporated societies play in New Zealand, it’s important that we ensure the rules governing them are fit for purpose in today’s conditions, are sensible, straightforward, and easy to comply with. In the spirit of bipartisanship, I think it’s quite sensible that the Government has seen fit to carry on the work the previous National Government did in developing and releasing the first draft of this legislation for consultation, and I look forward to seeing the progress of this bill through the House.

The Minister, in his opening remarks, referred to a number of incorporated societies, and they were all good and worthy of mention, but one in particular that caught my ear was the Gore Country Music Club Incorporated, which incorporated back in 1972. I just have to mention the importance of that as an illustration of the value that incorporated societies give to our communities. The Gore Country Music Club has had a core role in developing the New Zealand Gold Guitar Awards, which has been going for 46 years. We’ve got the Tussock Country Music Festival coming up on 29 May to 6 June. I’d recommend everyone go to it. It’s quite an epic.

In developing those connections that incorporated societies do, I just note that because of the Gold Guitar Awards in country music, Tamworth, in New South Wales, Australia, and Gore formed a sister city relationship back in 1992, and that’s continued to flourish over the years. The Tamworth mayor, the sister city chairman, and Tourism Tamworth regularly attend the festival, and the Mayor of Gore regularly attends the Tamworth music festival, which is usually in January, I understand. Hopefully, with the trans-Tasman bubble, we might be able to see them back in Gore for the music festival this May and June.

Look, just moving on from that, there’s three good reasons, I’d say, that this proposed legislation addresses. Firstly, the rules and regulations surrounding incorporated societies should be up to date and applicable to 2021 and not 1908. As a number of other speakers have mentioned today, the 1908 Act requires fines to be paid in shillings. This bill will put into place a framework that’s suitable for our modern conditions.

Secondly, a modern law is necessary to give guidance to New Zealanders who volunteer to run not-for-profit organisations. Given the role they play in New Zealand, it’s important we ensure that rules governing them are fit for purpose, straightforward, and easy for them to comply with.

Thirdly, this piece of law has a good background in multi-party support over a long period of time and with genuine community consultation. Through submissions and consultation with stakeholders, the Ministry of Business, Innovation and Employment has noted significant support from the voluntary sector for reforms of this nature, and because the proposed reforms are extensive and the structure of the 1908 Act doesn’t provide a strong base, it’s best to start afresh.

So this Incorporated Societies Bill will bring the existing statutory regime into the modern age. The New Zealand Institute of Directors welcomed the introduction of the bill, noting that “The Bill overhauls governance structures and arrangements for societies. Governance duties are set out in one place for the first time, helping to provide certainty for those leading societies. There are also new conflict of interest rules, which are essential for boards.” Committee members and officers of incorporated societies have duties similar to those of a director under the Companies Act 1993. However, those duties have been developed through case law, not the 1908 Act. This rule will provide people elected into governance roles a clear understanding of what they have to do with the law, and that’s very useful.

Anecdotally, I understand that auditors have experienced instances where organisations have been adversely impacted due to poor governance, not aided—I would say—by the 1908 Act. Auditors have also seen instances where incorporated societies have got into serious financial difficulties or even been subject to financial mismanagement or even fraud due to a lack of appropriate accounting disciplines.

There are no cases where it is acceptable for an officer of an incorporated society to place a personal financial interest ahead of the interests of the society without first disclosing the conflict. Therefore, leaving it up to individual societies to make their own conflict of interest rules is negligent compared to the option of including it in a statutory regime, and that is why we need this legislation.

The proposed legislation also gives clearer guidance to New Zealanders who take time out of their lives to run not-for-profit organisations, which is such a core part of the fabric of this country. The more than 24,000 incorporated societies in New Zealand are an essential part of our social fabric. They provide a range of valuable services at both a community and national level, including sport, culture, education, health, and animal protection.

The Law Commission noted in a report which led to this legislation that “The largely voluntary space in which incorporated societies operate is an important part of New Zealand society and of the economy. Uncertainties and difficulties in the current incorporated society regime not only create significant problems for particular incorporated societies, but also create uncertainty and difficulty for the sector as a whole. … Much of the law of incorporated societies [is currently found] not … in the statute … but in the case law … Case law is not particularly accessible or useful for most Incorporated Societies because in general the people that run societies: (a) may not have the funds to take legal advice about what case law exists; (b) [may] have limited legal training; [and] (c) if able to obtain legal advice, may find it difficult to determine what the case law may mean for the society and its application to resolving a current [dispute] in a cost-effective manner.”

Given the vital role that the societies play in New Zealand, it is important we ensure the rules governing them are fit for purpose, sensible, straightforward, and easy to comply with. This is a good start for a piece of law that has been developed over a period of time and with genuine community consultation, and largely this bill has been well-thought-out. It will strengthen the governance organisations that hold together our community, and it modernises and clarifies law governing incorporated societies. So I’m happy to commend this bill to the House in its first reading.

We’ve heard it all tonight about the importance of incorporated societies, particularly around rugby clubs and leisure groups, and so on, but I would also like to tautoko those who have talked about the importance of incorporated societies as part of the third sector in holding Government and other organisations to account. There is one being formed at the moment in my own electorate of Taieri, where a bunch of residents are concerned about a proposed landfill that is being proposed at Brighton Beach, near a creek, and rather than try and go through the process and the system as individuals, they have an understanding that their collective voice will have more impact, and they are going through the process of forming an incorporated society, which is the right thing to do, certainly in terms of being able to get advice and share information and share the collective passion for protecting their patch in the world.

So that is just an example of the sort of third-sector use of incorporated societies that really adds to New Zealand’s mana and reputation internationally as a transparent society—and, in fact, to our ranking as No. 1 out of 180 societies last year ranked by Transparency International. It is not just our public sector; it is also our third sector that shows this level of transparency and good governance. But, as we’ve heard tonight, the law is out of date, and we also need to have better governance structures within incorporated societies, and better accountability. We also need them to be fair to the officers who take on the roles—that they understand what their duties and obligations are, which is only fair. We’ve heard that we need proportionality on the financial reporting, and I’m sure that will form a good part of the submissions that come in to the select committee, which is the rightful place to have that discussion. I would encourage all incorporated societies to make their submissions around that so we get that level of proportionality correct in terms of being able to get the accountability that’s needed, the stability that’s needed, but also to make it fair on those societies, to not over burden them, and to allow for the great diversity in representation that we need on these societies, because, every time we add a layer of governance, we may exclude people. So we need to get that proportionality right, and it will be great to see that at the select committee.

Just one final comment from me is around A and P shows. Having part of my electorate be rural, these are a really important feature of the rural calendar, and we’ve had them in Balclutha and Middlemarch and Northern Taieri. There was some discussion, at several points of the long history of this Act, about including A and P shows into the legislation. In fact, they have been carved out; they will remain under the Minister of Agriculture and the Agricultural and Pastoral Societies Act. The submission made by the Royal Agricultural Society, on behalf of its 96 A and P society members, stated that all its members wished to remain firmly under the Agricultural and Pastoral Societies Act. So, for anybody in my electorate who is concerned that this is going to make changes to those A and P bodies, that do such a fantastic job in putting on events that promote farming and rural life and bring our communities together, you don’t need to worry; you are still being governed under the Agricultural and Pastoral Societies Act. There is some concern that that Act is outdated and incomplete and inconsistent with modern governance principles and practices, but I am sure there will be another opportunity to look at that, and, in the meantime, for the other incorporated societies that are captured by this bill, I do commend it to the House.

Motion agreed to.

Bill read a first time.

The question is, That the Incorporated Societies Bill be considered by the Economic Development, Science and Innovation Committee.

Motion agreed to.

Bill referred to the Economic Development, Science and Innovation Committee.