Widespread deregistration hits incorporated societies

A significant number of incorporated societies across New Zealand have now been deregistered after failing to reregister under the Incorporated Societies Act 2022. The effects are now being felt, with challenges for operations, asset control and those responsible for governance. 

“We are talking about a range of groups that make a huge contribution to New Zealand. Cultural groups, arts groups, RSAs, sports clubs – often led by volunteers and delivering great value to their communities,” says Herman Visagie, General Manager of the Governance Leadership Centre at the Institute of Directors. 

Deregistration has, in many cases, likely brought entity operations to a halt. The Act requires organisations to wind up operations and dispose of assets. Even where a group continues as an unincorporated entity, it may not have access to the assets of the former incorporated society.  Authority over the entity and its assets passes to the Registrar, who may direct how the assets are distributed.  

While there is a process to restore entities after deregistration, this requires an order from the Registrar or a court. It is subject to several requirements and will take time and cost.   

“Loss of legal identity can cause significant challenges. Bank accounts and contracts, including leases and employment agreements, may become invalid. The entity is likely to lose its charitable status and be unable to be able to keep operating,” Visagie says. 

Leaders of these groups, who are officers under the law, may not realise they can potentially become liable for debts or losses once their society is deregistered, Visagie says. This process happens automatically if the society has not reregistered under the 2022 Act.  

If you are an officer or committee member of one of these entities, you may now face legal and financial risk. As noted by Sue Barker, a specialist charities lawyer, deregistration removes limited liability protections, meaning officers may be personally liable.  

“Officers and also members could find they have lost the limited liability that protected them from financial penalties associated with the organisation’s debts. Losing charitable status may also create tax issues for the organisation, which exacerbate financial risk,” she says. 

For those affected, Visagie’s message is clear. 

“The key advice is to act quickly and seek appropriate support. Your first port of call should be the Registrar of Incorporated Societies. It may also be worth seeking legal advice.” 

While urging officers to act quickly, Visagie says there is no need to panic. 

“Guidance on restoration is available on the New Zealand Companies Office website, including templates for constitutions that meet the requirements of the Incorporated Societies Act 2022. We also expect further guidance to be provided. In the meantime, contact the Registrar for advice.”