The Incorporated Societies Act 2022 – finally passed

The replacement of the Incorporated Societies Act 1908 took a major step this week with the Incorporated Societies Act 2022 receiving the royal assent and coming into force on 6 April 2022. 

As a result, in process that mirrors that for the replacement of the Companies Act in the 1990s, all existing incorporated societies will have a period of roughly 3 and a half years in which to transition (by means of re-registration) and the filing of a new constitution that complies with the 2022 Act.

The 2022 Act is designed to bring the legislative framework applying to incorporated societies into the 21^st century and, particularly, assist with governance matters. 

Headline changes

The headline changes made by the 2022 Act to the governance of incorporated societies include a ‘codification’ of the duties of officers – much like that for company directors.

Specifically, officers of an incorporated society must:

• act in good faith and in what the officer believes to be in the best interests of the society;
• exercise their powers for proper purposes;
• exercise the care and diligence that a reasonable person with the same responsibilities would in the same circumstances;
• not agree to (or cause or allow) the activities of the society to be carried on in a manner that is likely to create a substantial risk of serious loss to creditors;
• not agree to the society incurring an obligation unless they believe on reasonable grounds that the society will be able to perform the obligation when required to do so; and
• not act, or agree to the society acting, in a manner that contravenes the 2022 Act or the society’s constitution.

The alignment of officers’ duties with those of a company director is not without its problems.  A number of submitters during the legislative process have made the point that alignment with the “broken” provisions of sections 135 and 136 of the Companies Act 1993 only serves to highlight the need for sensible law reform in this area. 

The changes to governance also include:

• clarity about disqualifying factors applying to officers;
• measures designed to improve the accountability of officers – by providing a mechanism for members to obtain information from officers; and
• offence provisions, such as those applying officers dishonestly using their position, (knowingly) providing false or misleading statements, fraudulently use of society property and falsifying records and documents.

Other noteworthy changes include:

• requiring 10 members in order to incorporate (previously 15);
• requiring a minimum membership of 10 to be maintained (there is no minimum ongoing requirement under the 1908 Act) – and note that a body corporate will be treated as the equivalent of 3 members;
• a society must have a committee consisting of at least 3 members;
• a Membership Register must be kept (with certain data being prescribed);
• annual accounts must contain specified information – but only ‘large’ incorporated societies ($60m in assets or $30m in annual revenue) will be required to have their financial statements audited;
• lodgement of an annual return;
• requiring all societies to have a disputes resolution procedure in their constitution; and
• providing an amalgamation regime – a short form version of the regime under the Companies Act.

Next steps

As noted above, all existing incorporated societies will be required to re-register during a transition period that ends on 1 December 2025 (at the latest). 

The transition period will provide time and breathing space for incorporated societies to review their existing constitutions and update them for the requirements of the 2022 Act. 

The transition period will also provide an opportunity to assess the impact of the new governance framework on the society and its officers.