Involved with charities? New legal obligations – what you need to know.
The Charities Act 2005 was recently updated to modernise charity practices by incorporating new rules that apply to governance and reporting requirements for registered charities in New Zealand. We outline below some of the key changes that you need to be aware of if you are involved with a New Zealand charity.
From October 2023 registered charities need to review their governance procedures every three years. Charities will need to assess whether these procedures are a) fit for purpose, b) assist the charity in achieving its purpose, and, c) assist the charity to comply with the Act. As part of this process, charities should review their constitution or trust deed as well as any additional policies or rules that impact their operations.
Registered charities will need to have systems in place to ensure this review is conducted at least every three years. Charities may choose to carry this out more frequently than the minimum three-year requirement – this could be a standing agenda item for board meetings annually. A more frequent approach may help to ensure reviews remain front of mind, as personnel change, and minimise the workload associated with more infrequent reviews. Incorporated societies that need to re-register under the Incorporated Societies Act 2022 may also wish to consider including this requirement in their constitutions as part of the review of their rules.
The definition of an ‘officer’ under the Act now also includes persons and entities that exercise significant influence over a charity’s decisions. This captures not only trustees and board members but also those holding significant positions within charities, such as CEOs and General Managers. The purpose of this change is to strengthen the accountability and governance of charities and promote consistency with other legislation that affects charities.
Officers are now expressly stated to be responsible for assisting their charity to deliver its charitable purposes and comply with the Act. This will include ensuring funds are used exclusively to advance the charitable purposes and reviewing, understanding, and ensuring compliance with governance documents and procedures. Officers who significantly or persistently fail to meet these obligations could face disqualification for up to five years.
With the expansion of the definition of ‘officers’, registered charities will need to identify all of their officers and update the register on the Charities Services website accordingly. Registered charities should also assess whether their management practices and rules align with these new requirements.
If you are involved with a charity and need help applying these changes to your organisation, please do not hesitate to get in touch. Our experts in charity and not-for-profit law can assist you with reviewing and updating your governance documents, advise on officer compliance, and provide any other legal help you may need.Disclaimer