Entering into agreement and contracts is a crucial part of business. It is important to ensure that these transactions take place without hiccups, as disputes in contract can be costly, time consuming and damage relationships. In our line of work, we see similarities in the hurdles that trip people up when they are entering into contracts. To help with this we have created this list of 7 useful tips to assist and point out the hurdles to avoid when entering into contractual agreements.

Contract Formation

  • The basics required for the formations of a contract are: Offer, Consideration (usually money) and Acceptance. If those exist a contract may be in place – even if it is not written down.
  • Make sure you receive a signed copy of the final version of the contract. We often see issues arising where one party signs and send the contract to the other party, on the understanding that the contract is finalised, but the other party makes further changes before signing or doesn’t sign the contract at all.
  • It is essential to ensure you receive a finalised contract which is signed by all parties/ which incorporates all agreed changes.

Record Keeping

  • Save important emails, relevant folders, keeping written records of conversations (follow up email recording what was agreed; meeting minutes etc).
  • Tailor a system that works for you personally, works for your team and your organisation. Be disciplined and stick to it, making sure the process is clear and being followed by all relevant people.
  • Take time to review your process every now and again, to ensure they are still fit for purpose.
  • There are some legislative and contractual requirements for documents and records that must be kept for a specified time. Know your obligations and abide by them.

Language

  • If you have a few people in your business who enter into contracts for your business then when they are sending an email or making a phone call they have the potential to commit your business to something.
  • If that’s you, ensure that you do not use language that can commit the business to transactions unless you are 100% sure that what you are doing is acceptable, and achievable. To avoid this use “less binding” phrases that do not commit the company, i.e.
    • “I will seek instructions”
    • “I will confirm in writing”
    • “I will talk to the leadership team and confirm”

Good Faith Transactions

  • While it is important to maintain good relationship it is hard, expensive and time consuming to get money back once it is paid, so if you are making a payment make sure there is an agreement in place.
  • To ensure a smooth transaction it is good practice to keep a record of the circumstances of good faith payment with an emphasis on recording when it would be repaid if no agreement was reached.

Variations

  • Changes to contracts are common practice in business. Variations offer much needed flexibility to agreements and allow contracts to be useful even in changing circumstances. However, poorly managed variations can present more bad than good. Poorly managed variation can be time consuming, expensive and strain the relationship between parties. They can result in misunderstanding or confusion between the parties or end up in lengthy and costly litigation.

 Practical Tips:

  • Ask whether a variation to the contract is necessary, or if it can be dealt with some other way.
  • Check the processes for variation in agreements.
  • Clearly specify the terms of the contract that are being varied.
  • Consider the flow on effects on other clauses.
  • Minimise as much as possible oral variations and if they occur, record them in writing.

Reviewing Documents

  • If contract documents are not standard, are new/unfamiliar, have substantial variations to them, or carry the potential for increased liability, we recommend having the documents reviewed. Reviews might be internal, with a colleague or supervisor, or you could let a lawyer review documents.
  • Make sure you give the person reviewing the documents all relevant paperwork (the full contract) etc; so they can ensure consistency and understand the context when they review.

Confidentiality

  • Have a system in place to ensure confidentiality is kept and there is a process for dealing with breaches, as they may occur.
  • Make sure documents are marked as confidential.
  • When sending sensitive emails, double check who you are sending to and who is copied in to the email. Check long email chains for sensitive material.
  • Check your legal and contractual requirements. Are their specific requirements in your contracts to keep material confidential, or are there individuals you have to notify if there is a breach?

We hope that these tips are helpful in your negotiation of contracts. If you’d like to discuss then our team of experts would be happy to do so.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Steven Moe – stevenmoe@parryfield.com,  Michael Belay – michaelbelay@parryfield.com or Diana Youssif – dianayoussif@parryfield.com at Parry Field Lawyers

With COVID-19 in mind and the importance of employees staying home when sick so as to not spread illness to others, the Government has recently passed the Holidays (Increasing Sick Leave) Amendment Bill in order to double the availability of mandatory employer-funded sick leave for employees.  The new legislation will come into effect on 24 July 2021.  After that date, employees will become entitled to 10 days’ sick leave on their next entitlement date.

So what does this mean practically?

  • New employees after 24 July 2021 will receive 10 days’ sick leave as soon as they become entitled to sick leave, which is six months after starting their employment.  For example, an employee employed in August 2021 will become entitled to 10 days sick leave in February 2022, being six months later.
  • Existing employees, who already are entitled to sick leave when the legislation comes into force, will become entitled to 10 days’ sick leave on their next entitlement date. Their entitlement date is their anniversary date on which they first became entitled to sick leave.  For example, an employee who has a sick leave anniversary date of April, will have to wait until April 2022 to receive their 10 days, given their entitlement date pre-dates 24 July 2021.  However, an employee with an anniversary date of August 2021, will receive 10 days sick leave in August 2021.
  • If an employer already provides their employees with an entitlement to 10 or more sick leave days a year, the employee will not be affected by this change and will not receive any more sick leave.
  • The entitlements for employees are still carried over if unused, up to a maximum of 10 sick days per year (rather than 15 under the current legislation) and can be accumulated up to 20 days (which is the same total amount employees were already able to accrue up to, prior to the upcoming law change).

So what should employers do as a result of this change?

For new employees after 24 July 2021, they should be provided with an Individual Employment Agreements (IEAs) which reflects the change.

Whether existing employment agreements need to be amended really depends on whether these contradict the new law and, more especially, conflict with it.  Even if they do, some employment agreements already provide that they are varied by the terms of any legislative changes.  In any case, the changes are minimum statutory entitlements which cannot be contracted out of, meaning that employers need to comply, regardless of whether the employment agreement is less favourable to the employee than the upcoming change.

Employers should also check their payroll systems to make sure that they have been updated to reflect the changes, after 24 July 2021.

Finally, employers should also expect further changes regarding sick leave, as the Government has also recently begun to work on further recommendations which includes a proposal for employees to be able to access some sick leave from the first day of their employment, as opposed to only being eligible for sick leave after 6 months.  This legislation is expected to be introduced in early 2022.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Mike Henderson-Rauter mikehenderson-rauter@parryfield.com at Parry Field Lawyers

As part of privacy week 2021 it was great to hear from the Privacy Commissioner, John Edwards and we would like to thank him for his time.  The video is below.  We hope it helps demystify and answer question you might have had regarding privacy and the new Act.

We had a great turn out of around 70, in person as well as over zoom, and we appreciate all of those questions which helped facilitate a great discussion

  • The slides from the presentation can be accessed here
  • Some resources mentioned can be accessed here from the Privacy Commissioner website; and
  • We put up articles, free guides for charities and social enterprises, templates, videos and more on our website under the resource tab at parryfield.com

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Steven Moestevenmoe@parryfield.com, Aislinn Molloy  – aislinnmolloy@parryfield.com or Michael Belaymichaelbelay@parryfield.com at Parry Field Lawyers.

If you have a successful business then chances are one way to grow it could be through Franchising.

In this article we want to cover some of the key points that you need to know if you want to head down that path.

Franchising is a good alternative to consider because it can increase your brand recognition and you provide oversight while not actually running the branch. However, you can still benefit from payments and the exposure that a growing brand creates.

So what do you need to consider?

In helping our clients franchise we work closely to look at the following – working through these points below we would then put into a Franchise Agreement and Manual. Your answers will likely depend on the amount of control you want to have over the Franchisee’s business. The Manual will outline the rules and guidelines for operating a Franchisee Business. What you need to think through is the following:

  • The Territory the Franchisee can act in (eg. Canterbury vs Ashburton)
  • Opening hours
  • Advertising
    • Who is responsible for doing this
    • How will it to be done
    • National or regional level?
  • Training course
    • Additional/on-going training?
  • Number of employees
    • Roles – Manager etc.
  • Minimum sales/performance criteria required for Franchisor to terminate agreement or revise territory
  • Inventory and supply specifications
  • Reporting
    • How often?
    • What form?
  • Grounds for terminating the Franchise agreement
  • Restraint of Trade terms (e.g. relating to termination, territory, goodwill etc.)
  • Insurance cover
  • Set up
    • Conversions/Alterations/renovations required to initially set up premises
    • Plans/drawings/specifications of the premises
    • Fixtures, fittings etc.
    • Initial stock required
    • Initial advertising required
    • Initial equipment provided by Franchisor
  • Continuing obligations
    • How often will franchisor consult with Franchisee
    • How will performance be monitored
    • How will records be kept
    • Code of Practice? (if member of Franchise Association of New Zealand)
  • Suppliers/Key Contracts needed
  • Stationery
  • Leases
  • Requirements for where shops are located
  • Intellectual Property – this will include considering:
    • Exactly what the Company has as IP
    • Whether trade marks are registered
    • How trade marks can be used
    • Licenses that may be in place
    • Providing clear brand guidelines

Franchising is a definite option for a growing business.

If you would like input on franchising then we would be happy to provide you with input through an initial conversation about what you want to achieve. To discuss this  or for further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292, Kris Morrison at krismorrison@parryfield.com or Aislinn Molloy at AislinnMolloy@parryfield.com.

You might also appreciate our guides such as the Doing Business in New Zealand guide and the Start-ups Legal Toolkit. We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.

Charities can be a powerful vehicle for bringing change. We have been fortunate to have helped and worked with many clients in this space and can testify to the positive impact they can produce. Given our experience with charities we have produced a handbook on Charities in New Zealand. You can download it here.

The handbook is intended to serve as a practical guide to help start-ups and existing charities from a legal and practical perspective. It is divided into several key sections and provides information on establishing your charity, operating your charity and much more.

If you have further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292 or Kris Morrison at krismorrison@parryfield.com.

Be sure to check out our other free guides too, such as Startups: Legal Toolkit and Social Enterprises in New Zealand: A Legal Handbook. We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.

Business can be complicated but it doesn’t have to be.  We have helped thousands of clients and know about the key legal areas that will affect you and have just released our fully revised and updated “Doing Business in New Zealand” free handbook.  You can download it here.

New Zealand consistently ranks as one of the most business-friendly nations in the world. Given this appealing status and the interest we receive both from local and international investors, as well as form businesses and entrepreneurs, we produced the “Doing Business in New Zealand” handbook a few years ago and now have fully updated it.  It is intended to introduce and provide information for those who may be unfamiliar with how business is done here. The handbook provides introduction on business structures, investment rules, employment, disputes, property, intellectual property, immigration, privacy and social enterprise, just to name a few examples.

If you have further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292 or Kris Morrison at krismorrison@parryfield.com.

Be sure to check out our other free guides too, such as Startups: Legal Toolkit and Social Enterprises in New Zealand: A Legal Handbook.  We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.

Trustees frequently ask us whether they would be personally liable if someone is injured on a course run by a trust where they are a trustee. For example, imagine a youth focussed trust and they employ Jane, she takes a group of children on a hiking trip. During this a child is injured in an accident. Could the parents of the child make a claim against the trust or even the trustees personally? Let’s look at what could happen in New Zealand.

The role of ACC

The accident to the child would most likely be covered by the Accident and Compensation Act 2001 as a personal injury. This means that the parents would be prohibited from bringing independent proceedings against the trust and the trustees. Therefore, trustees are protected from third party claims relating to accidental personal injury where ACC would cover the accident. For more on this see ACC’s guidance here. This would not be the case in other countries where a claim might be possible.

What about WorkSafe?

Trustees may have proceeding brought against them by WorkSafe New Zealand if they find that the trustees breached the Health and Safety at Work Act 2015. This is because the trustees are ultimately in control. WorkSafe may pursue action against trustees if they find the trust failed to ensure, so far as was reasonably practicable, the health and safety of workers and others, such as those attending courses they organise. For example, in 2017, WorkSafe accepted an enforceable undertaking from a Trust Board following its investigation into an accident in which students were injured during a school production. The accident occurred during Saint Kentigern School’s performance of Sweeney Todd when two students were hospitalized after their necks were slit with a sharp shaving razor which was wrapped in duct tape. Despite the numerous incidents there was a failure to report and investigate these incidents. WorkSafe launched an investigation into the incident and concluded that the school failed in its duty to students and the school Trust Board accepted these findings.

Conclusion

Trustees may be liable if they are found to have breached their duties to ensure the health and safety of those they are responsible for. For more on these issues and the Health and Safety at Work Act 2015, as it applied to PCBU’s (a person conducting a business or undertaking) see our article here. Ultimately it may be wise for trusts to get a specialist Health and Safety advisor to provide guidance in this area.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist you, please feel free to contact Steven Moe stevenmoe@parryfield.com

There is often confusion over Health and Safety – the rules have been around for a while now but we still get some common questions.  Below we set out some of the key points to consider to ensure compliance around volunteers. Check out our other guidance on these topics as well.

Is your organisation a PCBU?

Under the The Health and Safety at Work Act 2015, a PCBU has the primary duty to ensure the health and safety of its workers and others, so far as is reasonably practicable.

Reasonably practicable means that “which is, or was, at a particular time, reasonably able to be done in relation to ensuring health and safety.”  A PCBU is not expected to guarantee the health of safety of their workers but they must do what can reasonably be done to ensure health and safety.  Factors that will affect what is reasonably able to be done include:

  • The hazards and risks associated with the work and the likelihood of the hazard or risk occurring;
  • The severity of the injury or harm to health that could result from the hazard or risk;
  • What the person knows or reasonably should know about the hazard or risk and the ways of eliminating or minimising it;
  • What can be done to eliminate or minimise the risks and how available and suitable these risk controls may be;
  • The cost associated with eliminating or minimising the risk, including whether it is grossly disproportionate to the risk.

What about Volunteer organisations?

Section 17 of the Act states a “volunteer association” is not a PCBU.  The Act defines a volunteer association as “a group of volunteers (whether incorporated or unincorporated) working together for 1 or more community purposes where none of the volunteers, whether alone or jointly with any other volunteers, employs any person to carry out work for the volunteer association”.

If your organisation has no employees then it will be known as a volunteer association under the Act.  As a volunteer association your organisation would not be a PCBU and therefore the Act would not apply to your organisation.  However, frequently this exemption would not apply to organisations.

If your organisation has one or more employees then it is likely it will be a PCBU and thus the Act will apply.

If your organisation is a PCBU

If your organisation is a PCBU, it will have a duty to ensure the health and safety of others so far as is reasonably practicable.

So what about Volunteer officers?

Officers have a duty to exercise due diligence to ensure the PCBU complies with its duties and obligations under the Act.  In exercising due diligence, officers must take reasonable steps to:

  • Know about work health and safety matters;
  • Gain an understanding of the operations of the PCBU and the hazards and risks associated with those operations;
  • Ensure the PCBU has appropriate resources and processes to eliminate or minimise risks;
  • Ensure the PCBU receives information about incidents, hazards and risks;
  • Ensure there are processes for the PCBU to comply with the Act.

Volunteer workers

Under the Act a “volunteer worker” is a volunteer who carries out work in any capacity for a PCBU on a regular basis, with the PCBU’s knowledge and consent and is integral to the PCBU’s operations.  A PCBU would owe a duty to ensure, so far as is reasonable practicable, the health and safety of volunteer workers.

The volunteer worker would also have duties under the Act.  While at work they must:

  • Take reasonable care for his or her own health and safety;
  • Take reasonable care that his or her acts or omissions do not adversely affect the health and safety of other persons;
  • Comply, as far as the worker is reasonably able, with any reasonable instruction that is given by the PCBU to allow the PCBU to comply with the act or regulations; and
  • Co-operate with any reasonable policy or procedure of the PCBU relating to health or safety at the workplace that has been notified to workers.

“While at work” is not defined but likely means while at the workplace or at an event run by the PCBU.

Casual volunteers

A volunteer is not a “volunteer worker” if their voluntary work includes:

  • Participating in a fund-raising activity;
  • Assisting with sports or recreation for an educational institute, sports club or recreation club;
  • Assisting with activities for an educational institution outside the premises of the educational institution; or
  • Providing care for another person in the volunteer’s home.

Even though this volunteer would not be a volunteer worker, the PCBU would still have a duty to them to ensure their health and safety is not put at risk from the PCBU’s work.

The casual volunteer would not have duties under the Act.

If your organisation is a PCBU and something goes wrong the penalties can be high.  It is therefore very important that you are aware of whether your organisation is a PCBU or not.  In some cases this may be unclear.  We would be more than happy to talk with you about your particular situation to help you determine whether or not you are a PCBU.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact Steven Moe at stevenmoe@parryfield.com

There is often confusion over Health and Safety – the rules have been around for a while now but we still get some common questions.  Below we set out some of the key points to consider to ensure compliance. Check out our other guidance on these topics as well.

Top 10 things to know

  • Be aware
    • The Health and Safety at Work Act 2015 has been in force for a few years and it has introduced greater accountability for Health & Safety for your organisation if you employ staff.
  • Are you a ‘PCBU’?
    • If you are a “Person Conducting a Business or Undertaking” then you are a PCBU.  A PCBU can operate in a voluntary way without primarily being set up to make money.  It has the primary duty of care in a workplace. See below for more on this.
  • Officers of PCBUs
    • Directors, managers and leaders of the PCBU also face significant penalties under the Act for failing to exercise due diligence in ensuring the PCBU carries out its duties.
  • To start: Identify risks
    • Ensure all risks and hazards are in your organisation are identified.  Start by looking at the facility, entry and exit points, stage areas, equipment used, the people, the weather … what are the risks where you are?
  • Control & Eliminate
    • Put procedures in place to control or eliminate risks to health and safety so far as is reasonably practicable.
  • Prepare
    • Maintain a health and safety policy with the help of your employees.  Put it into action and ensure your employees and contractors are aware of it and follow it – don’t just hide it in a drawer!
  • Tailor your documents
    • Customise your documents so they are practical for you.  One size does not fit all. It may be that a consultant is worth hiring to help you prepare documentation as well.
  • Check your visitors
    • If other contractors or other entities come on to your property you must ensure they have proper health and safety procedures in place and provide you with a copy.  Ask for it and check it!
  • Standing item
    • It is good practice to have this topic as a standing item at your board meetings.
  • Remember the penalties are high
    • Fines of up to $3 million and imprisonment of up to 5 years can be imposed.  “She’ll be right” is no longer OK. Think about these issues now, not later

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact Steven Moe at stevenmoe@parryfield.com

A. Introduction

In a gentle way, you can shake the world. Mahatma Ghandi

Governance for faith based organisations is not the same as for other entities. We have dealt with both types of structures for many decades and wanted to set out some key thoughts in this article. This was originally prepared as a paper presented at the Legalwise “Religion and the Law” conference held on 30 October 2021. The paper was written and presented by Steven Moe, a Partner at Parry Field Lawyers.

Faith based organisations have their own unique dynamic that can be distinguished from other Not for Profits. Albeit this being an important issue, there has not been much written about it in Aotearoa New Zealand to support leaders of faith based organisations. This article stipulates the unique nature of faith based organisations and provides practical recommendations for their governance.

This article addresses the following issues faced by faith based organisations:

  • What are the usual legal structures where these boards operate?
  • What are the key functions of boards of faith based non-profits?
  • How does the legal framework affect these boards?
  • What added dimensions shape governance?

Should you have any questions or comments about this article please feel free to reach out.

B. What are faith based organisations?

In New Zealand there are approximately 115,00 Not for Profits, with around 27,500 being registered charities. Of those, 8,000 are listed as advancing religion with Charities Services. Charities Services, as the regulator of charities, provides the following description of organisations which advance religion:

“The term “religion” includes many different faiths and belief systems (for example, Christianity, Judaism, Islam, Hinduism, and Buddhism). Generally, however, to be religious there needs to be a body of doctrines that:

  • concern the place of humankind in the universe and its relationship with the infinite
  • go beyond that which can be perceived by the sense or ascertained through the scientific method
  • contain canons of conduct around which adherents structure their lives.”

They go on to provide that the doctrines involved and the conduct expected must be structured and serious enough to be capable of advancing religion. For example, a Jedi Society was denied charitable status. This promoted the ideology found in the Star Wars films.

C. Common legal structures

There are a range of legal structures that can be adopted by faith based organisations – from Charitable Trusts to Incorporated Societies to Unincorporated Associations. This article focuses on registered Charitable Trusts because in our experience it is the most common entity type for a faith based organisation.

A registered Charitable Trust has a written trust deed and trustees that advances its charitable purpose. Most often the purpose concerns advancing religion, however there may also be purposes concerning relief of poverty, education or purposes beneficial to the community. Moreover, it is understood that faith based organisations perform various functions within the communities that they operate. They may have associated initiatives that come under the umbrella of the main faith organisation or as a separate entity. For example, a faith based group may have itself, or have members that started, initiatives such as a preschool, counselling service, aged care, mental health services, teaching English as a second language, immigrant services, school related work, food banks and the like.

A Charitable Trust Deed is flexible in that there is no industry standard. Nevertheless, the common elements are set out in Annexure 1.

D. The bigger picture

A faith based organisation is founded on a very different paradigm of thinking than other organisations, such as a company. This is a fundamental point accounted for when framing our discussion on governance for faith based organisations. There is something much bigger involved with faith based organisations whereby the way of operating or describing entities in the legal sense does not touch on the “spiritual” side of what faith based organisations really represents.

This may be difficult to grasp so let’s consider this dynamic using a word picture:

Imagine a tree standing in a field. The leaves and branches are moving. We can talk about the tree because we can see it easily. However, that is not all that is at play. We may come to realise that what is being considered is not just the tree itself but also the wind. In other words, we cannot easily see and explain some aspects of the dynamics that are relevant when we turn to look at a faith based organisation. In this picture, the organisation is the tree and the wind represents other aspects such as faith, eternity, God and the spiritual. These are often unseen dimensions of life. A purely objective person might say “you are talking about a tree” whereas in fact we may be “talking about the wind”.

We often use the English word “Church” to describe certain types of organisations. Legally we might consider them to be entities that exist and are registered within our law. However, through the eyes of Christian faith the word “church” is something bigger and more profound than a registration number filed with a Government department. In fact, the term used for Church in the Bible falls on the Greek word used in the New Testament of ekklesia which refers to “a calling together”, that is people gathering to worship and serve God. Other religions have similar deeper conceptions about what is going on in the World than can be explained just with legal entities and formal documents. For example, in Hinduism there are concepts like Atman (eternal self – the self as spitirual rather than a material being).

These examples show that we must delve deeper than what exists at law. This is because for faith based organisations there is a lot more going on at a spiritual level.

E. Unique aspects of governance for faith based organisations

Let’s turn now to some of the aspects which make governance for faith based organisations a bit more unique than other forms of entity.

1. Purpose

The purpose of faith based organisations will likely be evident that they are about advancing religion. However, the issue is that sometimes such organisations get involved with activities that no longer align with their original purposes. As a result, it is often appropriate for those in governance to consider whether they are still within the remit of the original purposes or whether they need to revise those purposes (if possible) or set up another entity to perform the activities that they have since taken up.

2. Unincorporated associations

It is common for faith based organisations to have a long history. Therefore, it is also common that these organisations do not have a trust deed or governance in the same way we would today. Many entities are in fact unincorporated associations without the formality of a constitution or document setting out how they will operate. This can introduce challenges for governors today to govern in an acceptable way, such as appointing and removing people, decision making and liability. Therefore, it may be appropriate to look at the existing structure and determine whether it is the right one or if a new entity should be created or new rules adopted.

3. Statements of belief

It is common for a faith based organisation to have a statement of faith or belief set out in the schedule to the trust deed. This introduces an additional set of criteria which Board members need to be aware of. Anyone that proposes to join the board would usually be required to confirm that they adhere to those beliefs. As such, a statement of faith may add an extra level regarding who can qualify to join the Board. Further, it may be that on a yearly basis, or when requested, a Board member may be asked to reaffirm or sign that they agree to the statement of faith.

4. Conduct of Board members

As well as affirming a statement of faith it is likely that in the rules there may be reference to criteria to remain a trustee. While this is also common in other organisations it may be heightened in a Church organization with the ability to remove a trustee if, in the opinion of more than three quarters of the other trustees, doing so is in the best interest of the Trust. In other words, it is likely that the standard expected of trustees may be different to those in a different context. Therefore, the impact of conduct will be particularly important for those on Boards of faith based organisations.

5. Relationship to the Bigger Group

It is common for churches to be affiliated to a denomination. This can provide real benefits such as in the form of training, conferences, sourcing of content and decision making at a national level. It may also mean that the individual Church and the governing body will relate to the Denomination. This is different to a normal “independent” charity. It introduces interesting dynamics to discussions which will differ depending on the strength of the relationship. For example, some trust deeds will simply refer to assets going to the denomination on wind up. Others will have more direct relationships, particularly if the denomination holds the legal title of the land on behalf of the Church. This can affect ventures that the Church wants to take on, such as developing part of the site for social housing, taking on more debt to fund expansion or even selling the land. Some denominations will be very involved in the decision making process while others are not so involved. The context is critical. As such, it must be understood how the entity relates to the domination and when approvals are needed at that level.

6. Relationship with international bodies

Sometimes a faith based organisation will not have a New Zealand based body which it relates to. This may be because the organisation was set up by an overseas based charity to do work in New Zealand. Consequently, the same considerations in relation to a denomination mentioned above may apply here to the overseas entity, in that it must be fully understood how the board relates to any overseas groups. For example, trustees may need to be approved by the overseas body, big decisions may need to be brought to them for approval and they may continue to have international board members that they appoint. This raises interesting dynamics for the New Zealand entity over time, particularly if those involved locally may want to align more with local culture and trends. For example, this could relate to wanting to partner on Treaty matters or other areas not familiar to the overseas based charity.

7. Interaction with other Trusts

Often a religious group will have members that wish to do good in the local community. It is common for them to approach the Charity and seek to set up a new Charity that has the blessing of the original group. Sometimes the old Charity itself controls these new initiatives. For example, if the trustees of the older Charity itself have the right to appoint and remove the trustees of a community focussed trust then it is likely that this will count as ‘control’ for tax and accounting purposes, and the accounts will need to be consolidated with those of that original Charity. Trustees of a faith based group should consider if this is the right solution because it may be that these new initiatives should be given their own wings to fly independently of the original group. Accordingly, the organisation will have to be aware of accounting implications when they have control over other trusts.

8. Duties of Trustees

The Trusts Act 2019 imposes on trustees mandatory and default duties. It is essential for trustees of a charitable trust to know and understand the terms of the trust deed so that they can be sure of meeting their obligations and duties to the beneficiaries. The various duties of trustees are set out in other articles we have written, such as this.

9. “Special Character” and Governance standards

Sometimes there will be some unique considerations when it comes to this type of organisation. It must be considered whether those “called” by God are employees. Also relevant will be considerations in relation to schools that a Church may be associated with.

With regards to governance standards there are overseas resources that may be of interest. For example, the CMA Standards Council in Australia have produced Principles and Standards. Further, the “Nine Principles of Ministry Accountability” provide a unique framework for thinking about governance for faith based groups. Their focus is on accountability. It is helpful to look for resources that deal with faith based groups and consider what might be suitable for the particular organisation.

10. Back to the bigger picture

As mentioned earlier, for faith based organisations there is another factor at play: A higher power. This means that there will often be extra dimensions to decision making and process. For example, it is common for faith based boards to start meetings with prayer or a devotional reading. In addition, it is likely that all those involved will feel that the Trust and entity is a vehicle to achieving a much higher calling. Therefore it is essential to understand that there is more at play that just the words in a trust deed.

Conclusion

We have a great deal of experience in dealing with faith based organisations and in our experience none of them are the same as the next. If you’d like to talk about your situation then let me know by email to stevenmoe@parryfield.com. To come full circle with how we began this article, it is clear that there will be unique aspects of governance for faith based organisiatons. Being aware of those will help – whether you are in governance or providing advice to such an organisation. Those different drivers and stakeholders will be vital when taking action and ensuring that the organisation is successful.

 

 

 

ANNEXURE 1: USUAL CONTENT OF A CHARITABLE TRUST DEED

There is no industry standard for a charitable trust deed. Also, there is no particular format required in the Charitable Trust Act 1957, but it is normally expected for a charitable trust deed to cover the following key points:

  • That a settlor is setting up the trust by donating to create a fund (often $10)
  • The purpose of the trust
  • The name of the board
  • Who is on the board, such as min and max number of the trustees
  • How trustees are appointed
  • How they can be removed
  • Any process around how long they serve
  • How the property will be controlled by the board
  • Powers of the trustees
  • What funds will be used for
  • Conflicts of interest and how they are dealt with
  • Common seal (it is required)
  • Meetings of the board and quorum and notices
  • Preparation of financial accounts
  • How contracts entered into
  • Variations of the trust deed
  • How to wind up and what happens to assets