Social enterprises often operate as limited liability companies, but new legal structures to govern them have been introduced in a number of countries. Lawyer Steven Moe argues we need these options in New Zealand.

In the classic children’s story by Hans Christian Andersen, an emperor is given new clothes which are invisible to those who are unfit to see them. So no-one dares tell him he isn’t wearing anything at all. That’s a bit like the current legal structures available for someone who has an idea to start a new venture which incorporates purpose beyond making profit – they are faced with a difficult choice. Do they become a company, which carries assumptions that it is for profit, with less focus on social good? Or a charity, which carries assumptions that it is not-for-profit, focusing on helping others.

Neither really fit a “social enterprise” the term used to describe businesses that act for both profit and purpose. Social enterprises combine entrepreneurial spirit with a strong dose of ‘heart’ as they work to make a real difference in our world. And it is not just part of a temporary trend. The 1,600 people who assembled last month in Christchurch at the Social Enterprise World Forum demonstrate that.

But how should social enterprises set themselves up? Would a legal structure created for these ventures help?

Let’s walk for a minute down each of the usual roads taken to map out that answer. Choosing a company structure has advantages because it is well known, and provides a return of profit to the founder through dividends or selling shares. Investors are easier to attract, although they probably won’t understand a business that exists for more than profit. And, in fact, directors may feel a legal obligation to maximise shareholder returns. While the purpose-driven company may solve a critical social or environmental problem, otherwise addressed by expensive government programmes, it will be hard to access any funding from that source as they will not be a charity, which is usually required.

Down the other fork in the road, a charity may offer the ability to access grant funding, although the danger is that it may come or go. People assume a charity is doing good, and an advantage that flows from such an assumption (if it meets strict charitable purposes) is that donations are tax deductible. However, despite years of a founder’s blood, sweat and tears – which every new venture requires – the founder will not be able to have private gain, apart from a market rate salary.

Neither option truly suits our social entrepreneur, a conclusion explored in detail in the recent Ākina Foundation paper about the inadequacy of current legal structures (check it out here). What would help is a “Social Enterprise Company”, a new legal structure which takes the best of both roads described above, as well as a dash of learning from Scotland, Canada and the USA where these structures already exist. Increased legitimacy would result as the purpose is baked into the DNA through clear statements in the constitution, reporting on how it is travelling (to prevent abuse), and the ability to return capped dividends to shareholders so profits go back into the purpose.

What’s the pitch to government on the case for change? We will end up with tax paying companies, that are also uniquely positioned to give back to their communities in ways that improve the environment, or care for disadvantaged social groups as they combine both making profit and acting with purpose. This new legal structure would ensure that when that light bulb moment happens, social entrepreneurs don’t need to reach for the number 8 wire in order to adapt, and then make do with the ill-fitting legal forms that currently exist. Social enterprises need ‘new clothes’ that fit better than the current legal structures we have.

All of us want to lead lives of purpose and meaning, and more businesses are seeking to position themselves in that direction as the old paradigms are tossed off the throne that profit and private wealth creation is king. New Zealand has the chance to be a true world leader through a new social enterprise legal structure that other countries would look to as an example, and which the next generations that follow us demand.

Steven Moe has a free e-book available, Social Enterprises in New Zealand. For a copy email stevenmoe@parryfield.com

This article by Steven Moe originally appeared on The Spin Off

State Integrated Schools are a kind of school recognised by New Zealand’s education system, but their structure can be confusing to understand.

What are State Integrated Schools?

New Zealand’s education system allows for a range of different types of schools. The four main categories are State Schools, State Integrated Schools, Charter Schools and Private Schools.

State Integrated Schools are a kind of special character school that allows for collaboration between the government and a private proprietor in a way that preserves the special character of the proprietor and the school.

Every state integrated school has an integration agreement between its Proprietor and the government which sets out various details about the intended operation of the school, and includes a description of the particular or general religious or philosophical beliefs that provide the framework for the education at the school.

Types of Special Character Schools that have been established in New Zealand include Catholic, Anglican, Methodist, Presbyterian, Adventist, Jewish, Muslim, Steiner, Montessori and non-denominational Christian schools.

Often the parents of children at a state integrated school struggle to understand who is responsible for leading and operating a state integrated school. It can be confusing when information and invoices relating to the school come from a variety of different sources.

Who governs State Integrated Schools?

The governance structure for Integrated schools can be confusing because they have more than one person or body with decision making power. The main decision makers are:

The Board of Trustees

Each state school (including state integrated schools) has a Board of Trustees, which is a body corporate incorporated under the Education Act 1989, and is a Crown entity under the Crown Entities Act 2004.

The Board of Trustees is the governing body of its school, and is responsible for the governance of the school, including setting the policies by which the school is to be controlled and managed. Its primary objective in governing the school is to ensure that every student at the school is able to attain his or her highest possible standard in educational achievement.

The Board of Trustees is required under the Education Act 1989 to ensure that the school is a physically and emotionally safe place for all students and staff; and is inclusive of and caters for students with differing needs. It must have particular regard to any statement of National Education and Learning Priorities, and must comply with specified obligations in the Education Act 1989 relating to curriculum statements and national performance measures, teaching and learning programmes, and monitoring of student performance. if the school is a member of a community of learning that has a community of learning agreement, it must comply with its obligations under that agreement.

The Board of Trustees is made up of the principal, several parent elected representatives, a staff representative, a student representative. In the case of state integrated schools, the Proprietor of the school has the right to appoint a number of trustees to sit on the Board of Trustees along with the other trustees.

The Board of Trustees of a state integrated school operates in mostly the same manner as the Board of Trustees of any other state school, but must operate in a manner that reflects the special character of the school, and must consult with the Proprietor on various matters.

The Principal

The school’s principal is the chief executive of the Board of Trustees in relation to the school’s control and management.

The Principal must comply with the law of New Zealand and the Board of Trustees’ general policy directions, but otherwise has complete discretion to manage as the principal thinks fit the school’s day-to-day administration.

The Principal of a state integrated school operates in mostly the same manner as the Principal of any other state school, but must manage the school in a manner that reflects the special character of the school and, if the school has a religious special character, may be required to have willingness and an ability to take part in religious instruction appropriate to that school .

The Proprietor

The school’s Proprietor owns or leases the land and buildings used by the school and is responsible for any loans or funding in relation to the land and buildings. The Proprietor must plan for and ensure that the buildings and facilities are brought up to at least the minimum standard specified by the Secretary of Education for state schools.

The Proprietor has the right and the responsibility to supervise the maintenance and preservation of the education with a special character provided by the school and to determine what is necessary to preserve and safeguard that special character.

If the Proprietor believes that the special character of school has been or is likely to be jeopardised it can exercise various powers under the Education Act, including a power to cancel the integration agreement with the government (but it must consult with the government before doing so).

The Board of Trustees and Principal must give the Proprietor access to the school at all reasonable times to ensure that the special character of the school is being maintained.

Who Owns State Integrated Schools?

The land and buildings of a state integrated school are owned and maintained by the Proprietor, which is often a charitable trust or Church or other religious organisation. The day to day operations of the school are funded by the government through the Ministry of Education. The government pays staff salaries and an operations grant for the running of the school, and gives some funding directly to the proprietor for maintenance and improvement of the buildings.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions. Copyright © Parry Field Lawyers 2017.

What is a Foreign Trust?

A foreign trust is one where there has never been a New Zealand resident Settlor. (a
“settlor” is usually the person who creates the trust by putting their personal assets
into it).

A non-resident can settle a trust that has non-resident beneficiaries, but has a New
Zealand resident Trustee. These trusts can be trust-effective in certain offshore
jurisdictions. However, such trusts are not treated as New Zealand trusts because New
Zealand taxes trusts based on the residence of the Settlor, not the Trustee, as do other
jurisdictions.

The Trustees are only taxable in New Zealand on income that has a New Zealand
source. However, the Trustees will only be eligible for a tax-exemption on the Trust’s
foreign-sourced income if they register the Trust with Inland Revenue.

Historical Perspective

Over a year ago foreign Trusts became a “hot potato” following the release of the
“Panama Papers” regarding New Zealand’s involvement in the foreign Trust “industry”.
The furore over the foreign Trusts in the past couple of years and the suggestion that
they were used as a ‘tax dodge” was clearly misdirected because such Trusts in general
do not have New Zealand sourced income and therefore have no exposure to New
Zealand tax. However, the way in which New Zealand tax law is applied to foreign
Trusts, coupled with New Zealand’s legal environment and previously minimal
disclosure requirements, made New Zealand attractive to wealthy foreigners seeking to
hold assets through offshore Trusts, and so avoid their tax obligations in their country
of residence. The Panama Papers highlighted the reputation/risk this has caused to
New Zealand.

New Zealand does in fact have a substantial foreign trust industry. Inland Revenue
records indicate that approximately 12,000.00 foreign trusts with a New Zealand
resident trustee have filed an IR607. The Department estimates that the New Zealand
foreign trust industry generates approximately 24 million in revenue per annum,
although this may be as much as 50 million per annum.

Accordingly, substantial changes to foreign trusts were introduced over 10 years ago
and since 1 October 2006 the New Zealand resident Trustees of foreign trusts have had
to disclose certain information to Inland Revenue within 30 days of the creation of the
Trust or a Trustee’s arrival in New Zealand. This is achieved by the use of form IR607-
“Foreign Trust Disclosure” and must include the following information:

The name or other identifying particulars of the Trust.
The name and contact particulars of the resident foreign trustees.
Whether the Settlor is a resident in Australia; and
If relevant, the basis of which a Trustee claims to be a qualifying resident
foreign Trustee.

Current legal position

Following disclosure of the Panama Papers, the “Shewan Report” was commissioned by
the Government, which recommended administration and disclosure changes for
foreign trusts. These have now been incorporated in the Taxation (Business Tax,
Exchange of Information, and Remedial Matters) Act (21 Feb 2017), which requires the
following additional information to be supplied to Inland Revenue:

Details of each settlement made on the Trust (other than “minor services”
provided to the Trust for less than market value);
The name, address, jurisdiction and tax identification number of every Settlor,
and every person with a power to add or remove Trustees or beneficiaries;
Details of beneficiaries; and
A copy of the Trust Deed and details of any alterations.

The above details must be properly registered with Inland Revenue (using IR 607A and
900A) within 30 days of the Trust being established at a cost of $270.00 and future
annual returns must be filed at a cost of $50.00.

Where the New Zealand tax Trustees of a foreign Trust do not comply with either the
registration or annual return requirements, the foreign Trust will be subject to a New
Zealand income tax on its worldwide income. However, if the breach was inadvertent
and was corrected immediately, then this sanction will not apply.

Foreign trusts in existence as at 21 Feb 2017 needed to register by 30 June 2017. If
not, provided certain conditions are satisfied, the registration period is extended a
further 4 years from the date the trust was established.

The current sanctions for intentional non-compliance (a fine of up to $50,000.00) will
continue to apply. Extreme care and vigilance is therefore needed.

Taxation

Determining, and accounting for, distributions made by a foreign trust can be
extremely complex. What beneficiary distributions are taxable and which are tax-free
is subject to an “ordering rule”, which says that distributions are treated as coming in
first from taxable reserves before they can be applied against non-taxable reserves.

As the accounts of such a Trust are not always prepared with this ordering rule in mind,
which is especially the case when dealing with New Zealand resident beneficiaries of a
trust established overseas, this can be very difficult. That difficulty is compounded
because often the trust’s accounts are not prepared in English.

Immigrating Settlors – what happens if one arrives in New Zealand and stays?

When the Settlor of a foreign trust becomes a New Zealand resident, the trustees have
12 months to elect that the Trust be treated as a “qualifying trust”. If no election is
made, the Trust becomes a non-complying Trust with significant additional tax payable
by its beneficiaries on asset distributions to them (i.e. 45%).

Conclusion

A lack of care by trustees of a foreign trust may quickly result in non-compliance with
our tax laws. If you haven’t already done so, we strongly urge all trustees of a foreign
trust to engage legal and accounting advice immediately, and if you have, to ensure
regular annual trustees’ meetings occur with both your trust’s legal and accounting
advisors present.

Every situation is unique so please discuss your particular case with a professional advisor who can provide you with a tailored solution. Please contact Pat Rotherham at Parry Field Lawyers patrotherham@parryfield.com or 03 348 8480

Parry Field Lawyers are pleased to release “Social Enterprises in New Zealand: A Legal Handbook” by Steven Moe. The book is a first of its kind and is intended to resource the Social Enterprise sector with useful information relevant for Social Enterprises. It is available as an eBook or a printed copy.

The 100 page book features and introduction by Alex Hannant, the CEO of Ākina Foundation and covers a range of topics such as:

what Social Enterprises actually are;
the different forms of legal structure they can take in New Zealand;
options for reform of the Social Enterprise sector; and
useful information for Social Entrepreneurs.

To get the ebook click here

Printed copies will also be available to those who would like one with a suggested donation of $5 to the Parry Field Charitable Foundation (you can learn more about that registered charity here).

Comments from a few advance readers are set out below.

If you find this resource helpful then please consider joining us in spreading the word to others by sharing this page on social media (see icons above) or emailing the link to one or two other people.

Comments from advance readers of the book:

This is one of the clearest and succinct summaries of issues around Social Enterprise I have read. It is a great resource for those entering into Social Enterprise and a good reference for those already involved.

Peter Townsend
CEO, Canterbury Employers’ Chamber of Commerce

Social Enterprise is becoming increasingly important in New Zealand as we work to solve our complex social and environmental issues. This handbook is an excellent starting point for anyone interested in learning more about social enterprise. I hope it will stimulate discussion and understanding of what is a very exciting opportunity for social and economic development in our country.

Louise Edwards
Chief Executive, Rātā Foundation

Our world has changed. It is now time for New Zealanders to take social enterprise and social impact seriously. This book clarifies the meaning of social enterprise and begins to show organisations how they can have a real positive impact on society. It is an excellent start to enable us all to move collectively to a new way of doing business.

Dr Rachel Wright
Director, Centre for Entrepreneurship
University of Canterbury

A great starter booklet for those wanting to get a basic understanding of social enterprise and the issues and opportunities for making it blossom more fully in New Zealand.

Dr James E. Austin
Eliot I. Snider and Family Professor of Business Administration,
Emeritus Co-Founder Social Enterprise Initiative Harvard Business School

I found Steven Moe’s book both interesting and valuable and believe it will stimulate discussion and further progress in this important area of social and economic development. A strong economy that marries sound business practice with social purpose will mean a more resilient New Zealand.

Dr. John Vargo, Executive Director
Resilient Organisations Ltd

This clearly written handbook is full of practical guidance and thought-provoking insights for social entrepreneurs and their advisers.

Professor Matthew Harding
Chair of the Charity Law Association of Australia and New Zealand

Steven Moe’s book serves to demystify the fast growing social enterprise sector, making it more accessible to both the practitioners and the curious. There is an unnecessary divide between the purely commercial and the charitable, and when they come together some of the most challenging social and environmental issues can been solved and we getting a little bit closer to building a more diverse and inclusive society, where everyone has the opportunity to participate on an equal basis.

Michelle Sharp, Chief Executive Officer
Kilmarnock

Excellent answers to common questions facing the growing number of humans waking up to the new way of thriving in business. I’m excited about the time when this is a history book, marking the time when global business began the paradigm shift to all business being ‘business for good’. Thank you Steven for being a powerful part of this change in New Zealand.

Kit Hindin, Start-Up Activator
Ministry of Awesome

I think the book will make a very valuable contribution to the emerging discussion about social enterprises in New Zealand, and how we can create a better eco-system that will allow them to flourish. I commend the book to anyone who is interested in exploring how we can remove barriers to finding innovative solutions to some of New Zealand’s pressing problems.

Susan Barker
Co-author of The Law and Practice of Charities in New Zealand,
Director of Sue Barker Charities Law, Wellington

At last a lawyer’s perspective on the social enterprise sector in New Zealand. Steven Moe’s book provides valuable and useful information for social enterprise practitioners on how to approach the messy legal and regulatory environment faced by the sector. It is a welcomed addition to New Zealand’s social enterprise literature.

Lindsay Jeffs, Director
Social Enterprise Institute

This is an excellent resource for the growing social enterprise sector in New Zealand! Parry Field are leading by doing, which is what this sector needs most right now.

Camia Young
Founder of Ohu Development

An easy to read book that touches on key topics that will surely stimulate a lot of discussion at both theoretical and practical levels among the New Zealand Social Enterprise community.

Dr Sussie Morrish, Associate Professor of Marketing
Department of Management, Marketing and Entrepreneurship University of Canterbury

Steven Moe has written a very readable, practical and accessible primer for all those interested in driving social change in New Zealand through the application of sound business principles. I congratulate Steven on his proactive leadership and heartily recommend his legal handbook, “Social Enterprises in New Zealand,” to social enterprise stakeholders in New Zealand and throughout the world.

Marc J. Lane
Author of “The Mission Driven Venture: Business Solutions to the World’s Most Vexing Social Problems.”
The Law Offices of Marc J. Lane in Chicago.

This is a landmark piece of work for the emerging social enterprise scene in New Zealand. This resource will be a great conversation starter to help build this community in NZ. Great leadership on the start of this journey. Kapai!

Tim Jones
Grow Good/ B Corp Ambassador

A big change that we have seen over the last few years is with the number of people looking to include values and a purpose within their early stage enterprises. Often these entrepreneurs don’t have the knowledge of the legal options and this “legal handbook” will not only reduce time spent but also minimize costly errors. The handbook also gives a great overview on a number of questions which are important for New Zealand to tackle over the next few years.

Geoff Brash
Founder, GBJ Innovation
Organiser/Facilitator/Mentor, Startup Weekend

An excellent “Field Guide” to social and business structures; what they are and how they work. Steven outlines a path through a very complicated maze of options. Disruptive technologies (exponential and otherwise) are having a significant impact on traditional structures. It is time to rethink how social focus can be most effective.

Rob Lawrence, R & D Specialist
Canterbury Employer Chamber of Commerce

Social Enterprises are becoming an increasingly popular topic of conversation. But with a variety of different meanings attached. Steven Moe provides a very helpful attempt to add clarity to our conversations, to explore some creative options and to point us to some helpful resources.

Alistair Mackenzie
Teaching Fellow, Laidlaw College
Author of “SoulPurpose: making a difference in life and work”

This helpful text comes at an exciting time for social enterprise in New Zealand. We need to use this opportunity to talk about the path of existing social enterprises and about the possibilities across the social enterprise spectrum. We need to help the current not for profit sector gain the skills and experience to explore enterprise. And we need to understand the role of the private and philanthropic sectors in providing capital and support.

Jenn Chowaniec
Trust Coordinator, Wayne Francis Charitable Trust

The label ’social enterprise’ seems to be very ‘on trend’ at the moment – however defining a ’social enterprise’ still remains reasonably elusive. In a country where many businesses have always operated in a socially good way without seeking recognition or formalising business models – this book will help us look at our unique way of doing business and I hope gather conversation to ensure our communities and governments insist Aoteoroa not only does ‘business for good’, but is a leader in the business transformation.

Jo Blair
Founder of Brown Bread

This is an incredibly poignant time to really kickstart this conversation: Canterbury is full of talented and dedicated people working in the ‘social enterprise space’, but oftentimes without a legal structure that really works for them. As leaders, customers, volunteers and commentators in this space, we have all grappled with this particular question – so we’re fortunate to have this piece of work aggregate some of the common opportunities and challenges to enable us to move forward. Onwards and upwards!

Erin Jackson
Director, Narrative Campaigns

This is a “must have” for anyone looking to start up their own social enterprise. It’s a great snapshot of the Social Enterprise legal landscape leading up to the 2017 SEWF and I can’t wait to see what opportunities exist for Aotearoa New Zealand afterwards.

Anthony Rohan
Enspiral Accounting

This book pulls everything you need to know to set up a social enterprise from a legal perspective in a way that is easy to read and understand. It will serve as a reference point for much of our decision making and is a must if you are setting up in social enterprise.

Rebecca Parnham
Co-founder, Krama & Co.

Social enterprise is the future, and this book provides a great launching point for practitioners and their advisors. Thank you for providing this insight and snapshot, Steven!

Anna Guenther
Chief Bubble Blower & co-founder
PledgeMe, a crowdfunding social enterprise

Around New Zealand, there are hundreds – if not thousands – of charities, entrepreneurs, communities, and whanau, investing their time, energy, passion, and resources into social enterprise. They are doing this as a means to end. A means to include more people in the economy, to regenerate the environment, to create and redistribute resources, and to innovate around intractable problems. To say, ‘we are empowered, equal, creative, caring, determined, optimistic, and we are taking charge of our future’.

Social enterprise can do all of these things and represents a systems solution to many of the complex challenges we face. Social enterprise is business but it is business in service to people, conducted in a very human way. It is also a movement that is growing, global, and entirely relevant to the fast changing world we’re moving into.

The individual social enterprise work going on in New Zealand is excellent; world-class. But what we have lacked up until now is the connectedness, intention, knowledge, and coherence that will make our collective effort more productive and powerful. We have lacked the presence of an identity, the guidance of good information, and the grunt of a supporting infrastructure.

This report helps to start solving this problem, giving sound advice and informed guidance for people finding their way in social enterprise as doers, supporters, or customers. It comes at a time when exciting progress is being made across our emerging sector, and contributes to a more strategic approach to building a world-class environment for more social enterprises to startup and succeed.

Ākina’s mission is to contribute to a sustainable, prosperous, and inclusive New Zealand through the growth of social enterprise. We applaud and welcome important resources such as this, which will help bring about these goals.

To access the book click here!

Alex Hannant

CEO of Ākina Foundation

Last week I attended and spoke at the Charity Law Association of Australia and New Zealand annual conference in Melbourne.

I had two observations that I thought it was worth sharing as an encouragement to others:

First, I am so thankful that we do not have a State based system. In many of the sessions so much time was spent on just comparing the position in Tasmania vs New South Wales vs Victoria. For example, fundraising and what licenses you need in each place – it just adds a layer of complexity that we don’t have to deal with and I was grateful for that.

Second, there were about 100 people at the conference and it was really interesting to see the collegiality among the lawyers attending. While in theory they might be ‘competitors’ there was a lot of sharing of information and challenging positions others had taken and discussions about how to improve the sector, advocate for reform, etc. It made me think that it would be great if a similar culture could start to develop in New Zealand.

I think it was worth attending just to have gained those two insights. There was a mix of regulators, practitioners, in house counsel and others who attended – about 100 in total. Here are a few photos of the event.

Have been reading “Zero to One” by Peter Thiel – one of the founders of PayPal – which has the subtitle: “Notes on startups OR how to build the future”. There is a really interesting section where he talks about clean green companies and social entrepreneurship that it might be worth throwing out to see what others think…. While I don’t agree with all his thoughts it is interesting to read opinions of others like this and be challenged about what we do think.

One aspect I do agree with is the idea kind of implied here that if we could move the dial on the “for profit” companies and get them to take more notice of social impacts then there could be a big change. I do worry that people may abdicate their responsibility in these areas by saying, “well, that’s what social enterprises do or think about so I don’t need to take any action and think about my own sourcing, staff policies, use of profits etc”.

For my longer analysis of the key points in the book you can access that here. Here is what he says:

“Cleantech entrepreneurs aimed for more than just success as most businesses define it. The cleantech bubble was the biggest phenomenon – and the biggest flog – in the history of “social entrepeneurship”. This philanthropic approach to business starts with the idea that corporations and nonprofits have until now been polar opposites: corporations have great power, but they’re shackled to the profit motive; nonprofits pursue the public interest, but they’re weak players in the wider economy. Social entrepenuers aim to combine the best of both worlds and “do well by doing good.” Usually they end up doing neither.

The ambiguity between social and financial goals doesn’t help. But the ambiguity in the word “social” is even more of a problem: if something is “socially good”, is it good for the society, or merely seen as good by society? Whatever is good enough to receive applause from all audiences can only be conventional, like the general idea of green energy.

Progress isn’t held back by some difference between corporate greed and non-profit goodness; instead, we’re held back by the sameness of both. Just as corporations tend to copy each other, nonprofits all tend to push the same priorities. Cleantech shows the result: hundreds of undifferentiated products all in the name of one overbroad goal.

Doing something different is what’s truly good for society – and it’s also what allows a business to profit by monopolizing a new market. The best projects are likely to be overlooked, not trumpeted by a crowed; the best problems to work on are often the ones nobody else even tries to solve.”

Am curious – what do others think? Drop me a line at stevenmoe@parryfield.com

We had about 30 people join us last Thursday for our second legal mashup. There was a lot of good questions and participation – thanks to all who came along!

We covered a variety of topics including forms of legal entity for social enterprises, trustee liability, ways to operate as a board, insurance that is commonly taken out by charities and social enterprises and others.

If you would like a copy of the slides drop us a line at stevenmoe@parryfield.com and sign up to our newsletter to get notice of future events like this – we are thinking we will try to run another one in October or so. We will also be loading up videos of the evening soon so check under the video tab for those.

A photo before the event began as people were arriving.

Here are links to the others who came along and gave us an overview of what they do – thanks Rachel, Kit and Jessica:

Ministry of Awesome: http://ministryofawesome.com/
Akina: http://akina.org.nz/
CECC: http://www.cecc.org.nz/

Frequently asked questions for Board nominees

Making the decision to join the board of a charity or trust or social enterprise is often a choice which is made without much information. Often this is simply because the person who may become a trustee is not sure what sort of questions it is that they might want to consider asking. Below we have set out some of the points which you may want to raise prior to agreeing to join a board.

Do you think there are too many questions? Others you think we have missed off? Email Steven at stevenmoe@parryfield.com and let us know so it can be improved for others!

This list originated from the first Legal Mashup we held in early May as it was something that people who came along were asking about. Obviously whether or not the questions are relevant or not will depend on the particular situation of the entity – so bear in mind and be aware that one that is in start-up phase will have completely different answers to one that has been going for 5 years…

While we wrote this with a social enterprise or charity in mind many of these questions would be equally applicable in other contexts such as joining a board of directors.

Before joining the Board I would like to ask for your responses to the following questions:

A copy of the Trust Deed/Constitution can be accessed _____________________________.
The purposes of the Trust/Social Enterprise are _____________________________. Any differences in actual activities (compared to the purposes) are ___________________________.
Our plans for the future include _____________________________. Major projects on at present are _______________ Any activities overseas?
There is an indemnity for board members contained in the Trust Deed/Constitution: Yes / No. We have taken out insurance for board members: Yes / No. What insurance is in place generally particularly if holding events?
Potential liability can result from the following key risk areas (eg health & safety): _______________________.
Our meetings are: monthly / quarterly / half-yearly. In addition to scheduled meetings we also expect board members to _____________________________.
What is the management structure? How does self-governance work for board members eg compulsory retirement after 3 years?
What is the legal entity of the organisation (eg Incorporated Society, Company, Charitable Trust)? Does it have charitable status?
Are the financial statements available to view? Are they audited or reviewed by an accountant?
For verbal discussion rather than in writing: Any employment disputes in last 3 years? Describe. Any third party disputes over provision of services in last few years?

We hope that this list is helpful for those who may be wondering about what topics they should be thinking through before joining a board. You could print this page and give it to your contact to run through the answers with you. Our intention is that it helps all those involved (both current trustees and the new trustee) to ensure there is clear communication from the outset regarding expectations, plans and the status of the organisation. If you are already on a trust then it might also trigger some thoughts for you about whether you need to undertake a strategic review to ensure you have clear answers to some of those questions.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions.
Copyright © Parry Field Lawyers 2017.

Reasons for a Trust Board to incorporate

It is very common for the board of a charitable trust to apply for incorporation under the Charities Act 1957. To do this certain forms must be submitted to the Registrar of Societies – information and access to those forms are here.

But why bother??

Well, incorporating a charitable board means that a group of trustees has a single identity in the eyes of the law – it then “exists” as a form of legal entity. The technical term is a ‘body corporate’ and – separately to the trustees who make up the board – it can be sued, can sign contracts (with a common seal, yes you need one) and can own property.

A board (once incorporated by the trustees of the charitable trust) will not end until certain events occur so it can then administer the trust going forward (whether or not trustees come or go).

Perhaps the biggest reason for trustees to incorporate is that the board itself will then enter into contracts and obligations – if things go wrong the incorporated board is liable for that (rather than the individual trustees). That is important safeguard for the trustees to have in place. Also, since it can hold trust property in its own name that does not need to be held in the names of the trustees themselves.

Having said all that, it is not a legal requirement to incorporate a trust board. If that is not done then the property of the trust is held in the personal names of the trustees.

If you have any questions about the process of incorporating a Trust Board or would like to discuss your situation we are happy to have a chat with you.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions. Copyright © Parry Field Lawyers 2017.