Charities/NFP - Parry Field Lawyers

Charitable trusts have a long history of supporting those in need. Yet those in charge of decisions about how to use funds should be cautious to ensure that any giving does not create a private gain or financial benefit to an individual. Failure to give in accordance with the permitted charitable purposes can mean a charity may lose its registered status.

To illustrate this it is good to look at a practical example. In 2014, the Charities Registration Board determined that the New Zealand Affordable Art Trust no longer qualified for registration as a charitable entity. The Board found that the Trust’s primary purpose was to promote the private interests of artists. This was outside the scope of charity as it conferred private benefits on artists which were more than incidental to any charitable purpose.

The Trust submitted that its support of artists fell under the ‘relief of poverty’ charitable purpose. This argument was rejected as the Trust chose to assist artists based on criteria such as originality, technique and development, rather than the relative wealth or poverty of the artist. The Board did acknowledge that the Trust helped to advance education in the arts for the general public, however this was not the main focus of the Trust.

A similar approach has been found in the courts. In Commissioners of Inland Revenue v White, Fox J held:

The promotion or advancement of industry (including a particular industry such as agriculture) or of commerce is a charitable object provided that the purpose is the advancement of the benefit of the public at large and not merely the promotion of the interest of those engaged in the manufacture and sale of their particular products. The charitable nature of the object of promoting a particular industry depends upon the existence of a benefit to the public from the promotion of the object.

At the risk of providing too much detail, Lord Simonds, when considering the question of whether an element of public benefit is necessary to achieve charitable status in Oppenheim v Tobacco Securities Trust Co Ltd said:

My Lords, once more your Lordships have to consider the difficult subject of charitable trusts … It is a clearly established principle of the law of charity that a trust is not charitable unless it is directed to the public benefit. This is sometimes stated in the proposition that it must benefit the community or a section of the community. Negatively it is said that a trust is not charitable if it confers only private benefits. In the recent case of Gilmour v Coats [1949] AC 448 this principle was reasserted. It is easy to state and has been stated in a variety of ways, the earliest statement that I can find being in Jones v Williams (1767) 2 Amb 651, in which Lord Hardwicke, LC, is briefly reported as follows: ‘Definition of charity: a gift to a general public use, which extends to the poor as well as to the rich …’With a single exception, to which I shall refer, this applies to all charities. We are apt now to classify them by reference to Lord MacNaughten’s division in Income Tax Commissioners v Pemsel [1891] AC 531, and, as I have elsewhere pointed out, it was at one time suggested that the element of public benefit was not essential except for charities falling within the fourth class, ‘other purposes beneficial to the community’. This is certainly wrong except in the anomalous case of trusts for the relief of poverty with which I must specifically deal. In the case of trusts for educational purposes the condition of public benefit must be satisfied. The difficulty lies in determining what is sufficient to satisfy the test, and there is little to help your Lordships to solve it.

What does this mean for charities?

Charitable trusts should ensure that any benefit they bestow are intended to create a benefit for the public. While a private benefit incidental to a charitable public benefit may be allowed, this should not be the primary focus if a trust wishes to maintain its charitable status.

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 in your journey. Please feel free to contact Steven Moe at stevenmoe@parryfield.com should you require assistance.

Implications of the Covid-19 lockdown

In property transactions, each party must sign an Authority and Instruction form allowing their respective lawyers the ability to make changes to a property’s title on their behalf. Physical signatures on these documents must typically be witnessed by a lawyer or Justice of the Peace. However, in response to the Covid-19 situation, interim guidelines issued by Land Information New Zealand (LINZ) record that Authority and Instruction forms can be signed by means of an electronic signature — until at least these guidelines are revoked. Alternatively, wet-ink physical signatures will need to be witnessed over a video link.

The Government has also made a temporary law change to modify the requirements of witnessing and signing wills and enduring power of attorneys (EPAs). These changes allow wills and EPAs to be signed and witnessed using audio-visual links (for example Zoom, Facetime and Skype etc). For further guidance on how these documents can be witnessed and signed, it is explained here for wills and explained here for EPAs.

In terms of statutory declarations and affidavits, it appears that these may be administered electronically — however, physical signatures would still be required. As above, signatures in these cases need to be witnessed over a reliable video link .

It is still understood that powers of attorney and enduring powers of attorney (and presumably Wills and the like) cannot be signed electronically.

If anything is not clear here then we would be happy to discuss with you — as usual individual circumstances usually mean that the context is important to consider.

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 should you require assistance.

Are physical signatures necessary when executing legal documents?

Not always. The rules are found in the Contract and Commercial Law Act 2017 (CCLA). The core principle is that a signature must be RELIABLE in order to have any legal effect. In determining whether the signature you have provided is reliable, the questions are:

Does the signature adequately identify you?
Does it indicate your approval of the information in the document?
Given the nature of the transaction, is the means by which your signature was provided (physical or electronic) appropriate?

An electronic method must satisfy the first two aspects above in order to be recognised as an “electronic signature” in New Zealand. Generally, an electronic signature is presumed to be reliable provided:

1. The means of creating the electronic signature is:

(a) linked only to the signatory;

(b) under the control of the signatory alone; and

2. Any alterations to either the signature or the information in the document, is detectable.

However, this presumption may be overturned if the electronic signature is held not to be ‘as reliable as is appropriate’ given the purpose and circumstances in which the signature is being required. This is very much a fact-specific determination that will depend on the context of each situation. It is suggested that the following factors be considered:

the size of the transaction (i.e. the level of risk e.g. documents involving large sums);
how often you transact with the other party concerned; and
whether the other party (and yourself) often enters into the sort of agreement represented by the document.

Practical examples of these principles

Below are some case law examples that help illustrate the standard:

Wilfred v Lexington Legal Ltd

An electronic signature (in the form of an email from a client to their lawyer signing “best regards — Harmon”) sufficed as being a reliable for the purposes of entering into a contract for legal services.

Company Net Ltd v Registrar of Companies

Original signatures were required by the Registrar of Companies in relation to company incorporation documents — albeit in this case, there were issues of identifiability that caused concern. The companies office makes clear that they do accept electronic signatures for most documents.

See: https://companies-register.companiesoffice.govt.nz/help-centre/managing-your-online-account/filing-documents-with-electronic-signatures/

Welsh v Gatchell

Agreements for sale and purchases of land can be signed electronically. Notice to the other party about electronic signatures is already provided in the standard terms of the Auckland District Law Society document which is commonly used for these types of transactions.

Consequently, although electronic signatures will generally be considered reliable, where there is a lot riding on a particular document (i.e. a sizeable transaction as opposed to a mere box ticking activity), it appears prudent to require physical signatures. Where physical signatures pose significant inconvenience and you wish to sign electronically, we advise that you give express notice to the other party that an electronic signature will bind all parties to the contents of the document, and that you expressly specify the form of electronic signature required.

What documents can be signed electronically?

As noted above, documents can be signed electronically as long as the signatory is identifiable and the signature is reliable. However, there are two main caveats to this:

Legal Requirement

Where there is a legal requirement on you to give information to a person (thus requiring your signature), you must obtain that person’s consent to receiving the information through means of electronic signature.

Documents of Integrity

Electronic signatures have no effect on documents that concern “matters of integrity” such as:

Documents relating to citizenship, elections, fish and game, civil aviation, corrections, credit contracts and consumer finance, disabled persons community welfare, fisheries, medicine regulations, misuse of drugs, passports, and court procedural documents;
Documents that relate to affidavits, statutory declarations, documents given on oath or affirmation (although there are some short term changes due to Covid-19 which we discuss below);
Powers of attorney and enduring powers of attorney, Wills, codicils and the like;
Negotiable instruments;
Bills of lading;
Warrants to enter, search or seize; and
Fair Trading Act 1986 provisions in relation to consumer standards information on goods or services, and products or safety standards.

Is it sufficient to provide electronic pdf versions of the signed documents or are originals always required?

The inclusion of a counterparts clause in documents allows parties to exchange pdf copies of signed agreements through email or fax. The party last to sign the document effects a binding contract upon their provision of the signed document to the other party/parties. It is common practice for physical signatures to be exchanged in this manner i.e. physical signature presented in electronic form/through electronic means will suffice.

The absence of a counterparts clause in the document itself however means that wet-ink physical signatures will be required. A signature may be deemed unreliable where it is performed in a manner that wasn’t agreed to between the parties as evidenced in the document.

Provision of the originally signed documents is also required when executing deeds. Section 10 of the Property Law Act 2007 requires a signed deed to be delivered in order to take effect. Delivery is commonly understood as being the physical handing over of documents either in person or through post. If the intention is to effect delivery otherwise, we advise that this be made clear in the document itself by recording that the deed shall be deemed delivered upon transmission of a scanned copy of the original executed document by one party to the other.

We live in unprecedented times. In this short guide we have set out key issues which we think Charities in New Zealand should be focussed on.

We will update this article as we have further information and expand it more.

Key Information

We recommend looking at this site for the latest Government announcements on COVID-19. Also, note that there is a specific page for community groups where there is more detail – in particular for eg Churches, regarding gatherings, here.

Government support for Charities

While initially unclear, the government has confirmed that this wage scheme and leave scheme apply to registered charities, non-government organisations, incorporated societies and other entities. These groups can apply if they meet the qualification criteria. We found that this information was the best to refer to but this summary from Deloitte is helpful as well.

Charities Services guidance

Charities Services have published this guide and key points to note are:
• They remain open and will continue to operate to process registrations etc;
• Annual returns can be extended – best email for info is info@charities.govt.nz;
• Charities Services will not be accessing their post during the shutdown so contact by email;
• They suggest formally postponing AGMs if needed.

Governance

We suggest this is a great chance to look back at your purposes and ensure that they are being followed. Why not also check policies and other rules? We also suggest you ask questions as a governing body to ensure that everyone understands the finances and budgets – how will they be affected? Remember, there are obligations as trustees which need to be complied with, for a summary see here. Finally, if you are making important decisions then record them in minutes of meetings. It may be that due to physical distancing you will need to adjust how you have meetings – we use Zoom.

Contracts

Consider seeing what they say about “Force Majeure” events – things outside of your control – there may be provisions which help to delay provision of services or goods at this time. Is some renegotiation needed around the terms? Price? Timing?

Leases

If you have a commercial lease have a look and see if there is an “Emergencies” clause. If you have such a lease it depends what it says – so it is worth checking your agreement with the Landlord. If you have a recent ADLS version Deed of Lease (which is industry standard) then there is a definition of “Emergency” which includes an epidemic. Clause 27.5 then has provision about access to the property in an emergency – see the screen shot – that refers to “a fair proportion of the rent and outgoings shall cease to be payable…” in some circumstances where you are unable to access the premises as a consequence of the emergency. Use that clause as the basis to talk with your Landlord in the coming weeks.
As a side note, if you only ever signed an Agreement to Lease, don’t panic that it doesn’t have that clause, as the Deed of Lease provisions are deemed to be incorporated into the Agreement to Lease as well (if it is an ADLS form) – see clause 4 of the ADLS Agreement to Lease form.

Other guidance

There is a lot out there – but here are some resources:

• For those in Churches, we have created this book – the principles would apply to any charity.
• Philanthropy NZ have issued this helpful summary of things to consider for COVID-19.
• As mentioned above, check out the Charities Services link here and what they refer to.

On March 26 2020, the Government announced more support for community groups. You can find out more here.

Questions?

This article is not a substitute for legal advice and you should consult your lawyer about your particular situation. Feel free to contact Steven Moe stevenmoe@parryfield.com or Kris Morrison krismorrison@parryfield.com at Parry Field Lawyers.

Are you an entity that carries on business for the benefit of a registered charity? Then it is essential that you are aware of the incoming changes to business income tax exemptions. This article explains what the current law is and how the incoming changes will impact both registered and unregistered entities.

A key benefit of being a registered charity is enjoying the tax exemptions on business and non-business income set out in the Income Tax Act 2007. Under section CW 42, registered charities do not need to pay tax on their business income provided that they carry out their charitable purposes in New Zealand. However, the section goes further and extends the exemption to entities that carry on business for the benefit of a registered charity. This means that businesses can benefit from this exemption without registering with Charities Services. Therefore these businesses are not obliged to comply with the charity reporting requirements.

The Government has been concerned that some businesses may be taking unfair advantage of the provision, undermining the transparency and accountability mechanisms in the Charities Act 2005. As a result, the Taxation (Annual Rates for 2018-2019 Modernising Tax Administration, and Remedial Matters) Act 2019 narrows the eligibility for this exemption. Taking effect from the 2020-2021 income year, an entity must be registered as charitable to be eligible for a business income tax exemption. This means that an unregistered entity carrying on business for the benefit of a registered charity is no longer eligible.

This will have an impact on companies that are owned by a charitable trust. From 2020, the charity’s registration will no longer shield that company from income tax obligations. Entities that are currently relying on another’s registration need to consider whether they are eligible for charitable registration in order to retain this benefit. This could involve revising the constitution of the business and making clear it is sending profits to the charity.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Our team is experienced with charities, social enterprises and trusts that are common in this area of law. We would be happy to assist you in your journey. Please feel free to contact Steven Moe at stevenmoe@parryfield.com or 021 761 292 should you require assistance.

We live in a time when paradigms are colliding. Old conceptions from an extractive economy which have been accepted for decades are being challenged by new ideas that are planted in the soil that dreams of a regenerative economy. One outworking of this is the growth of “Impact Investing”. In this paper we outline what that is, why it matters, discuss examples and cover the implications for NFPs interested in this area.

What is Impact Investing?

Traditionally, the primary driver when looking at an investment has been monetary returns for the investor. “You can offer a 9% return on investment? Well, I can get the 11% over here…” However, such an outlook is limited and narrow because it is only focussed on financial returns.

Impact investing offers a different and more holistic approach. The Global Impact Investing Network provides the following definition: “Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”

So the alternative presented by impact investing is that there are other considerations that need to be thought about beyond financial returns, such as:

What does the business actually do – is it an extractive business which is harmful to the planet?
Who does the buisiness employ – is the business model built on the premise that there is exploitation in how cheaply it can produce whatever it makes, either onshore or offshore?
What other outcomes are there – perhaps social, cultural, environmental or other factors will be mpacted by the business?

Key attributes

Some of the key attributes of impact investing include a desire to achieve a positive social/environmental (or other) impact, a plan to measure this impact and an expectation of generating a financial return on the capital invested. So in an NFP context, this is more than just grant making (or receiving) as the funds actually come back to the investor. The key is that there will be some positive impact through the investment, while still generating positive return for the investor. This also means an investor may need to think a bit longer before they decide what to invest in.

How does Impact Investing Work?

Impact investing is not a one-size-fits-all model. Different investors may have different impact and financial aims, meaning the form and terms and conditions of investment will be different in each scenario. However, to create a level of consistency, the International Finance Corporation has created a framework for managing impact investing.

Source: Investing for Impact: operating Principles for Impact Management, IFC, 2019,

https://www.impactprinciples.org/sites/opim/files/2019- 06/Impact%20Investing_Principles_FINAL_4-25-19_footnote%20change_web.pdf

It is worth noting that there are different types of impact investing (e.g. managed funds, CDFIs (Community Development Finance Institutions), SIFIS (Social Investment Finance Intermediaries), social impact bonds, direct investment, investment clubs and catalytic investment).

Why is Impact Investing Important?

Increasingly, organisations are being pressured by both shareholders and stakeholders to achieve a social impact alongside financial returns. Larry Fink, CEO of Blackrock (the largest investor in the world at around US$6.8 Trillion) has stated, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” According to the Morgan Stanley Institute for Sustainable Investing, 85% of investors surveyed were interested in engaging with Impact Investing. It is clear that funders are now expecting more from the organisations they choose to invest in.

A Broader Shift?

This represents an expanded view of the role companies play and to whom they are accountable. While companies have traditionally focused on achieving the best financial outcome for their shareholders, the interests of stakeholders is becoming increasingly relevant. The Companies Act 2006 of the United Kingdom focuses on promoting a company’s success, “for the benefit of its members as a whole.” Impact investing is only one aspect of a much broader shift in thinking that is challenging (and hopefully transforming) the shareholder capitalist order.

Examples of Impact Investing in NZ

It is useful to look at some examples of impact investing to show this is more than just a theoretical discussion.

Ākina

The Ākina Foundation is dedicated to transforming the values of the New Zealand economy by supporting enterprises and businesses in creating positive impact for the land and people of Aotearoa. Ākina is leading the way in Impact Investing, co-establishing New Zealand’s first impact investing fund. The Impact Enterprise Fund manages $8.7 million and has supported several projects, including Waikaitu and Melon Health. Ākina also introduced Impact Investment Readiness Grants to provide social enterprise and impact-driven businesses support to become “investment-ready”.

Purpose Capital Impact Fund

The Purpose Capital Impact Fund has raised $20 million and is aiming to raise $30 million to, “generate meaningful impact and financial returns in its regions and across New Zealand.” Having already reached its initial target, it is one of New Zealand’s largest impact investing fund. The Fund focuses on tackling big issues such as affordable housing, environmental degradation, climate change and inequality and aims to generate financial returns of 5-6% per annum (net of fees and expenses).

Community Finance

Community Finance provides low cost finance to New Zealand’s Community Housing Providers to build new, safe and affordable homes for Kiwis (disclaimer: the author is he chair of this company). Their finance model enables investors, philanthropists and foundations to invest in a meaningful and ethical way to help develop thriving, diverse and inclusive communities. Their lending platform, called the “community-to-community model”, enables investors to ethically invest for the benefit of communities and help make a positive impact. Investors receive regular reports on the direct social impact of their investment as well as a financial return of between 2% pa and 2.50% pa, which is similar to the financial returns on corporate bonds and term deposits. Community Finance has partnered with a range of Community Housing Providers including the Salvation Army, Habitat for Humanity and Community Housing Aotearoa to activate new housing supply where it is most needed. Community Finance also has three pilot projects under way in Auckland, as well as emergency transitional, social and affordable housing projects in Bay of Plenty and Christchurch.

What does this mean for New Zealand NFPs?

By just relying on grants, NFPs are reliant on other activities (such as fundraising) to raise funds.Conversely, the tenets of traditional investment may clash with the charitable purposes of aNFP. Impact investing provides NFPs with a unique way to invest funds in accordance with their charitable purposes (or potentially to receive investment themselves). The trustees of a charitable trust may be able to invest the trust’s assets in projects that are making an impact, while receiving a return.

However, impact investing isn’t for everyone and there are many things that a NFP should consider before engaging with this new model of investing.

Option B: Those seeking to Invest

What do NFPs need to consider when exploring impact investing within their future investment plans?

It is important for NFPs consider what impact they want to achieve – is the way they have always done things the only way? One option that could be considered is through investing for impact. Critical to this is how to measure impact and set expectations and create accountability. The NFP will also need to address what to do if the impact is not achieved.

As with any form of investing, impact investing carries risks which NFPs should consider. For example, as impact investing is an emerging concept, there is less capital in the market. This means that it may be harder to sell investments if capital is needed. NFPs need to think about whether they will be in a position to wait the full duration of the investment. What are the primary motives – purpose or profit or both?

What types of projects suit this model of investment?

There are different types of projects that NFPs may invest in. An organisation may seek seed funding, allowing them to research and develop new ideas. Alternatively, money may be invested to grow an existing project or enable a business to perform a contract (e.g. social bonds). Finally, impact investment can allow an organisation to purchase assets which will provide revenue over time.

What legal questions does an organisation need to take into consideration before embarking on this model?

The governing body of a NFP must ensure their investing activity complies with legislation and their governing documents. For example, Sections 13A and 13B of the Trustee Act 1956 enable trustees to invest prudently in any property. This means that trustees must exercise care, diligence and skill when investing trust assets. Section 13E sets out a list of factors that trustees may consider when choosing to invest. It is important that trustees seek professional advice when choosing to invest and take steps to reduce the risk of breaching their duties.

The trustees must also ensure they are complying with the trust deed. The trust deed may direct trustees how to use the trust’s assets and have instructions on investing. The charitable purposes of a registered charitable trust will also guide the trustees as to the type of projects they should invest in. Where possible, it may be beneficial to amend the trust deed to expressly allow the trustees to carry out impact investing. If the trustees are unsure of their obligations, it is recommended that they obtain advice.

Positives

There are many positive aspects of impact investing. It represents the future of investing, as traditional views of business and charity are being challenged. Impact investing also diversifies income streams, opening up new opportunities to generate income while making a positive impact. And it empowers others through more than just providing grants. While there may always be a place for grants in the NFP sector, impact investing widens the scope of both fundraising and investing and successfully integrates profit with purpose.

Challenges

While impact investing is an exciting and emerging concept, there are several challenges that must be addressed to ensure its growth. Key challenges include:

Readiness: while there are many opportunities to create impact in New Zealand, some entities are not yet ready to seek investment. Groups that would traditionally seek grants may lack the training to engage with investors. This means that more resources need to be allocated for preparing these organisations for investment.
Greenwashing: as impact can be hard to measure, there is a fear that organisastions may claim their product/service creates a positive impact but, in reality, has very little social/environmental benefit. This means standards to measure impact must continue to be developed and investors need to have clear reporting mechanisms to ensure accountability
Inefficiency/difficulty: in a 2016 survey carried out by Ākina, 10% of organisations surveyed had sought impact investment but had found the process difficult and inefficient. They also noted that there was often a disconnect between the objectives of the investor and investee. This means that organisations need to consider how to make impact investing more accessible to organisations and investors need to clearly set out their expectations before investing.

Impact investing is here to stay and we are confident it will grow as more people step back and think through how they are investing their funds. It represents one element of a broader shift in thinking, as the traditional values of investing and capitalism are challenged. While not all organisations will be able to engage in impact investing, NFPs should consider how they can best achieve their desired impact and whether impact investment is the way forward. They should think about what impact they want to achieve, how to measure that impact and how to manage the risks of investment. Finally, they should ensure they comply with any legal obligations imposed on them to prevent a breach of duty. We look forward to see how impact investment reconciles profit with purpose, for the benefit of shareholders, stakeholders and the future of Aotearoa.

Should you need any assistance with these, or with any other NFP matters, please contact Steven Moe at Parry Field Lawyers stevenmoe@parryfield.com (+64 3 348 8480).

Interested in pursuing a purpose or cause that benefits the community? The type of vehicle you use is critical in ensuring your efforts are effective and that any assets you hold are protected.

Charitable Trusts and Incorporated Societies are two common vehicles used in New Zealand that often cause much confusion. We provide a short summary outlining the benefits and drawbacks of each option below:

Incorporated Society

• Governed by the Incorporated Societies Act 1908 until the society has reregistered under the Incorporated Societies Act 2022.
• Members can come and go without affecting the vehicle’s identity.
• Minimum number of 15 members required (Body Corporate members do however count as three (3) individuals).
• Usually used by sports clubs, cultural groups, etc. that see benefit in wider involvement.
• Accountability: committee members (officers) are accountable to the members.
• Administration costs: annual financial statements must be filed and annual general meetings held.
• Control: democratic control of the vehicle and its activities by its members. Inefficiency may result if majority of the members hinder the society’s purposes. There are some stories of members ousting officers but in our experience this would be very rare.

Charitable Trust

• Governed by the Charitable Trusts Act 1957/Trust Act 2019.
• We recommend at least three trustees or an odd number to prevent conflict.
• Accountability: individuals (a.k.a trustees) need to operate in accordance with the trust’s deed or be held personally liable for breaching their duties as trustees.
• Administration costs: proper records required for activities undertaken, etc. Trustees must meet regularly to make decisions as required by the trust deed.
• Control: decisions are made by a select few which may mean greater stability and efficiency. Conflict between the trustees however could adversely affect the performance of the trust. As trustees appoint each other, the ability to change hands of controlling power may be difficult.

Various factors must be considered before committing to a vehicle. We generally find that a Charitable Trust is the most flexible of the two. However, it is important that you consider how your operations are likely to look like. Imagine the future. Will your vehicle advance or hinder your ability to effect your purpose?

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Our team is experienced with charities, social enterprises and trusts that are common in this area of law. We would be happy to assist you in your journey. We have free resources for start-ups, boards and companies including “Start-ups Legal Toolkit” which covers the key issues we see people face when starting out (it’s a free PDF guide in the resources section of this site). For more information, please feel free to contact us at Parry Field Lawyers:

Steven Moe, Partner – stevenmoe@parryfield.com
Yang Su, Senior Solicitor – yangsu@parryfield.com
Michael Belay, Solicitor – michaelbelay@parryfield.com
Sophie Tremewan, Solicitor – sophietremewan@parryfield.co

Are you considering joining your first board and not sure where to begin or what you should be thinking about? Below are some key points to be considering (these reflections are a summary that came from an hour long discussion with a group of experienced board members Steven Moe helped facilitate recently – so is the collective wisdom of about 15 people):

Be clear on your motivation – if it’s about kudos or prestige then it is unlikely to result in being effective or be sustainable. One way to test your motivation is (for non profit boards) to consider whether or not you would actually give them money if they asked for that? If not, well…
Expectations are critical – so clarify what is expected of you (the number of meetings, number of committees, other work contributions) – it is not understanding what is expected of you that usually leads to issues.
People are key – talk with the CEO, meet with the other board members, get to know them first before committing.
Undertake due diligence – do at least some basic checking and ask to see the finances, understand why the last person left, ask questions about future strategy. If it is appropriate, ask to attend a board meeting just to see how they operate before agreeing to join – and pay particular attention to ‘board only time’ to see what is discussed and the style and approach of the chair.
Ask for an induction – make it an expectation that you will receive an induction to learn about the history, ways of decision making, explanation of future etc. Having a manual for new board members can be good too.
Mentors – Value and seek out mentors who can give you advice as you start a governance role.
Ask questions – don’t be afraid to ask things before you join, in fact that is often what a board is looking for in a new appointee because it shows the style and approach the person brings.
Culture rules – make sure you find out about the culture of the board and as part of that learn how the CEO relates to the Board.
Resources – Some good resources can be found at Sport New Zealand here as well as IOD resources here and BOMA directors programme courses here. For more information on governance, you can also check out our article “Good Governance” here.

Having posted the points above on Linked In there were a lot of comments added with some insights from others, such as:

Dorenda Britten: Listen
Sue McCabe: Make sure you are up for what can go wrong – not just business as usual governance – and realise the seriousness of the accountability you take on. My first governance role was for the childcare provider my kids were at. I wanted to ‘give back’ and get experience. We found out that the crèche building had friable, leaking asbestos (so had to consider whether we’d breached health and safety law), needed to manage understandable health worries from staff and parents (no risk in the end), then it led to the centre’s closure and we had to lay off the most wonderful staff and wind up the business. Thankfully the Board was strong and competently led by the Chair Kelvin Wong, so the issues were worked through as well as they could be. Good question Steven Moe – I look forward to more answers.
Camille Wrightson: Particularly as a young woman- you might be surprised what you can contribute! Don’t assume everyone in the room is necessarily smarter than you or that they’ve thought of everything.
Hannah McKnight: Make sure you truly have the time to commit to a Board role without spreading yourself too thin at mahi, at home, and with other commitments you value. Wellbeing comes first and while an amazing opportunity, you need to ensure you can give your full self to a Board. This is why I’m yet to go ahead with a formal Board position. Timing is everything.
Andrew Phillips: Read your rules document / deed very carefully or maybe advise myself of the outcome of the Cricket World Cup this year, a boundary count victory has got to pay out reasonably.
Barry Baker: Really good question , research the chair and their back ground. Meet with them and get a feel for them. The chair (and CEO relationship ) is a good indicator of how the board and org operate.
Dorenda Britten: Read your briefing/ board papers, learn all you can about the organisation concerned – its history, threats and the context for future opportunities. Listen and observe the characteristics of the existing board members and the leadership team. Figure out how best to use the skills you have been hired to contribute.
Phil Johnson: Temper your enthusiasm to “get involved” with your responsibility to govern. Mistake I made in my first role was to assume that operational involvement was an inherent element of governance.

We hope that these tips will be of use to you as you start on the journey of joining a board. Please feel free to contact Steven Moe at stevenmoe@parryfield.com or 021 761 292 should you require assistance – we have a lot of free resources for start-ups, boards and companies including “Start-ups Legal Toolkit” which covers the key issues we see people face when starting out (it’s a free PDF guide in the resources section of this site).

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