Charitable trusts and incorporated societies are two common legal vehicles for doing good in New Zealand. There is often confusion around the different structures. We have provided a brief summary outlining the benefits and drawbacks of each option below:
| Incorporated Society | Charitable Trust | |||
| Legislation | 🗸 | Incorporated Societies Act 1908 (to be replaced by the Incorporated Societies Act 2022). | 🗸 | Charitable Trusts Act 1957 and Trusts Act 2019 |
| Minimum number of people involved | 🗸 | 15 members, or 10 under the new Act (body corporate members count as 3 individuals). | 🗸 | We recommend at least 3 trustees or an odd number to prevent conflict. |
| Accountability | 🗸 | Officers are accountable to the members. | 🗸 | Trustees need to operate in accordance with the trust’s deed or be held personally liable for breaching their duties as trustees. |
| Governance | 🗸 | By officers are elected. | 🗸 | By trustees are appointed (usually by existing trustees but this can vary). |
| Elections | 🗸 | Elections of officers, which take place according to the society’s constitution. | X | No elections, trustees are appointed as set out in the trust deed. |
| Stability | X | Societies are less stable owing to the election of officers. There are some stories of members ousting officers, but in our experience these are rare. | 🗸 | Stable governance structure, as trustees are appointed and can remain trustees for a few years (depending on the trust deed). |
| Annual General Meetings | 🗸 | AGMs are required to be held in accordance with the Act and the society’s constitution. | X | AGMs are not required, trustees instead meet regularly to make decisions as required by the trust deed. |
| Flexibility | X | Less flexible structure, as the society is accountable to its members. | 🗸 | More flexible structure, as the trustees must comply with the trust deed. |
| Democracy | 🗸 | Decisions such as amendments to the constitution and the election of officers are made by members, making incorporated societies more democratic. | X | Decisions are made by a select few trustees in accordance with the trust deed. |
| Efficiency | X | Inefficient governance structure, as bigger decisions need to be made by members. | 🗸 | Efficient governance structure, as decisions are made by a select few. |
| Charities registration | 🗸 | An incorporated society can register as a charity. | 🗸 | A charitable trust can register as a charity. |
This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers:
- Steven Moe, Partner – stevenmoe@parryfield.com
- Aislinn Molloy, Senior Solicitor – aislinnmolloy@parryfield.com
- Michael Belay, Solicitor – michaelbelay@parryfield.com
- Yang Su, Law Clerk – yangsu@parryfield.com
- Sophie Tremewan, Law Clerk – sophietremewan@parryfield.com
