Under New Zealand’s Incorporated Societies Act 2022 (“the Act”), incorporated societies now have more flexibility regarding governance and decision-making. One area that often sparks questions is whether a society can pay its Committee members for services rendered.
The short answer is yes, subject to certain conditions.
Full Powers Under Section 18 of the New Act
Section 18 of the Act grants societies full capacity to carry out any activity, enter into any transaction, and enjoy full rights, powers, and privileges to pursue their objectives. This includes the ability to pay Committee members for their services, provided that the payments are on arm’s-length terms (as outlined in section 24 of the Act).
Importantly, arm’s-length terms mean that the payment should be reasonable and comparable to what an independent third party would expect to receive for similar services, ensuring that it is fair and transparent.
This means that even if your society’s constitution does not specifically allow payments to Committee members, the society still has the power to make such payments under the Act. However, there are several factors to consider before doing so.
Limits on Power in the Constitution
While section 18 provides a broad power to make payments, it also allows a society’s constitution to restrict or modify this power. For example, many societies choose to require member approval before Committee members can be paid either at a general meeting or through a resolution in lieu, or mandate a (majority or unanimous) resolution from the Board before any payments are made. If your society wishes to exercise full powers under the Act, but restrict payments to Board members, your constitution can specify such conditions.
This allows societies to balance flexibility with control, ensuring that the payment process remains transparent and accountable.
Why Consider Including Payment in Your Constitution?
Even if your society chooses not to restrict its powers and allows for payments to Committee members, it may still be wise to set clear expectations within your constitution and set up a Committee policy on the topic.
This can outline:
- When and how payments are made (e.g., for services rendered or as a reimbursement of expenses).
- How decisions are made regarding payment.
Best Practices for Transparency and Governance
Setting clear guidelines on the payment of Committee members is essential for maintaining good governance, particularly for registered charities – as noted in the Community Toolkit and a Charities Services article, clear guidance for such payments is crucial. This can help prevent any potential conflicts of interest or mismanagement of funds, and maintain trust with members, stakeholders, and the public.
To ensure your society remains compliant and well-governed:
- Update your constitution to clarify whether Committee members can be paid and under what circumstances.
- Establish a Committee policy on payments, detailing the process and criteria for making such decisions.
- Consider obtaining advice to ensure that payments to Committee members are made in a manner that complies with the new Act, as well as with any other relevant laws or regulations.
Conclusion
The Incorporated Societies Act 2022 provides societies with greater flexibility to manage their internal affairs, including the ability to pay Committee members for services. While the Act allows for such payments on arm’s-length terms, societies are encouraged to clearly define these arrangements in their constitution to ensure transparency, accountability, and good governance.
If your society is considering paying Committee members, or if you need guidance on how to properly amend your constitution, our team is here to assist. There are a couple of different ways we can go about assisting with this, including preparing a draft constitution for you that is based on our template – this also includes a clause on payment of Committee members.
Please note that this article is not a substitute for legal advice and you should contact your lawyer about your specific situation.
