With over 28,000 registered charities in New Zealand, the Charities Amendment Bill (the “Bill”) will have a far reaching impact in the for purpose sector. The Bill had its first reading on the 28th September 2022 and submissions are being accepted until 9th December 2022. This article sets out some of the key changes introduced by the Bill, with Part 2 explaining how you can make a submission. You can look at the progress of the Bill in Parliament here and see the Bill itself here.
1. Requirements for officers and governance of charities
The Bill includes some clarification and additional requirements for officers and the governance of charities. For example, the Bill sets out the role of an officer includes assisting the charity to:
(a) deliver its charitable purposes; and
(b) comply with its obligations under the Charities Act 2005 (the “Act”) or any other enactment.
The Bill also expands the definition of officer to include a person who is able to exercise significant influence over the management or administration of the entity, along with trustees and members of the governing body. This expanded definition aligns with the definition of officer in the Incorporated Societies Act 2022. The Bill also requires at least one of the officers of the charity to be 18 years or older. This recognises the requirements in the Companies Act 1993 and Trusts Act 2019 for directors or trustees to be at least 18 years old, but also recognises that young people aged 16 or 17 can contribute to charitable work by being an officer.
In relation to governance, the Bill requires charities to review their governance procedures (whether those are set out in their constitution or trust deed or elsewhere) annually. The Explanatory Note suggests this promotes good governance and requires charities to check in on whether their governance procedures are up to date, work towards achieving their charitable purpose and help the charity to comply with the Act.
2. Financial reporting requirements
The Bill allows the regulator of charities to exempt very small charities from the tier four financial reporting standards. The charities that qualify for the exemption and the minimal reporting information that will be required from them will be set out in the regulations.
This change recognises that very small charities are often volunteer run and have limited resources. The Explanatory Note to the Bill explains that this change has been introduced to acknowledge the tier four reporting requirements for very small charities may be disproportionate to the transparency needed from them. We wonder whether the regulations will introduce standards similar to those in the new Incorporated Societies Act 2022 for small societies.
3. Regulatory decision-making
There are two regulators under the Act: Te Rātā Atawhai, the independent Charities Registration Board (the “Board”), and the chief executive of Te Tari Taiwhenua Department of Internal Affairs. The Bill increases the processes these regulators are required to comply with when they exercise their powers under the Act in order to align with best practice, enhance transparency, fairness and accountability of their decision making.
For example, the Bill includes more situations where an entity can object to a decision made under the Charities Act, allows charities to be heard by the decision maker in person, increases time frames for lodging objections and increases the number of members on the Board.
4. Appeals framework
Rather than the High Court hearing first instance appeals on the Charities Act, the Taxation Review Authority (the “Authority”) is given that power. The Explanatory Note discusses how the Authority is the most appropriate existing tribunal to hear these appeals owing to the historical connection between tax and charities law.
Authority decisions can then be appealed to the High Court, or referred to the High Court on questions of law or where the Authority decides the High Court should hear the appeal.
5. Regulatory compliance and enforcement tools
The Bill makes some changes to better the compliance and enforcement functions of the regulators. For example, the Bill explicitly states that charities must remain qualified for registration by maintaining its charitable purposes, have officers that are qualified under the Act and maintaining its rules. This doesn’t introduce new obligations for charities, rather it clarifies what was already there.
The Bill also clarifies the definition of serious wrongdoing and gives Te Rātā Atawhai, the independent Charities Registration Board, greater discretion to disqualify an officer.
We have helped many for purpose entities over the years and would be happy to discuss your situation with you. Please feel free to contact us at Parry Field Lawyers.
We also have other free resources available for charities and for purpose entities that may be of interest:
• Our Charities in New Zealand: A Legal Handbook
• Our Information Hub on the new Incorporated Societies Act 2022
• We host monthly impact calls to hear from a variety of voices across the for purpose sector – you can find out more here
• Below is a discussion of the Charities Amendment Bill with Steven Moe and Sue Barker – this goes into more detail about the changes and how you can make a submission