Created: July 23, 2013 at 11:38 AM | Updated: January 4, 2019 | By Community Resource Kit
(This table is also included as a supporting document - you can download it below)
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Unincorporated group
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Incorporated society
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Registered charitable trust |
Registered charitable trust |
Company
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Industrial and provident society |
Māori land trust
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Legislation |
None
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Incorporated Societies Act 1908 |
Charitable Trusts Act 1957
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Charitable Trusts Act 1957
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Companies Act 1993
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Industrial and Provident Societies Act 1908 |
Te Ture Whenua Māori Act 1993 |
Minimum number of people required |
Two individuals |
15 individuals, five corporate bodies, or a mix of both (corporate bodies count for three people) |
5 individuals or existing society
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Two or more trustees
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One or more shareholders
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Seven individual members
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Trustees
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Decision-making |
By members at general meeting/by committee |
By members at general meeting/by committee |
By members at general meeting/by board |
By trustees/trust board |
By directors/ shareholders at AGM |
By members at general meeting/by committee |
By trustees
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Liability of members/ |
Personal liability of members |
In general, limited personal liability, provided decision makers act prudently and within the group's purpose and, if charitable, not for personal gain (specific provisions apply to company directors and Māori land trust trustees) |
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Reporting requirements
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None unless registered under the Charities Act 2005 |
Registrar of Incorporated Societies requires: changes of rules and office annual financial statements (unless registered under the Charities Act 2005) |
Registrar of Incorporated Societies requires: changes of rules and office
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Registrar of Incorporated Societies requires: changes of rules and office |
Companies Office requires: annual return and changes of name, office, rules and directors |
Registrar of Industrial and Provident Societies requires: annual return |
Registrar of the Māori Land Court requires: annual financial statement and changes of trustees |
All organisations registered under the Charities Act 2005 (also known as charitable entities) need to file an annual return (including financial statements) with Charities Services and notify changes to the name, address, balance date, rules, purposes, or officers of the charity to Charities Services. |
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Disposal of assets on liquidation
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Surplus assets can be distributed among members unless charitable status, or other tax-exempt status applies
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Surplus assets can be distributed among members unless charitable status, or other tax-exempt status applies
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Surplus assets must be passed on to other charitable organisations
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Surplus assets must be passed on to other charitable organisations
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Surplus assets can be distributed among shareholders unless charitable or other tax-exempt status applies |
Surplus assets can be distributed among members unless charitable or other tax-exempt status applies |
As the court directs, or to beneficial owners or successors
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Best suited for
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One-off situations, informal groups and clubs
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Not-for-profit groups and clubs – particularly membership or volunteer-based groups especially smaller groups with strong community links |
Good for most not-for-profit groups with a charitable purpose |
Not-for-profit organisations with a charitable purpose – especially where the initial trustees want to maintain control and succession |
Good for groups with a commercial purpose (such as a community business)
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Good for co-operatives, generally with a business/ commercial purpose (such as craft or workers–co-ops) |
Only for Māori land owners or shareholders of corporations
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Advantages
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No external reporting requirements (unless the group is seeking tax benefits or charitable status) Informal structure, with few rules or restrictions |
Democratic, membership-based organisation structure Easy, efficient structure for non-profit organisations (particularly smaller ones)
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Provides a better framework for governance/ management than incorporated societies (especially in larger, more complex groups) Only requires five individuals to incorporate Charitable status and limited liability of members/trust board |
Keeps control in a few hands (the trustees), while enjoying limited liability. This provides longer-term stability (but may lead to staleness/
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Easy to set up Useful where the group has some commercial activities (such as a community enterprise) Keeps control in a few hands (the directors), while enjoying limited liability Often easier to obtain loans (but this may require personal guarantees from directors) |
Profits can be distributed to members (unless the group has charitable status) |
Protection of land from alienation Strong shareholder participation |
Limitations/
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Members may be liable for the debts of the group Not a separate legal entity Not recommended for on-going groups, where groups are employing staff or receiving external funding
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Finding (and maintaining) 15 members may be a problem Risk of committees being overturned annually (at AGM) which may lead to short-term decision-making and limited succession planning (note this can be addressed in the rules) Not suitable for groups with a commercial purpose |
Groups need to have a charitable purpose and cannot distribute profits to members The distinctions between the different types of charitable trusts can be confusing |
Control is with the trustees - there is no accountability to a wider membership base Trustee succession planning is usually by Trustee appointment The distinctions between the different types of charitable trusts can be confusing |
Generally too complex for charitable community organisations Reporting requirements are more complex than other structures Directors may be liable if they fail to meet their obligations |
Not suitable for broad membership- based organisations Because they are quite rare, many accounting and legal professionals may not fully understand how they work |
Not suitable for commercial enterprises Can be cumbersome to operate due to the wide shareholder participation |
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Previous page: Initial considerations for organisational structures
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