The Charities Amendment Bill – what it means for registered charities in New Zealand

The Charities Amendment Bill, which passed in the Committee of the Whole House on 20 June 2023 will, if enacted, introduce new governance and reporting requirements for registered charities.

This article sets out some of the key provisions in the Bill and the potential implications for the registered charities and their officers.

Introduction

The Charities Amendment Bill (Bill) is the result of a process to review and modernise the Charities Act 2005 (Act). The Bill is intended to clarify the role and responsibilities of ‘officers’ (currently defined in the Act to include trustees of a trust or members of a board governing the charity) of registered charities, increase transparency within the charities sector, improve access to justice, and reduce barriers faced by smaller charities.

Anyone involved in the operation and management of a registered charity needs to be aware of what is proposed and how it will affect the operation of that charity. This article sets out some of the key changes of proposed in the Bill.

Governance of Charities

The Bill clarifies the roles and responsibilities of officers of a charitable entity, and adds a number of additional requirements for the governance of charities. In particular:

• the Bill sets out that the role of an officer includes a requirement to assist the charity to deliver its charitable purposes and to ensure the compliance with the charity’s obligations under the Act;
• the definition of “officer” is expanded to include a person occupying a position in the charity who is able to exercise significant influence over substantial decisions of that charity. This is in line with the approach taken in other legislation, such as the Incorporated Societies Act 2022;
• the Charities Registration Board will be empowered to disqualify an officer for ‘serious wrongdoing’ or a significant or persistent failure to meet their obligations, without having to de-register the charity itself;
• all registered charities will be required to undertake a three-yearly review of their governance procedures. An explanatory note to the Bill records that this promotes good governance and ensures that work towards achieving the charitable purpose is front of mind for officers of a charitable entity This is a timely reminder to charities to ensure that they have written governance procedures, follow their rules, and that their rules are fit for purpose; and
• there will now be an explicit requirement for charities to operate in a way that qualifies them for registration. For example, a registered charity must maintain charitable purposes and operate in a way that promotes those purposes, have qualified officers, and have rules that are compliant with that charity’s governing legislation (i.e, the Incorporated Societies Act 2022, the Trusts Act 2019, and the Charitable Trusts Act 1957).

 Financial reporting requirements

Under the Bill, the Department of Internal Affairs (DIA) will have the power to exempt very small charities from complying with financial reporting standards, and instead an exempt charity will only be required to provide an annual return with “minimal information”. This change recognises that very small charities are often run by volunteers and have limited resources to comply with the reporting requirements currently in place for registered charitable organisations, What constitutes a small charity and minimal information is not defined in the Bill and will likely be included in supplementary regulations if the Bill is passed.

The Bill also aims to improve transparency in reporting of funds for larger charities. Charities Services has indicated that, in conjunction with the changes proposed by the Bill, it will now require larger charities to report on the reasons for their accumulated funds (including cash, assets, and other resources), with the aim of increasing transparency as to the need to hold such funds.

Appeals Framework

The Bill empowers the Taxation Review Authority (TRA) to hear appeals against decisions of the Charities Registration Board. For example, if the Charities Registration Board deregisters a charitable entity, the charity may make an appeal to the TRA rather than to the High Court (which is the current position under the Act).

This amendment intended to increase access-to-justice as the appeals process to the TRA will be more expedient, informal and less costly than the current regime. Charities will be able to represent themselves, further reducing legal costs, and the timeframe to lodge an appeal is increased from 20 working days to two months.

Consultation

Charities Services will be required to consult with the charitable sector when developing significant guidance materials for charities. This gives the charitable sector the ability to better participate in matters that affect it.

Summary

The Bill has now moved to its third and final reading, and subject to the Bill being acceptable to Parliament, submission to the Governor General for royal assent.

If you are involved in a registered charity, keeping up-to-date with the development of the Bill and any regulations that have an impact on the day-to-day operations is important.

Want to Know More?

If you have any questions about the Charities Amendment Bill or would like to undertake a legal review of your charity’s rules, please contact our specialist property team.

PDF version: here.