New laws see New Zealand grassroots sporting clubs fearing ‘extinction event’

Community sports clubs in New Zealand say they'll be wiped out if changes to the nation’s Incorporated Societies Act aren’t wound back before they take effect next year

As reported by Newsroom, the New Zealand Amateur Sports Association says changes to the law go too far and will result in the widespread dissolution of community groups, including sports clubs because they won't meet the new legal requirements.

Changes to the Act will strengthen compliance requirements for incorporated societies including financial reporting, re-writing their constitution, declaring and managing conflicts of interest, and the need to set up a dispute resolution scheme.

The changes will also see officers assume responsibilities similar to those of company directors, with personal fines for non-compliance that may apply for up to six years after someone has left the club.

The changes were ratified more than a decade after the Law Commission commenced a review of the “uncomfortably old” Incorporated Societies Act 1908.

However, New Zealand Amateur Sports Association Chair Gordon Noble-Campbell believes that, for the most part the current Act had been working well, and the changes brought in were not a “one-size fits all” solution.

Noble-Campbell told Newsroom “I think that the old law needed to be modernised, to remove references to shillings and pence. But the reality is it was fulfilling its purpose in providing a relatively light governance framework for organisations to operate under.

“It was certainly fit for purpose for a section of the community, particularly the section of the community we're talking about. And as already illustrated, even in its relatively light form was proven to be problematic in terms of compliance for community sport clubs.”

Noble-Campbell noted the current annual financial reporting requirements, which if not filed, put the society at risk of dissolution.

Last month 493 societies were dissolved by the registrar as a result of their “no longer carrying on their operations".

Noble-Campbell said about 38% of them were community sport organisations, with about 1000 sports groups dissolved in the past five years - many of which did not realise it had happened and continued to operate.

He said if this was the level of dissolution under the current law, levels would be even higher when the requirements under the Act were stricter, adding “this has the potential to become an extinction event and you might say I said that glibly and rather dramatically, but actually, the statistics we see today suggests that many people - based on their inability to comply with the existing legislation - are increasingly unlikely to comply with the new legislation.

"We shouldn't be trying to make it hard to run and operate a club for the benefit of the community" - Gordon Noble-Campbell, NZ Amateur Sport Association

Any society currently operating or that is set up between now and October 2023 will work under the old legislation, but must re-register with the Companies Office sometime between October 2023 and April 2026.

When they re-register they become subject to the new rules.

Noble-Campbell said while the law had already been passed, the window until the compliance requirements changed was a good chance to amend some of the “more pointed effects” of the new Act.

He wants groups that promoted amateur sport exempt from the stricter financial reporting requirements, and said sports clubs should be able to offload the dispute resolution and conflict of interest requirements to their respective national sporting organisations, such as NZ Rugby or Tennis New Zealand.

He also said the threat of penalties could also be mitigated.

New Zealand Commerce and Consumer Affairs Minister David Clark said there would not be any amendments to the Act before the changes took effect, but there were still regulations that needed to be worked through and there would be more public consultation.

Noting that deterrence concerns were raised during the select committee process, Minister Clark stated “it is important to note that the new Act simply codifies rules that have long existed or would have been made in future by the courts. For example, section 76 of the Act says that a person must consent before being made a member of a society. In my view, it is better that individuals considering taking on the role of society officer have a clear understanding of their duties and potential liabilities.

“Societies, when they become incorporated, benefit from legal personality and limited liability, but with these advantages come responsibilities around governance standards and financial reporting.”