18/09/2023·5 mins to read
Charities Act changes coming in October 2023
The Charities Amendment Act 2023 was enacted in July 2023 and amends various aspects of the charity registration and reporting regime under the Charities Act 2005.
Key changes affecting charities already registered or applying to register under the Charities Act come into effect from 5 October 2023.
This article focuses on the October 2023 changes and their implications for registered charities.
Action points for registered charities:
- Don’t panic! The Amendment Act does not make wholesale changes to the Charities Act and in the ordinary course you will not need to change your charity’s governing document.
- Add a triennial governance review to your charity’s schedule.
- Identify your ‘officers’ and make sure they’re not disqualified and are listed on the register.
- Update your charity’s officers regarding their role and duties.
- Make sure your fundraisers can provide your charity’s registration number on request.
If you need further details regarding the Amendment Act or assistance with Charities Act registration and compliance matters, get in touch with one of our experts.
Background to the Amendment Act
The Amendment Act can be traced back to the review of the Charities Act that began in 2018. The review, including its scope and its conduct by the Department of Internal Affairs (DIA), was controversial from the outset and attracted numerous submissions. To give you a flavour of submitters’ concerns, the NZ Law Society’s submission to which we contributed is available here.
The Amendment Act itself has also been heavily criticised as failing to deal with submitters’ concerns regarding the Charities Act regime and instead prioritising DIA, not charitable sector, concerns. To many, it smacked of legislation introduced by the government late in its term, under the influence of DIA, simply to be seen to have done something as a result of the review.
The Charities Amendment Bill also drew a large number of Select Committee submissions, including many calling for the bill to be withdrawn. You can read our submission on the bill here.
Nonetheless, the Amendment Act has been enacted and charities need to be ready for forthcoming changes.
The October 2023 changes and action points
1. Mandatory triennial review of governance procedures
A charity registered under the Charities Act will be required to review its governance procedures (whether set out in the charity’s governing document, policies adopted by the charity or elsewhere) at least once every 3 years. In doing so, the charity must consider whether its governance procedures:
- are ‘fit for purpose’;
- assist the charity to achieve its charitable purpose(s); and
- assist the charity to comply with the requirements of the Charities Act.
There is no immediate urgency to conduct the required governance review; registered charities can conduct their first review any time in the next 3 years.
All registered charities should add a triennial governance review to their schedule and ensure that each review ticks all of the statutory boxes noted above, and keep appropriate records of each review.
2. Changes to the Charities Act ‘officer’ definition
The ‘officer’ definition under s 5 of the Charities Act is being amended so that for all forms of charity, including trusts, a charity’s officers will include any person (individual or corporate) occupying a position in the charity who is able to exercise significant influence over substantial decisions of the charity. This includes:
- For trusts, the trustee(s).
- For other forms of charity, members of the board or governing body of the entity.
- In all cases, any other person (individual or corporate) occupying a position that enables them to exercise significant influence over substantial decisions. The legislation notes two examples, a CEO or treasurer, but those examples are not exhaustive.
In all cases, the definition is also extended to include any other person (individual or corporate) who has powers conferred on them to make decisions that would otherwise fall on the charity’s trustee(s), board or governing body (even if the person does not hold a position in the entity).
Regulations can also include or exclude particular persons or classes from the definition, but at this stage there are no such regulations.
All registered charities should check their position in relation to the ‘officer’ definition change, to make sure that all of their Charities Act ‘officers’ are properly identified, not disqualified from acting as officers, and listed on the Charities Register. Many charities will need to certify and list one or more additional officers.
A charity should also bear in mind that the Charities Act ‘officer’ definition is not identical to ‘officer’ definitions in other legislation that might apply, or soon apply, to the charity (eg, the Health and Safety at Work Act 2015 and the Incorporated Societies Act 2022). A charity’s Charities Act ‘officers’ may differ from its officers under other legislation (and from its officers as referred under its governing document).
The ‘officer’ definition change is particularly important for trusts, because to date a trust’s officers have been limited to the trustee(s) of the trust (whereas for other forms of charity, eg charitable companies and societies, the officer definition already covers board/governing body members and others holding positions of significant influence over the management or administration of the charity).
A trust’s officers may now include, for example, the directors/board members of a corporate trustee, any CEO, treasurer/CFO or other such person engaged by the trust, and potentially others such as any settlor or protector holding rights/powers under the trust’s terms.
3. Updated officer disqualification criteria and prescribed role
The principal significance of the ‘officer’ definition is that, for a charity to become and remain registered under the Charities Act, all of the charity’s officers must not be disqualified from acting as officers under the Charities Act.
Existing disqualification criteria include bankruptcy, conviction for certain types of offence, prohibition from undertaking company roles, and other such criteria. From October 2023, the criteria will be updated to refer to offences relating to the financing of terrorism and prohibition from undertaking incorporated society roles. It will also be necessary for at least one Charities Act officer to be 18 years or older at all times.
The Charities Act officer disqualification criteria overlap with, but are not the same as, the disqualification criteria that may apply, or soon apply, to specific officer positions under other legislation (eg, disqualification criteria applicable to trustees under the Trusts Act 2019, directors under the Companies Act 1993, and officers under the Incorporated Societies Act 2022).
The criteria under all applicable legislation need to be taken into account, as well as any further qualification/disqualification criteria under the charity’s governing document.
From October 2023, the Charities Act will also expressly provide that the role of every officer of a charity includes assisting the charity to ‘deliver its charitable purpose’ and comply with its obligations under the Charities Act and any other enactment.
The new provision is an add-on to any statutory duties (eg, under the Trusts Act 2019, the Companies Act 1993, the Incorporated Societies Act 2022 or otherwise) and other duties (eg, under a charity’s governing document and/or its engagement of an officer) applicable to an officer’s position. The provision applies regardless of the particular nature of the officer’s position.
The new provision should not be unduly onerous, but your charity should update all of its officers regarding their role and duties. Your charity’s internal documents/materials relating to your officers may also need to be updated.
4. Expanded fundraiser duty to disclose a charity’s registration number
The existing duty of telephone and internet fundraisers to disclose a registered charity’s Charities Act registration number to the public upon request will be expanded to cover all fundraisers (not just telephone or internet fundraisers).
The duty will apply whenever a person (referred to in the Charities Act as a ‘collector’), acting on behalf of a registered charity, requests funds, canvasses for subscriptions, sells raffle or lottery tickets, or appeals for donations.
Again the expanded duty should not be unduly onerous, but your charity should ensure that its fundraisers are aware of the duty and internal documents/materials may need to be updated.
Other Charities Act changes to be aware of
The Amendment Act includes various other changes to the Charities Act which, in the ordinary course, should not raise any immediate issues or implications for your charity.
Other changes include:
- Increasing the maximum membership of The Charities Registration Board - Te Rātā Atawhai (CRB), which is principally responsible for registration/deregistration decisions and other decisions under the Charities Act, from 3 to 5.
- Allowance for DIA, in accordance with regulations that are yet to be issued, to exempt small charities or classes of small charities from financial statement preparation and filing requirements and instead require such charities to file minimum financial information with their Charities Act annual returns – but note that financial statement requirements for small ‘Tier 4’ charities are being simplified anyway (as outlined here).
- Provision for DIA to consult on any significant ‘best practice’ guidelines or recommendations before they are issued (but this should be happening anyway, without being prescribed under the legislation), and for the publication of CRB decisions to decline applications for registration (which already happens).
- Updated provisions relating to documents/information on the Charities Register, including provision for additional charity documents/information to be included on the register, updated provisions regarding prevention or restriction of public access to registry information, and provision for amendment of the register to correct mistakes.
- Provision for the CRB to be able to disqualify a person from acting as an officer of a registered charity without the charity itself being deregistered (unless the CRB separately determines that deregistration of the charity is warranted).
- An overhaul of the dispute/appeal provisions under the Charities Act in relation to registration/deregistration decisions and other decisions. This includes provision for appeals to be heard in the first instance by a review authority (the Taxation Review Authority, which will become the Taxation and Charities Review Authority), instead of the High Court. These changes do not come into effect until 5 July 2024 (and will not apply to any court proceedings already pending or in progress before that date).
DIA is also in the process of consulting on updated Charities Act registration application and annual return forms, with the consultation period scheduled to close on 24 October 2023. The proposed updated forms and related reference documents are available here.
The proposed forms reflect the Amendment Act changes and charity financial reporting developments. They also seek to collect additional information from charities, including information regarding charities’ accumulated funds and matters relevant to charities’ eligibility to benefit from exemption from income tax and donation tax incentives.
Get in touch
If you have any queries or concerns regarding any of these changes or the proposed updated forms, please get in touch.