Question: I am a registered NZ non-profit. What do I have to do to maintain my legal status?
Answer: You have not stated the specific form your non-profit takes, but in general, non-profit organisations in New Zealand must adhere to certain legal and regulatory obligations to maintain their registration with government agencies.
Here is an overview of these responsibilities:
Legal Structure and Registration
Non-profits must choose an appropriate legal structure, such as an incorporated society, charitable trust, or charitable company, depending on their goals and operational needs.
Let’s examine these structures:
Incorporated Society
This is an organisation formed by a group of members who elect a committee to manage the society in accordance with its constitution or rules. The rules must comply with the requirements of the Incorporated Societies Act 2022 (Societies registered under the 1908 Act have until April 2026 to re-register under the new Act)
- Focuses on collective membership activities
- Decisions are made democratically which can foster inclusivity but may lead to inefficiencies if internal conflicts arise.
- Suitable for clubs, sports teams, or cultural groups where active member participation is essential
Charitable Trust
A charitable trust is established for specific purposes and is governed by trustees (usually a minimum of three). The trust deed outlines the appointment of trustees and the purposes of the trust. A charitable trust can register (be incorporated) with the Companies Office, which provides additional legal status, such as limited liability protection for trustees.
- Designed for managing assets or delivering services for public benefit.
- Trustees hold decision-making power, which can provide stability but may lead to challenges if conflicts arise among trustees.
- Commonly used for organisations focused on education, religion, or the relief of poverty.
Charitable Company
This is formed for specific purposes in a manner similar to a trading company. It is governed by a board of directors and has a formal constitution.
- All profits or surpluses must be dedicated to the charitable purposes outlined in the constitution, with no distribution to shareholders.
- Offers flexibility for organisations that need a commercial structure while maintaining a focus on social good.
- Often used by social enterprises or larger entities with significant operational needs.
Charitable Purpose
Any of the above can qualify as a registered charity if the organisation demonstrates a clear charitable purpose, such as relieving poverty, advancing education or religion, or benefiting the community. These purposes must provide public benefit and exclude private financial gain. The organisation’s governing document (rules document) must reflect these purposes and comply with Charities Services’ guidelines.
Registration with Charities Services under the Charities Act 2005 is voluntary but essential for accessing benefits like tax exemptions. Some non-profits (e.g., churches) can register directly with Charities Services if they meet the charitable purpose test.
Keeping Information Updated and Annual Reporting Obligations
Incorporated societies, charitable companies, and charitable trusts must comply with the requirements of the Registrar of Incorporated Societies or Companies Office. This includes updating details such as addresses, rules, or board composition.
Examples include:
- Reporting changes to a charitable trust board’s rules – within one month of approval.
- Registering changes to rules, deeds, or constitutions with the Companies Office before implementing them or registering them with Charities Services (if also a registered charity).
- Filing annual financial statements for incorporated societies.
For registered charities, the requirements of the Charities Act 2005 take precedence regarding annual reporting and officer updates. Registered charities must submit annual returns to Charities Services that include financial statements or performance reports based on External Reporting Board (XRB) standards. Failure to file annual returns is a common reason for deregistration.
Financial Management and Tax Compliance
Non-profits must manage their finances responsibly and meet tax obligations:
- Organisations seeking income tax exemptions must maintain registration with Charities Services.
- Non-profits that are not registered charities may need to file tax returns (e.g., IR9 for clubs and societies) and register for GST if applicable (note that there is no GST exemption for registered charities). See IRD guidance .
Governance Standards
Charities Services encourages best practices in governance and resource management. Non-profits should implement sound policies and procedures to ensure compliance with laws affecting employees, volunteers, and stakeholders. Financial reporting standards set by XRB apply to registered charities.
Non-profits that breach laws or fail to meet their obligations under the Charities Act 2005 or other statutes may face penalties or deregistration. Serious issues like fraud should be reported to appropriate authorities.
Winding Up Procedures
If a non-profit decides to cease operations, it must follow proper winding-up procedures as outlined in its governing document (e.g., constitution or trust deed). This may involve dissolving or liquidating the entity and removing it from relevant registers. Do not forget to ensure that IRD is advised that the organisation is no longer operating
Conclusion
Maintaining registration as a non-profit in New Zealand requires understanding of, and careful attention to, legal compliance, governance standards, financial reporting, and transparency. These responsibilities not only uphold public trust but also ensure that resources are effectively used for community benefit.
Non-profits should seek professional advice when needed to navigate these requirements successfully.