Further consultation on modernising the Charities Act 2005

The Department of Internal Affairs (DIA) initially started reviewing the Act in 2019 and the IoD submitted on its discussion document on modernising the Act. Progress stalled in 2020 due to the election but DIA has now resumed work on the review, publishing 3 consultation papers for targeted feedback from the IoD and a number of other stakeholders. DIA’s consultation focuses initially on the following topics:

• the regulator (roles and functions of the Registration Board and Charities Services)
• appeals
• the role of officers.

Feedback on the papers will be used to develop policy proposals on modernising the Act.

Role of officers (board members)

DIA has identified several issues around governance including that the Act does not have any detail on the role of officers. DIA has set out options to address these issues including introducing duties into the Act or providing a best practice guide. 

Consistent with our earlier submission, we support introducing a voluntary governance code rather than having legislative duties in the Act. We note that there are already legislative duties for officers (eg in the Companies Act, the Trusts Act and in the Incorporated Societies Bill) and introducing further legislative duties in the Act would essentially duplicate these. We also highlight the benefits of codes, including they can: 

• help build governance capability
• provide more flexibility and comprehensive guidance (eg through principles, recommendations and commentary)
• allow differential requirements for small and large organisations.

We also note that a community governance code is being developed later this year by the Centre for Social Impact and this a crucial opportunity for Charities Services and the sector to be aligned.

Serious criminal offences

People can be disqualified from being officers under the Act for many reasons including if they have been convicted of a dishonesty offence in the last 7 years. The Act doesn’t exclude officers with other serious offences such as fraud, murder, manslaughter or terrorism. DIA has put forward several options to address this including adding more disqualification offences into the Act.

We also encourage DIA to consider disqualifying people who have been:

• convicted of offences overseas that are in all material respects equivalent to those offences disqualified under the Act in New Zealand
• banned in governance roles overseas from being officers of charities (or other entities).

Bans/suspensions

DIA is considering amending/adding regulator powers to address enforcement gaps in the Act. Under the Act, an officer can only be disqualified in the event a charity is deregistered. DIA is considering introducing a power to disqualify an officer, without having to first deregister the charity. It is appropriate that there is more flexibility to ban officers in serious cases and there should be consistency with other not-for-profit legislation (eg the Incorporated Societies Bill).

DIA is also considering introducing a power to suspend an officer for a specified period to protect charitable assets during an investigation. This power seems to be appropriate for the regulator and we understand that there are similar provisions in relation to charities in the UK. However, there will need to be appropriate safeguards in place such as defining in what circumstances an officer may be suspended and the process and timing.