[wlug_org] FWD: To incorporate or not to incorporate, info on ramifications.

[Jamie Baddeley]

I think it's an excellent summary of facts, and I certainly appreciate
Tony taking the time to do it.

I agree with your summary Brent of the meeting outcome, that's what I
thought the conclusion was.

The only question that pops into my head having read it is what the
ins&outs of being a not-for-profit....

jamie

On Sat, 2004-08-28 at 15:57, Wood Brent wrote:
> Hi y'all,
> 
> Figured I should forward this here as Tony has done a fair bit of work putting
> this together, and it was to you all, not just me.....
> 
> As I understand it we generally agreed that there was no immediate need to
> incorporate, but that the situation may change, depending on what activities
> the LUG undertakes. (anyone frantically disagreeing please make some noise!)
> 
> Given the discussion at the last meeting over this, I suggest this is stated
> clearly on the wellylug list & at the meeting (I won't be at the meeting- a few
> hundred miles too far south :-)
> 
> I think this is a very useful summary which should be on record on this list,
> and be referred to if the issue crops up again, which was also Tony's intent.
> 
> Brent
> 
> ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
> 
> --- jumbophut <jumbophut@gmail.com> wrote:
> 
> > Date: Fri, 27 Aug 2004 14:48:14 +1200
> > From: jumbophut <jumbophut@gmail.com>
> > To: Wood Brent <pcreso@pcreso.com>
> > Subject: To incorporate or not to incorporate
> > 
> > Hi Brent
> > 
> > I no longer subscribe to the wlug_org list, as it was doing my head
> > in, so I'm posting this to you instead -- feel free to forward it to
> > the other org subscribers.  It doesn't belong on the main list.
> > 
> > I'm not looking to relitigate the conclusions of the last meeting, but
> > I felt it was important to get some well supported facts into the
> > debate, because I heard some incorrect statements.  Inevitably, this
> > issue will be raised again in future, and it will be useful to have
> > the facts on hand when it does.  I'm not offering an opinion about
> > whether or not to incorporate, just saying the legal situation is in
> > either case.
> > 
> > So, here we go...
> > 
> > Substantial and authoritative information about incorporating can be found
> > here:
> >
> <http://www.companies.govt.nz/pls/web/DBSLIBCT.Define_Search?p_access_no=19d70c63dac9a120847430ba51c08b93&p_application=LIB&p_current_level=1.41.6&p_folder_id=1717&p_error_msg=&p_error_comment=&p_first_order_field1=&p_first_order_field2=&p_first_order_field3=&p_last_order_field1=&p_last_order_field2=&p_last_order_field3=&p_doc_chkbox=dummy">
> > 
> > The relevant legislation is here:
> >
> <http://www.legislation.govt.nz/libraries/contents/om_isapi.dll?clientID=3007164462&infobase=pal_statutes.nfo&record={61861079}&hitsperheading=on&softpage=DOC>
> > 
> > I've drawn extensively on these, and won't bother attributing.  The
> > bulleted stuff is taken verbatim from the Companies Office website.  I
> > recommend you go and have a read if you doubt any of what I say below.
> > 
> > If the LUG decided to incorporate, it would have to:
> > ====================================================
> > 
> > 1. Have a constitution
> > 2. Pay $100 to register as a society (a one-off payment)
> > 3. Submit annual accounts to the Registrar (Companies Office)
> > 4. Hold at least one General Meeting per year
> > 5. Either apply for charitable status or file an annual tax return.
> > 
> > The constitution would have to include at least:
> > * The name of the society which must end in the word Incorporated 
> > * The objects (purpose) of the society 
> > * How people become members of the society and stop being members of
> > the society
> > * How the society can change its rules 
> > * How meetings are called and held and how voting will take place 
> > * How office holders within the society will be appointed 
> > * How the society's funds will be controlled and invested 
> > * The powers (if any) that the society has to borrow money 
> > * How any property of the society will be distributed in the event of
> > the society is wound-up.
> > 
> > From the point of view of the Registrar (Companies Office), the annual
> > accounts do not need to comply with generally accepted accounting
> > practice (GAAP) or be audited, unless the Society's rules require it. 
> > The Tax Commissioner _may_ frown on non-compliance with GAAP or a lack
> > of audit, however.
> > 
> > Charitable status requires having the IRD approve the charitable
> > purpose of the organisation.  Charitable societies pay no tax on
> > retained profits and do not need to file a tax return.  However, it is
> > difficult to achieve charitable status and many organisations instead
> > apply for a simple non-profit designation.  Those non-profit societies
> > do pay tax on retained profits above a certain amount ($1,000 I think)
> > and do have to file an annual tax return.
> > 
> > Being an incorporated society does NOT exclude members from all
> > liability.  In particular, if the society carries on illegal
> > activities or operations involving financial gain, "the society and
> > the members are liable to be prosecuted and fined. In addition, all
> > members involved can be personally liable for any debts and
> > obligations incurred by the society."  In short, all members have to
> > trust all other members not to break the law or engage in activities
> > involving financial gain.
> > 
> > If the LUG decides to remain unincorporated, then:
> > ====================================================
> > 
> > * The LUG is based on an agreement (contract) between the members,
> > that changes when people join or leave. The society does not have an
> > existence separate from its members
> > * Members can be held liable for the debts of the society 
> > * The society cannot sue or be sued in Court. Any Court action would
> > either be taken by, or against, the members individually
> > * The LUG cannot own property or enter into contracts. 
> > * The LUG is not required to have rules to govern it. This can become
> > a problem if there are disputes about how the society is run
> > * There are problems in gifting property (including money) to a
> > society that is not incorporated.
> > 
> > Since the LUG has no explicit membership, most of these probably
> > wouldn't apply (e.g. liability), but I am not a lawyer, so I can't say
> > for sure.  Certainly no membership fee is paid for the LUG, and no
> > membership records are kept.
> > 
> > =======================================================
> > 
> > I am interested to note that the Waikato LUG is incorporated, but
> > hasn't filed a financial statement since incorporation, potentially
> > putting it at risk of being de-registered.  This indicates that if we
> > go the 'Incorporated' route, someone will have to keep a careful eye
> > on responsibilities for meeting legal obligations.
> > 
> > I hope this has been informative.
> > 
> > Cheers
> > Tony
> > 
> > -- 
> > Tony (echo 'spend!,pocket awide' | sed 'y/acdeikospntw!, /l@omcgtjuba.phi/')
> > 
>