Incorporated Societies Reminders

Following on from last month’s article, we remind incorporated societies that time is running out to re-register under the new Incorporated Societies Act 2022 (the Act).

The Act came into force on 5 October 2023 and required all incorporated societies (including those that are also registered charities) to be reregistered by 5 April 2026.

 

Incorporated societies that are also registered charities

If an incorporated society that is a registered charity does not reregister with Companies Office by April 2026, it will cease to exist. If this occurs:

• All of the charity’s outstanding debts would need to be paid
• Any remaining assets would need to be distributed according to its constitution
• Members would also lose their right to limited legal liability
• It would become possible for another group to incorporate as a registered society using the charity’s name
• The charity would need to re-apply for registered charity status under Charities Act 2005.

 

In addition to re-registration, we also remind incorporated societies that you now have mandatory financial reporting requirements.

 

Financial reporting requirements – all incorporated societies

As detailed in our prior article the new Act requires all incorporated societies to prepare and register financial reports annually. Certain incorporated societies are also required to be audited. Incorporated societies that are registered charities must follow Charities Act 2005 requirements.

 

Small societies

Small societies¹ can choose to prepare either:

1. GAAP compliant financial statements (effectively the XRB’s Tier 1, Tier 2 and Tier 3 PBE Accounting Requirements),
2. A non-GAAP standard that applies under the 2022 Act (effectively the XRB’s Tier 4 PBE Accounting Requirements); or
3. Minimum requirements as set out in section 104 of the 2022 Act.

You can access more information about financial reporting for small societies here. In addition Companies Office has made a small society financial reporting template available which can be accessed here.

Small societies do not require an audit.

 

Large societies

Large societies must use the External Reporting Board (XRB) public benefit entity reporting standards when preparing financial statements.

• Specified not-for-profit entities - i.e., those entities having in each of the 2 preceding accounting periods of the entity, the total operating payments of $140,000 or more - are required to prepare GAAP compliant financial statements (effectively the XRB’s Tier 1, Tier 2 and Tier 3 PBE Accounting Requirements).
• All other large incorporated societies can apply the XRB’s Tier 4 PBE Accounting Requirements.

Under the new Act, an incorporated society must have its financial statements audited if:

• it is not a charitable entity; and
• in each of the 2 preceding accounting periods of the society, the total operating expenditure of the incorporated society and all entities it controls (if any) are $3 million or more.

For registered charities, under the Charities Act 2005, a registered charity must be audited if it is defined as large in that Act, and if the registered charity is a medium sized entity, it must be either reviewed or audited.

Under the Charities Act 2005:

• Large is defined as having in each of the 2 preceding accounting periods of the entity, total operating expenditure of the entity and all entities it controls (if any) of $1.1 million or more.
• Medium size is defined as having in each of the 2 preceding accounting periods of the entity, total operating expenditure of the entity and all entities it controls (if any) of between $550,000 and $1.1 million.

You can access more information about financial reporting for large societies here.

For more on the above, please contact your local BDO representative.