The COVID-19 Response (Further Management Measures) Legislation Bill (the Bill) provides, amongst many other things, for company directors to have asafe harbour in relation to certain obligations that directors have.  The intention of the safe harbour is to enable companies to continue to operate through COVID-19 even if they temporarily have substantially reduced, or even no, revenue.

However, what about officers of incorporated societies?  Currently, the Bill limits the safe harbour provisions to company directors only, and does not extend the same or similar protections to officers of incorporated societies.

Officer Duties

The Incorporated Societies Act 1908 does not specifically set out officers’ duties in the same way that directors’ duties are set out in the Companies Act 1993.  

Whilst there is a general consensus that some duties do apply, it is not clear exactly what those duties are.

The New Zealand Law Commission considered this issue in its June 2013 report A new Act for incorporated societies. In that report, the Law Commission stated:

"It is likely that the officers of incorporated societies owe similar fiduciary duties to their societies to those that company directors owe to their companies, but there has been very little consideration of duties in the incorporated society context. While it is reasonably clear from the cases that an officer, because he or she holds a position of trust, owes a duty of good faith to his or her society, the extent of most other duties and how they are to be discharged is unclear."

This lack of clarity leaves officers of incorporated societies in a very difficult position as the extent of the duties they may owe to creditors is unclear.

Why Does It Matter?

There will be many incorporated societies around the country (some very substantial) that have been adversely affected by COVID-19 in the same way that many companies have been adversely affected.  Many officers of incorporated societies will now be very concerned about solvency and the ability of their societies to meet their debts as they fall due.

Currently, officers do not have certainty around what duties, or what protections, they have in relation to creditors.  This may result in societies having a receiver or liquidator appointed, or in officers being found liable to creditors, at some stage in the future if and when a Court does consider the issue.

Submission on the Bill

Providing specifically in the proposed legislation for officers of incorporated societies to receive the benefit of safe harbour provisions would give a significant level of comfort to officers.  We strongly believe that such safe harbour provisions would give many incorporated societies a much better chance of surviving the impacts of COVID-19.

Our firm has made a submission to the Epidemic Response Committee identifying this issue and seeking some form of safe harbour provision for officers of incorporated societies.  We have also noted that the same issue may apply for other entities.

If you would like to discuss this further, please get in touch with your usual Dawson Harford contact. 

During New Zealand’s nationwide lockdown, even though our offices are closed, it is business as usual for Dawson Harford.  We are here to support and assist you by phone, email and video conferencing to help keep you and your business going. Stay safe.

Disclaimer: This update is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters it addresses.