A Society, which was a registered charity, held an AGM for the purposes of voting on new officers, as the term of some of the current officers had expired.

A member was nominated in writing prior to the AGM.  After their nomination, the member contacted the president of the society and advised that around five years ago they had been convicted of theft. They had turned their life around since that time.  They asked the president if this prohibited them from being an officer of the Society.

The president did not know the answer to this so sought legal advice.

Who is disqualified from being an officer of a charity?

In order to register as a charitable entity, you must be able to confirm that all officers of your entity are qualified to be officers.

The Charities Act outlines a list of factors that will disqualify someone from being an officer of a charitable entity. These factors include:

• Undischarged bankruptcy
• Being under age 16
• Being convicted of a crime involving dishonesty or certain tax offences in the last 7 years
• Being prohibited from being a director of a company or other incorporated body
• Being subject to a Property Management order under the Protection of Personal and Property Rights Act – ie: lacking capacity
• Being convicted of an offence relating to terrorism in New Zealand or elsewhere
• Having been disqualified by the Charities Board for serious wrongdoing in connection with the entity, or for failing significantly or persistently to meet their obligations under the Act
• Not meeting any required criteria in the relevant entity’s governing rules.

Serious wrongdoing is defined in the Act and includes:

• Unlawful or corrupt use of the funds or resources of the entity;
• An act, omission or course of conduct that constitutes a serious risk to the public interest in the orderly and appropriate conduct of the affairs of the entity;
• An act, omission, or course of conduct that constitutes an offence punishable by imprisonment for a term of 2 years or more or imprisonment for life; or
• An act, omission, or course of conduct by a person that is oppressive, improperly discriminatory, or grossly negligent, or that constitutes gross mismanagement.

How about under the Incorporated Societies Act?

There are further criteria in the Incorporated Societies Act 2022 which provide similar restrictions.  Those criteria also extend to:

• Being convicted of certain additional offences in the last 7 years including:
• operating a society for personal financial gain or making false statements;
• dishonesty or certain tax offences in other countries;
• money laundering offences;
• Being subject to a banning order under that Act;
• Being subject to a forfeiture order relating to receiving the proceeds of crime

Charitable Trusts also have similar criteria for trustees.

There is an ability for the Charities Board to provide a waiver to the disqualification criteria on application to the Board.  There is a similar power vested in the Registrar of Incorporated Societies.

What can the Society in the example do where a nominated person does not meet the criteria to be an officer?

In the above example, the Society has two options:

1. Do not accept the nomination of the member as an officer, as they have been convicted of a dishonesty offence in the last 7 years so are disqualified from being an officer of a Charity and of an Incorporated Society. This is the more straight forward option;
2. Apply for a waiver of the disqualification criteria in relation to that particular person. The application would need to be made to the Charities Board as well as the Registrar of Incorporated Societies.  This may or may not be granted as it is at the discretion of the Board and Registrar.

What if an existing officer becomes disqualified?

If an officer of your charity becomes disqualified after they have been appointed, for example is convicted of a dishonesty offence, loses capacity or acts in a way that constitutes a serious wrongdoing, you should seek legal advice with urgency.  You should also seek advice from Charities Services so that they can inquire into or investigate the behaviour if appropriate.

If an individual becomes disqualified from acting as an officer of a charity, you need to inform the Charities Board within 3 months of you becoming aware of the issue. The officer will either need to be removed, or you will need to apply to Charities Services for a waiver allowing the person to remain as an officer.

The Charities Board has the power to remove a charity from the Charities Register if one of the charity’s officers becomes disqualified, which would mean your entity loses its charitable status. It is important to address the disqualification as soon as possible to avoid this outcome and any further potential liability your entity could face for acting in breach of the legislation.

Having a procedure for dealing with issues relating to officers will also help mitigate disputes and confusion when problems arise. 

It is also important to ensure that any process for nomination of officers includes the nominated person providing a declaration to you that they are not disqualified from being an officer of a charity or society.  Such declaration exists already when initially setting up a charity, but many societies won’t have this in place when changing officers.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.