Re: [atlarge-discuss] Where To Incorporate

["NameCritic" <chris1@telnor.net>]

Thank you David. Why don't we accept this offer. The forming of the
nonprofit in new zealand for now can at least get the ball rolling, then
later other filings can be proposed and filings can be made for each region
while we decide where the best place to incorporate the main umbrella
organization.

For now we could all participate in the New Zealand Chapter until other
chapters are formed.

Chris McElroy aka NameCritic
----- Original Message -----
From: "David Farrar" <david@farrar.com>
To: <atlarge-discuss@lists.fitug.de>
Sent: Wednesday, October 09, 2002 6:07 PM
Subject: [atlarge-discuss] Where To Incorporate


> To gain recognition as a legal body icannatlarge.org needs to register
itself
> in an appropriate country.  This is very important because it will also
confer
> limited liability on the members.  At present all members are equally and
> jointly liable for any costs of icannatlarge.org so if for example a
defamatory
> statement was posted on our website then the members could have to pay any
> damages.
>
> Recently InternetNZ had their lawyer prepared a document for another
global
> body on the benefits of registering a non profit organisation under NZ
law.  I
> have attached most of that document below for people to consider.
>
> NZ has a particular statute for registration of non profit organisations
which
> only incurs a one off registration fee.  Annual accounts and rule changes
have
> to be filed but these are extremely minimal compliance costs.  The law
merely
> states what provisions have to be included in your rules, but gives
maximum
> flexibility as to what those provisions are - something very useful for an
> organisation that will probably only ever meet in cyberspace.
>
> If the panel and the members would like to pursue registration under the
New
> Zealand Incorporated Societies Act 1908 I would be happy to ask InternetNZ
> secretariat to arrange this, cover the cost of registration and for them
to act
> as the contact address for matters relating to incorporation.  I can not
> guarantee InternetNZ will agree but they/we (I am the Secretary) have been
long
> standing supporters of the at large so I am hopeful.
>
> I suggest that the panel asks for alternative proposals for registration,
and
> proceeds to a membership ballot in the next month.  This issue needs to be
> sorted quickly as it affect issues such as the constitution of
icannatlarge.org.
>
> Regards
>
>
> DPF
>
> - Paper attached
>
> 1. Background
> 1.1 You have asked me to advise on the feasibility and advisability of
> establishing the proposed xxxxxx as an incorporated body in New Zealand.
You
> have also asked me to indicate the steps which would need to be taken to
attain
> incorporation, the compliance requirements following incorporation and the
> costs involved in both establishment and later compliance.
> 1.2 In short, I consider that a suitable course would be for the
> Association to be incorporated under the Incorporated Societies Act 1908.
That
> would provide the benefits of incorporation, including limited liability
and
> perpetual succession, with maximum flexibility in setting the
constitutional
> and governance arrangements and a minimum of compliance costs.  It would
be a
> requirement under the Act that the Association may not exist for nor
provide
> personal pecuniary advantage for its members, by virtue of membership.
> However, I understand that this limitation would be consistent with the
> preferences of the proposed membership.
> 1.3 There are other possible forms of incorporation, but none have the
> advantages of proceeding under the Incorporated Societies Act.  This
memorandum
> refers to the available forms of incorporation and the relevant features
of
> each, and sets out in more detail the necessary steps and compliance
> requirements for incorporation under the Incorporated Societies Act.
> 2. Available forms for incorporation
> 2.1 Under New Zealand law, it is possible for an association of
individuals
> or other 'legal persons' (corporations or government agencies) to
incorporate
> as a company under the Companies Act, 1993, to form a trust to carry out
their
> purposes or to incorporate as a society under the Incorporated Societies
Act.
> 2.2 If the members of the association incorporate as a company, they would
> then be holding shares in the company with corresponding entitlements to
the
> assets upon winding up, dividends from net profits and other rights which
go
> with a commercial organisation.  These arrangements are unnecessary for
the
> Association and I imagine may be inconsistent with the preferences or even
the
> powers of some of the member organisations.  In addition, a company would
be
> subject to income tax in New Zealand if it made a profit, and it would be
> required to prepare and file audited financial statements separately in
respect
> of its New Zealand operations and its operations in other jurisdictions.
These
> and other compliance obligations would almost certainly incur a cost
greater
> than otherwise necessary for the operations and member obligations of the
> organisation.
> 2.3 If the association forms a trust, the members would have a great deal
> of flexibility under New Zealand law in setting up the governance
> arrangements.  If the purposes of the Trust were exclusively charitable,
it
> could be incorporated under the Charitable Trusts Act.  However, the
> requirement for charitable purposes would raise some compliance
requirements
> under New Zealand law and would be quite restrictive in the context of the
> proposed activities of the association.  In addition, whether or not
> incorporated, the association would be governed by the law of trusts.
This has
> the potential to cause difficulties and uncertainties in the governance
and
> conduct of the association, particularly as the law of trusts has
different
> applications in different jurisdictions and some jurisdictions do not
recognize
> the concept at all.
> 2.4 If the association is incorporated under the Incorporated Societies
> Act, it will have the usual advantages of incorporation.  It will become a
> separate legal entity, with a continuing existence separate from its
members or
> the individual members of its governing council.  It can hold assets,
enter
> into contracts and bring (or defend itself against), legal actions for the
> enforcement of its rights.  As long as the rules deal with the minimum
> requirements, listed below, there is full flexibility for the organization
to
> establish whatever membership and governance structure it wishes.  I
believe
> that, as a separate corporation, it would be recognized under each of the
> relevant jurisdictions.  As with any body or organization it   must comply
with
> the law generally, but specific compliance requirements are limited to
filing a
> copy annually of its financial statements and any changes to the rules.
> 2.5 A society incorporated under the Incorporated Societies Act would need
> to have only:
> (a) an application by at least 15 individual members (or individual and
> corporate members, with each corporate members substituting for three
> individual members);
> (b) a declaration that the members of the Association had agreed to apply
> for incorporation;
> (c) a name which has been approved by the Registrar;
> (d) a set of rules which meets the statutory requirements (explained
> below);
> (e) a notice of the registered office of the Association;
> (f) the filing fee of approximately $100.
> 2.6 To be incorporated, the Association must provide in its rules for:
> (a) the name with "Incorporated" as the final word in the name;
> (b) the objects for which the Association is established, which must be
> lawful;
> (c) provision for members to become members and cease to be members ;
> (d) provision for the rules to be amended or rescinded, including powers
to
> make bylaws if that is required;
> (e) provision for summoning, holding and voting at general meetings;
> (f) provision for electing or appointing officers of the Association;
> (g) provision for the control and use of the common seal of the
> Association;
> (h) provision for the control and investment of funds of the Association,
> including powers (if required) to borrow money;
> (i) provision for the disposition of the property of the Association if it
> goes into liquidation; and
> (j) any other matters which the Registrar requires.
> 2.7 It is a requirement of the Act, and commonly included in the rules,
> that no member may benefit financially in their individual capacity, by
virtue
> of membership of the Association.  That does not prevent members being
paid as
> servants or officers of the Association, for services rendered on normal
arm's
> length terms, but the Association must not exist for, or permit, pecuniary
gain
> by virtue only of the membership.
> 3. Taxation and compliance
> 3.1 If the Association is incorporated in New Zealand as a non-profit
> organisation, it will most likely be subject to the Income Tax Act.  It
may be
> possible to apply for an exemption as a charity or under the provision
relating
> to sports and cultural clubs, but those do not seem likely to succeed.
> 3.2 However, the treatment of non-profit organisations is such that there
> is unlikely to be a need for the Association to incur any income tax
> obligations in New Zealand, other than the obligation to file a tax return
with
> details of the income and expenditure.  That is because membership
> subscriptions are generally not treated as part of assessable income, and
there
> may be other sources of revenue available to the Association which are
> similarly not assessable.  Therefore, if the Association incurs
expenditures
> which exceed any assessable income which it does receive, it is unlikely
to
> have an obligation to pay income tax.
> 3.3 The other compliance obligations of the Association will be to file a
> copy of its financial statements, annually, with the Registrar of
Incorporated
> Societies and to file with the Registrar any amendments which are made to
the
> rules from time to time and any changes to the registered office.
Although
> there will, of course, be a cost involved in preparing financial
statements and
> in the drafting of any rule changes which are required, the additional
> compliance costs to meet the filing obligations are relatively minor and
should
> not exceed NZ$200 or NZ$300 per year.
> 3.4 There are no explicit standards laid down for the preparation and
> publication of financial statements, so that the financial statements can
be
> prepared to meet the requirements of members, or the professional
standards of
> the accountants or auditors involved in preparing the financial
statements.
> 3.5 There is no statutory requirement for the financial statements to be
> audited, but it is common to make provision in the rules for an audit to
be
> conducted.
> 4. Steps to incorporation
> 4.1 If the Association wishes to proceed with incorporation under the
> Incorporated Societies Act, then it will be necessary to confirm that the
name
> is acceptable, pass the necessary resolution, finalise the rules and
complete
> the application form as indicated above.  The legal costs involved in
preparing
> the documentation and attending to incorporation should be no more than
NZ$300,
> apart from any costs involved in finalising the rules.
> 4.2 I understand that the Association has already done some work on
> drafting a set of rules.  Depending on whether any further work needs to
be
> done for the rules to comply with the statute and any other relevant
> considerations, I anticipate that those tasks could be completed for no
more
> than NZ$500, and possibly less than $200.
> 4.3 Please let me know if you need any further information, or if you wish
> me to assist in arranging for the incorporation of the Association.
>
>
>
>
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