Lawbrief September 2022

Jessica Temm – Partner Gault Mitchell Law!

The Partners are delighted to announce the appointment of Jessica Temm as a Partner of the Firm from 1 September 2022.

Jess joined Gault Mitchell Law as a Solicitor in 2016. She has progressed steadily since then and was appointed a Senior Associate in 2020. Her further promotion to Partner is in recognition of all her achievements and contribution within the Firm and her ability to consistently provide our clients with high-quality legal advice.

Originally from Auckland, Jess has a Bachelor of Laws and a Bachelor of Arts from Victoria University of Wellington and a Master of Laws (Corporate and Commercial) from the University of Auckland. She was admitted as a Barrister and Solicitor in September 2013.

Prior to working at Gault Mitchell Law, Jess worked in a variety of roles, including as a Trusts Solicitor at Public Trust where she focused particularly on Trusts and Estate administration.

Jess brings to the Partnership a wealth of experience, advising clients in respect of a range of areas of law, with a particular focus on:
– Residential and Commercial Property
– Asset Protection
– Family Trusts
– Wills, Estate planning and Estate administration
– Relationship Property
Clients love working with Jess. They appreciate the practical and legal advice that she provides and the care and concern that she displays.
Jess has recently returned from parental leave and her love of running has now been surpassed by her love of parenting her gorgeous son Marlow.

Contact Jess by email at or by phone on (04) 472 4685.

Incorporated Societies – an update

By Jessica Temm, Partner

Changes to the rules relating to Incorporated Societies will require those organisations to re-register between October 2023 and (approximately) April 2026 or they will cease to exist.

If a Society is registered as a charity there may be tax implications associated with ceasing to exist.
Residents Associations, Sports Clubs, Ethnic Associations, Bridge Clubs and other special interest groups are typically set up as Incorporated Societies. Some of those organisations will generally be registered as charities.

What do I need to do?

First, check the correct legal structure of your organisation. You can do this by searching your organisation by name on the Incorporated Societies Register –

If your organisation is an Incorporated Society, it will have a constitution containing the rules by which it is governed. You will need to locate that constitution, as the new laws require additional clauses in order for re-registration to take place. If you’re uncertain where your constitution is, you can check the Register as a copy is typically held there.

The constitution will need to be revised to ensure, among other things:

  • A suitable dispute resolution clause is included. The new legislation contains suggested dispute resolution provisions that a Society can include in its re-drafted constitution. However, it may be prudent to consider how your organisation works and whether a bespoke dispute resolution clause should be drafted.
  • A procedure setting out how the Society can enter into contracts.
  • A procedure for dealing with the Society’s finances. There are new financial reporting requirements for Societies and the redrafted constitution will need to take those into account.
  • That there is a Committee in place at all times, with at least 3 Committee members.

Once the constitution has been revised to align with the new rules, typically the Society will need to hold an Annual General Meeting where its members will vote on the proposed changes.

Consideration would need to be given to any funding the Society has in place, as lenders may need to be updated on the legal status of the Society together with any changes to its constitution.

All these steps will take time and your Society may encounter problems along the way. We recommend getting ahead of any issues by starting to plan for the changes now.

What other changes do I need to be aware of?

Conflict of interest register

Societies will need to keep a ‘conflicts of interest’ register detailing any member who is ‘interested’ in a particular transaction or matter proposed by the Society. That ‘interested’ member cannot vote or sign documents in relation to the conflicted matter.
The Society will need to develop a process by which such conflicts can be identified and recorded.

Officer duties

The new law clearly defines a series of duties imposed on all officers of an Incorporated Society, namely:

  1. Act in good faith and in the best interests of the society
  2. Exercise powers for proper purposes only
  3. Comply with the Act and the constitution
  4. Exercise reasonable care and diligence
  5. Not create a substantial risk of serious loss to creditors
  6. Not incur an obligation the officer doesn’t reasonably believe the society can perform

Members of the Society can apply to the Court to enforce these duties if they consider an officer has breached them.

Opportunity to rethink your structure

Now is the time to consider whether the Incorporated Society structure is working well for your organisation, or whether a different structure would better serve your purposes.

Incorporated Societies are sometimes considered the simplest structure for a not-for-profit organisation. They are democratic in operation and therefore easy to understand.

However, that democratic quality can reduce efficiency of decision-making and contribute to disputes and dissatisfaction within the membership.

Provided the members of the Society agree, alternative structures could be explored, for example establishing a Charitable Trust whereby the Trustees are responsible for governance and decision-making in the best interests of the organisation.

Jessica Temm can assist with preparing your Society for re-registration and advising on any issues that may be encountered.

Now is also an opportune time to contact an accountant who can prepare your Society for meeting the new financial reporting standards when they come into effect.

Why have a family trust? Do you need one?
By Jessica Temm – Partner

Asset Protection

Transferring your assets into a Family Trust, if done properly, severs the ownership link between you and those assets. If something then went wrong with your business and a creditor pursued you for a debt, the assets now owned by the Trust would not be immediately available to service that debt should the creditor be successful in their claim against you.

This is particularly important if you give personal guarantees in your business dealings. Often people don’t realise they are giving personal guarantees when they are dealing with other businesses or suppliers, as the guarantees are buried in the fine print of Terms of Trade. If something went wrong with that particular deal the person who signed that guarantee could find that all their assets are on the line when the dispute kicks off, rather than just the value at stake in that particular transaction.

Some business owners assume that setting up a limited liability company structure will protect their assets in the event of a claim against that company. Unfortunately, although a company structure does provide a degree of protection by establishing a separate legal entity to contract with creditors, the Directors Duties set out in the Companies Act 1993 still impose personal obligations on company directors. A company director’s personal assets may be at risk if they are held to have breached those duties.

It is crucial that the Family Trust is set up at a time when things are going well with your business and there is no actual prospect of a claim from a creditor. Otherwise, the Trust’s assets could still be made available to a creditor who is successful in a claim against you, on the basis that you knew the assets should be used to pay that specific creditor and you were attempting to evade that obligation.

Maintaining intergenerational assets

Some people choose to put the family bach or other property into a Family Trust for the long-term benefit of future family members, rather than passing it to their children who may choose to sell it instead of preserving it for the next generation.

The Family Trust would typically name the family members who are intended to benefit from the bach (or other property) and should include instructions for how the property should be used and managed. Careful attention should be given to what will happen to the property at the end of the Trust’s lifetime (typically between 80 – 125 years). Will it be sold and the proceeds split amongst the grandchildren? What if some grandchildren are not yet born at the time of sale?
If you think a Family Trust would be useful for this purpose, we recommend reviewing your Will at the same time to ensure your wishes align and can be properly carried out after your death.

Support of a specific family member

Inheritance Trusts are a type of Family Trust that can be used to hold money or other assets for the benefit of a particular family member who is unable to manage the funds themselves.

That family member may have an addiction problem, or a disability or the parent may simply feel that it would be unwise to leave a large sum of money to the person directly.

During a parent’s lifetime, they can transfer assets into the Inheritance Trust and give the trustees instructions on how those assets should be managed to benefit their child.

After the parent dies the Trust will continue to exist and their child will continue to benefit from the Trust’s assets in a sustainable manner with the support and assistance of the Trustees nominated by the parent.

Although the parent-child scenario is common, the structure can be used to benefit many different family relationships, for example providing ongoing support for nieces and nephews after your death if some or all of them are not yet born.

Other benefits

Addressing family disputes

Some families have a difficult relationship with one another, e.g. a parent who considers their adult child has been violent or offensive toward them. That parent may not want that adult child to receive their assets after they die.

Historically, a Family Trust could be established during the parent’s lifetime to prevent those assets going to the violent or offensive adult child after the parent has died.

However, recent Court decisions indicate that in extreme circumstances such a Trust can be challenged after the parent has died, and assets made available to adult children on the basis that the parent was the abusive person in the relationship. Care is needed when establishing a Family Trust with this benefit in mind.

Relationship property

In conjunction with a Relationship Property Agreement, a Trust can be a useful tool in supporting blended families to manage their affairs in a way that benefits everyone.

If a couple are both bringing children from a previous relationship and want to benefit their own children separately, each partner may want to set up their own Trust to protect their children’s interests from the new partner and potentially the new partner’s children.

Relationship property protection for your children

For children whose parents set up a Family Trust many years ago, that Trust may still provide good protection against the adult child’s new partner or spouse, should the adult child’s relationship end by separation or death.

It can often be worth continuing with the existing Trust structure to preserve that relationship property benefit provided the Trustees are careful to keep the Trust’s assets separate from the pool of potential relationship property.

If this is your primary reason for keeping a Trust going, please contact us to make sure the Trust is being managed in a way that preserves this important benefit.

How do I set up a Family Trust?

A Family Trust is typically established by the preparation and signing of an appropriate Trust Deed.

Once the Trust Deed has been signed we would then assist with preparing the documentation to record the transfer of your assets into the Trust, and with the required documentation for decision-making and annual meetings going forward.

There are a range of different issues that can come up in the decision to establish a Family Trust and we recommend contacting Jessica Temm to discuss your circumstances if you think a Trust might be useful.