Plain language law

New Zealand law explained for everyone

Building Societies Act 1965

Constitution of building societies - Commencement of business

29: Minimum subscription by founding members

You could also call this:

“Founding members must buy shares before the society can start”

When a new building society is formed, it can’t start doing business or borrowing money until certain things happen. The people who signed the rules to create the society need to buy shares in it. Each of these founding members must buy at least $1,000 worth of shares. Together, they need to buy at least $200,000 worth of shares. They have to pay for these shares in cash.

The society needs to show proof to the Registrar that this has happened. The Registrar will then give the society a certificate. This certificate allows the society to start its business.

If the society doesn’t show this proof within two months of being created, the Registrar might cancel its registration. If this happens, the Registrar will let people know by publishing a notice.

The shares that the founding members buy have special rules. These rules must be followed for five years after the Registrar gives the certificate.

If a society starts doing business or borrows money before following these rules, it’s breaking the law. The society could be fined up to $1,000. Any person in charge of the society who breaks this rule could go to jail for up to two years, be fined up to $1,000, or both.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM371632.

Topics:
Money and consumer rights > Banking and loans Housing and property > Buying and selling homes Business > Starting a business
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Part 2 Constitution of building societies
Commencement of business

29Minimum subscription by founding members

  1. A society incorporated after the commencement of this Act shall not commence any business or borrow any money unless there has been produced to the Registrar evidence satisfying him or her that all those members who signed a copy of the rules for sending to the Registrar under section 13—

  2. have each been issued with shares in the society to the value of $1,000 or more on terms that conform to the requirements of Schedule 2; and
    1. have together received shares issued under paragraph (a) to a total value of at least $200,000; and
      1. have fully paid to the society in cash the value of the shares issued to them—
          1. and that the Registrar has issued to the society his or her certificate that the requisite evidence has been so produced.

        1. If at the end of the period of 2 months beginning with the date on which the society became a body corporate the requisite evidence has not been produced to the Registrar under subsection (1), the Registrar may if he or she thinks fit cancel the registration of the society, and the society shall cease to enjoy the privileges of a society under this Act.

        2. Notice of the cancellation of registration of a society under subsection (2) shall be published by the Registrar in the Gazette, and in such other ways as appear to him or her to be expedient for informing the public, and the Registrar must register the cancellation.

        3. The provisions of Schedule 2 shall have effect in respect of shares issued in conformity with subsection (1), for the purpose of ensuring that the conditions attaching to the shares are observed until the end of the period of 5 years beginning with the date on which the Registrar issued his or her certificate to the society under that subsection.

        4. If any society commences business or borrows any money in contravention of this section, the society shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $1,000; and every officer of the society who is in default shall be guilty of an offence and shall be liable on conviction to imprisonment for a term not exceeding 2 years or to a fine not exceeding $1,000, or to both.

        Compare
        • Building Societies Act 1962 s 13 (UK)
        Notes
        • Section 29(1): replaced, on , by section 8(1) of the Building Societies Amendment Act 1980 (1980 No 92).
        • Section 29(1): amended, on , by section 7 of the Building Societies Amendment Act 2007 (2007 No 43).
        • Section 29(3): amended, on , by section 7 of the Building Societies Amendment Act 2007 (2007 No 43).
        • Section 29(5): amended, on , by section 413 of the Criminal Procedure Act 2011 (2011 No 81).