Establishing A Charitable Entity
Establishing a Charitable Entity
A charitable entity is an entity which has been established principally for charitable purposes and registered under the Charities Act 2005. Charities Services defines Charitable Purpose:
“Charitable purpose has a special meaning in the law that is more limited than the meaning people generally give to those words.
To have a charitable purpose, the rules or governing document of an organisation must clearly state that its work is for:
- the relief of poverty
- the advancement of education
- the advancement of religion
- any other matters that are beneficial to the community
For an organisation’s purposes to be charitable, its aims must also be for a public purpose. The benefit must be available to a large part of the community and the activities must not result in the private benefit or profit of any individual. Some examples include:
- religious institutions
- aged persons’ homes
- homeless hostels
- organisations relieving the special needs of people with disabilities
- non-profit child care centres
- societies that promote the arts
A non-charitable purpose secondary to an organisation’s charitable purpose does not stop the organisation from qualifying for registration as a charitable entity.
The relevant section of the Charities Act 2005 relating to the meaning of charitable purpose is section 5.”
The following steps are involved in the establishment of a charitable entity:
What type of entity
Determine what entity is to be established – charitable trust; incorporated society or charitable company;
Choose a name for the charitable entity;
Trust deed or constitution
Prepare the trust deed or constitution. The primary matters to be covered in the deed or constitution are:
Purposes/objects of the entity
Apply for an IRD number for the entity
A condition of registration under the Charities Act 2005 is that all entities must have an IRD number.
Incorporation of a charitable entity under the Charitable Trusts Act 1957, Companies Act 1995 or the Incorporated Societies Act 1908.
Registration under the Charities Act 2005