Charities come in all shapes and sizes, from informal, local groups to national and international ventures. It’s important to make sure that your charitable goals are supported by the correct structure, documents, trustees and administrative expectations. These should help your charity achieve its goals as well as making sure that it operates within the relevant law.
Charities: Starting out
1. Is a charity the correct structure?
Charities must have a “charitable purpose” for the public benefit. These are set out in law and not everything that will benefit the community will be charitable.
2. Which structure should be used?
Choosing the right structure will depend on a number of factors. Very small charities may be comfortable using a less formal, unincorporated structure, but those who wish to employ people or enter into dealings with third parties may find this problematic. Small charities may, however, find more formal structures an administrative burden.
3. What’s in a name?
Did you know that there are restrictions on what you may name your charity? You can’t use a name which could be misleading, and you need to make sure that your name isn’t too similar to that of another organisation. You also cannot infringe IP rights with your name, e.g. using a name which is a trademark. If you decide to have trading names these will need to be listed – please note trading names are not generally protected.
4. Who can run the charity?
Your charity will need individuals to run it, regardless of the structure selected. You must ensure that the individuals running the charity understand their duties and liabilities and have the appropriate skills mix to ensure that the charity is appropriately managed. Depending on your legal structure, trustees may need to comply with charity law and company law; this includes the rules on disqualification. If the charity is unincorporated you should still comply with disqualification criteria to avoid charity mismanagement.
5. Governing documents
All charities need a governing document. The structure selected will dictate what is legally required. For example, if you are a company you must have articles of association which comply with both charity and company law – the Charity Commission has model documents. If the charity is a CIO, the governing document will follow one of the Charity Commission model documents for either the association or foundation model. Unincorporated associations will have constitutions and trusts will have a trust deed or will.
6. Administrative obligations
Administration can be quite a burden for smaller charities, and obligations can vary based on your income. If you are a company of any size you need to comply with filing requirements for companies – you may be fined if you don’t comply. Companies may also need to register with the Charity Commission. CIOs always need to register with the Charity Commission. When the charitable structure is selected it is vital that those in charge understand their legal obligations and budget for these costs, which may include fees of financial and legal advisers.
This article was kindly contributed by Aviva’s international law firm partner DAC Beachcroft’s Charities & Not-for-Profit practice.
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