A Non Profit Incorporated Society

What to be or non to exist - Incorporated Societies and Charitable Trusts

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Published twenty December 2019

[ v minutes to read]

If you're thinking about starting a charity you lot will demand to turn your mind to what kind of structure your organisation volition accept. Information technology pays to think about this carefully every bit it will impact a number of aspects of your clemency. Is this an easy or straightforward decision? The short answer is no!

The Customs Toolkit(external link), developed by Community Law, provides a range of legal information and resources for community groups. In that location is also a Charities Services webinar(external link) that provides information on the different types of structures a charity can accept. This blog provides a summary of their information on choosing the right structure for your group.

There are many unlike types of structures that charities and other not-for-profit groups in New Zealand can choose to be. You lot could decide to form an unincorporated or an incorporated group. You lot could likewise choose to form a order, a trust or a visitor. To go on things simple, nosotros're going to call all of these different structures "groups".

In this blog, we focus on:

whether you desire to incorporate your group, and
what legal structure you want your grouping to have.

You'll also need to decide whether you desire to register as a charity with Charities Services. This is a separate decision. Charities Services and Te Rātā Atawhai, the independent Charities Registration Lath, exercise not make decisions on your legal structure.

Although nosotros're non discussing whether to register as a charity in this weblog, you tin learn nearly the benefits and obligations of existence registered every bit a clemency with Charities Services here(external link).

To comprise, or not

If yous want to incorporate your charitable trust board, social club or company you lot can do that through the Companies Role(external link), who are part of the Ministry for Business, Innovation and Employment (MBIE).

The master advantage of being incorporated is that your trust lath, order or visitor has separate legal condition. This means that it is not the trustees, members or directors who personally enter into any obligations for the group (e.g. signing a contract) but rather the incorporated group itself.

Incorporation does not bear on on the charitable revenue enhancement status of the group, only some funders crave groups to be incorporated.

If you desire to incorporate and register your group every bit a charity, the process goes like this:

Stride 1	Decide what kind of grouping you lot desire to be: Trust, society or visitor
STEP 2	Apply to the Companies Office
Stride 3	Apply to be a registered charity with Charities Services

Incorporated society or incorporated charitable trust board

The fundamental difference between an incorporated society and an incorporated charitable trust board is that a club has democratic processes.

Incorporated societies are often used for community membership groups like ethnic and religious groups, residents' associations, parent-teacher associations, or sports clubs. In an incorporated guild everyone gets the adventure to vote and have their say nearly leadership and the management of the society. An incorporated gild needs to take at least 15 members, so this type of entity won't suit everyone.

An incorporated charitable trust board holds funds for a specific charitable purpose and is usually established when at that place isn't a membership base. This is not a hard and fast rule because some membership organisations tin set up as trusts, just, more often than not, an incorporated charitable trust is used when a few trustees have a great idea and want to put it into action, without a group of members.

There are many things to consider, and compare, when making the decision to go an incorporated lodge or an incorporated charitable trust board:

THINGS TO CONSIDER	CHARITABLE TRUST	INCORPORATED Gild
LEGISLATION	- Charitable Trusts Human action 1957 - Trusts Human action 2019*	Incorporated Societies Human activity 1908**
MINIMUM NUMBER OF PEOPLE	1 or more trustees (note: we recommend at to the lowest degree 3 so that in that location is less change of conflict of interest)	A minimum of 15 members
Conclusion MAKING	Past trustees, in accord with the trust deed	By members/committee in accordance with the constitution
MEMBERS	No members, the trustees operate the trust for the charitable purpose	Membership is determined past the constitution
LIABILITY OF MEMBERS OR TRUSTEES	No liability unless the trustee does not comply with the trust deed or the Trusts Act 2019*	Limited liability unless members run the gild to brand profit for themselves (this is non charitable)
ACCOUNTABILITY	Trustees are accountable to the public, through the Attorney Full general, and must comply with the trust human action and the Trusts Act 2019*	The committee is accountable to the members
MEETINGS	Trustees should meet to make decisions in accordance with their trust human action	The members/committee must hold an annual full general meeting once a yr
PROFITS	Used to run the charitable trust to accomplish its purpose; profits can exist accumulated	Used to run the society to reach its charitable purpose; profits cannot be distributed to members
WINDING UP	The trust can current of air up according to the trust deed, just any money or assets must be left to charitable purposes	The society can current of air up but must distribute any money or assets left in accordance with its rules and the Incorporated Societies Deed 1908**
ADVANTAGES	- Control is in the easily of a few trustees rather than a wider membership - Trustees usually remain the same so there is some stability around succession	- An easy to manage structure for autonomous membership based organisations - There is opportunity for diversity and new voices on the commission each year
DISADVANTAGES	- Sometimes the same trustees tin remain involved over several years which may have a negative issue on the charity - There should be a consensus in conclusion making between trustees; trustees disagreeing tin can result in challenges	- Information technology tin can be hard to govern a charity that has changing officers as people need to be trained on running the social club each yr - The democratic construction ways that groups can seize command from established leaders

Incorporation of trusts, societies and companies are all done with the Companies Office, but are governed by different Acts.

If want to comprise a trust nether the Charitable Trusts Act, visit the Charitable Trusts Register.(external link)
If you want to incorporate a order under the Incorporated Societies Act, visit the Incorporated Societies Register.(external link)
If you want to incorporate a company under the Companies Human activity, please visit the Companies Annals(external link) for more information.

For more than information we recommend checking out the information on the Community Toolkit(external link).

Once you take decided what group structure you lot will use and y'all have registered with the Companies Office(external link), you can utilize for registration every bit a registered charity with Charities Services(external link).

If yous are a registered clemency and you lot want to alter your legal structure you will demand to tell us, please visit the Update charity details(external link) folio for more data.

* The Trusts Act 2019 replaces the Trustees Act 1956 and Perpetuities Act 1964 and came into strength on 21 January 2020.

** The Incorporated Societies Act 1908 is currently nether review. Nosotros will go on you updated through our all of our different communications channels.