A charitable trust is a way to hold and protect assets (money, property, etc) for charitable purposes. The trust’s assets are managed according to the purpose set out in a trust deed, or an agreed set of rules.
A charitable trust, or an existing society (with a charitable purpose), can apply to us to be incorporated as a board under the Charitable Trusts Act 1957.
To do this, a charitable trust or society must exist principally or exclusively for the following reasons:
- the promotion of education
- the promotion of religion
- the relief of poverty
- other purposes of benefit to the community.
In most cases you’ll need legal help to establish a charitable trust, and to have it incorporated. A solicitor can also help you to administer the trust, or you can have it administered by a company that specialises in managing trusts.
What it means to be incorporated
A charitable trust incorporated under the Charitable Trusts Act is considered to be a body corporate much like a company or an incorporated society. All are created by Acts of Parliament to give a group of people a single identity for legal purposes.
As such, a board can hold property, sue and be sued, and has a 'common seal' to attach to important contracts, as evidence of its agreement to honour its commitments.
What a charitable trust board can do
An incorporated board is permitted to make profits on its trading activities, but these profits must be used for its charitable purposes and cannot be distributed to its members.
A board can operate almost exactly like an individual. It can own property, raise mortgages, and hold bank accounts and all types of assets and investments, as long as it operates according to the powers set out in its trust deed or set of rules.
Types of charitable trust board
Under the Charitable Trusts Act you can apply to incorporate as a board in one of two ways: either as trustees or as a society.
Trustees as a board
These are boards made up of individual trustees.
This type of board must have:
- at least one trustee
- a trust deed under which it operates.
Society as a board
These are boards made up of members of an unincorporated society. To incorporate as a trust board the society’s rules must express a charitable purpose. This kind of society must not be confused with an ‘incorporated society’ registered under the Incorporated Societies Act 1908.
To register as a board the society must have the following:
- at least five members
- a set of rules, or a constitution, under which it operates.
Trust deeds and rules
The Charitable Trusts Act 1957 requires every charitable trust board to provide a copy of the documents setting out the general purpose of the trustees or society, how the board will operate, and how the trust property will be managed.
It’s common for trustees incorporated as a board to be governed by a ‘trust deed’, and societies to be governed by a ‘constitution’ or a ‘set of rules’. These documents must accompany an application for incorporation.
The Charitable Trusts Act 1957 is not explicit about the format of a trust deed or a set of rules, or what needs to be included. However, there must be a clear intention to devote money or property to a charitable purpose. Assets must be clearly defined and the purpose must be for the good of the community.
The purpose of the trust must either agree with the meaning of the term 'charitable' as defined in the Charitable Trusts Act 1957, or be religious or educational in nature.
What to include in your trust deed or set of rules
Ideally, your trust deed or set of rules should contain the following information:
- The name of the board
- The purpose (or ‘objects’) of the trust
- The make-up of the board, including the number of trustees or board members, how they will be appointed, how long they can serve, and how they can be removed
- How the property of the trust will be controlled and managed by the board
- The powers and duties of the trustees
- How the funds and property of the trust will be managed
- How meetings of the board will be held, including what the quorum will be (the minimum number for a meeting), and how meetings will be notified
- How the financial affairs will be managed, such as the banking of money and the preparation of financial accounts
- The use of a 'common seal'
- How the trust deed or rules of the organisation can be altered.
The role of the Registrar
Under the Charitable Trusts Act 1957, the role of the Registrar is limited to registering trust boards, and recording changes to trust deeds, addresses and other details. We have no power under the Act to inquire into a board’s activities or operations.
Should a charitable trust board experience internal problems about how it is being run or the way its rules are being interpreted or applied, it must resolve them itself.
The authority to examine and inquire into the condition and management of charities in New Zealand resides with the Attorney General, who can be contacted at the following address:
The Solicitor General
Crown Law Office
P O Box 2858
The Crown Law Office website address is www.crownlaw.govt.nz
The role of Charities Services
Charities Services is the agency responsible for maintaining the Charities Register and monitoring charitable organisations in New Zealand.
Charities Services and the Charities Register operate independently of the Companies Office and the Charitable Trusts Register.
Registering with Charities Services is voluntary. If you choose to register with Charities Services, the information about you on the Charities Register must be maintained and updated separately to that on the Charitable Trusts Register.
Those registered with Charities Services must also file an annual return along with a performance report or financial statements.