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.
The trustees of a charitable trust can apply to us to be incorporated as a board under the Charitable Trusts Act 1957.
To do this, a charitable trust 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 a charitable trust board can do
A charitable trust board incorporated under the Charitable Trusts Act is considered to be a body corporate much like a company or an incorporated society. These entities are options to give a group of people a single identity for legal purposes.
As such, a trust 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.
A trust 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 trustees or related persons.
A trust board can operate 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.
Under the Charitable Trusts Act 1957 trustees can apply to incorporate as a board. Boards are made up of individual trustees.
A board must have:
- at least one trustee, and
- a deed under which it operates
- a deed may include a ‘trust deed’
- trust property should be identified in this deed.
The Charitable Trusts Act 1957 requires every charitable trust board to provide a copy of the documents setting out the general purpose of the trust, how the trust 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’. Your trust deed must accompany your application for incorporation.
The Charitable Trusts Act 1957 is not explicit about the format of a trust deed or what needs to be included. However, there must be a clear intention to devote money or property to a charitable purpose. Property 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
Ideally, your trust deed 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 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 registered under the Charities Act 2005 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 with charities services along with a performance report or financial statements.