The UK is home to roughly 200,000 registered charities, around 169,000 of that are based in England and Wales. In the event you are hoping to hitch this philanthropic effort and make a positive difference to the lives of others, this detailed guide will explain how one can arrange a charity in six steps.
The data included on this blog pertains to charities in England and Wales. Different rules and processes apply if you would like to set up a charity in Scotland or set up a charity in Northern Ireland.
What’s a charity?
A charity is a kind of organisation that is ready up to offer a profit to society. That is in contrast to a business (for profit) business that goals to make a profit for the financial advantage of its owners.
In England and Wales specifically, the Charities Act 2011 defines a charity as an organisation that:
- is established exclusively for charitable purposes, and
- is subject to the High Court’s charity law jurisdiction
Charities are non-profit, within the sense that each one surplus income is used to further their exclusively charitable goals. Nonetheless, not all non-profit organisations are eligible to register as charities.
So, in case you are enthusiastic about organising or registering a charity, it’s vital to know what makes a charity. It’s also an excellent idea to check the alternatives to organising a charity to make sure that it’s one of the best option for what you would like to do.
Arrange a charity in six steps
In the event you are certain that your organisation satisfies the Charities Act definition, follow the six steps below to establish a charity in England and Wales.
Step 1: Select your trustees
Ideally, a charity must have no less than three independent trustees. These are the people chargeable for leading the charity and deciding the way it is managed and run.
The role of a charity trustee is incredibly vital and requires an incredible deal of commitment. Most trustees are also unpaid volunteers, although they will claim reasonable expenses.
As such, you need to recruit and appoint trustees who’re genuinely concerned about the cause and possess the fitting skills and experience to your charity.
Who can and can’t be a trustee
Apart from a couple of restrictions, almost anyone can arrange and run a charity within the UK. They don’t even must live within the UK – they is usually a citizen or resident of any country on this planet.
Unless the charity’s governing document imposes the next minimum age, trustees have to be no less than:
- 16 years old, if the charity is registered as a limited company or charitable incorporated organisation (CIO)
- 18 years old, if the charity is a trust or unincorporated association
By law, some individuals are disqualified from being a charity trustee or senior manager (e.g. Chief Executive, Chief Finance Officer), including anyone who:
- has unspent convictions for certain offences
- is disqualified from acting as an organization director
- has previously been removed as a trustee, officer, agent, or worker of a charity by the Charity Commission or High Court resulting from mismanagement or misconduct
- has previously been faraway from a position of control or management of a Scottish charity resulting from misconduct or mismanagement
- is an undischarged bankrupt or subject to bankruptcy restrictions or an interim order, including a person voluntary agreement (IVA) with creditors
- is subject to a debt relief order, debt relief restrictions order, or an interim order under the Insolvency Act 1986
- has been found to be in contempt of court for making (or causing to be made) a false statement
- is on the sex offenders’ register
- is a delegated person under particular anti-terrorist laws
In limited circumstances, the Charity Commission may waive (remove) a disqualification.
Step 2: Define your charitable purposes
Charitable purposes are the objectives or goals of your charity. They need to be ‘for the public benefit’ and fall inside no less than considered one of 13 descriptions of purposes outlined within the Charities Act 2011:
- relief of poverty
- health or the saving of lives
- citizenship or community development
- the humanities, culture, heritage, or science
- amateur sport
- human rights and spiritual or racial harmony
- the environment
- people in need due to a particular drawback
- animal welfare
- the efficiency of the armed forces, police, fire, and rescue, or ambulance services
- some other charitable purpose not covered by the opposite descriptions
Your charitable purposes should clearly explain:
- WHAT outcomes your organisation is ready up to realize (e.g. the relief of food poverty)
- HOW it’ll accomplish these outcomes
- WHO will profit from these outcomes
- WHERE these advantages will occur
The needs of a charity are frequently set out within the ‘objects’ clause of its governing document. GOV.UK provides detailed guidance on writing your charitable purposes.
Step 3: Select a reputation to your charity
Selecting the fitting charity name is one of the vital crucial facets of your branding strategy. It’s the important thing means by which others will discover your organisation and change into aware of your cause.
Given its importance, you need to spend an honest period of time on this a part of the method. This can make sure that your chosen name is exclusive, memorable, and appropriate to your charity.
Charity name rules
Your principal (official) charity name must not:
- be similar to or just like the name of one other charity
- include words or expressions that you simply don’t have permission to make use of, e.g. a trade mark, famous name or copyrighted work, or ‘Royal’ words like King, Queen, etc.
- use offensive words or acronyms
- be misleading, e.g. suggest that the charity does something that it doesn’t
- breach mental property rules
You possibly can search the charities register online to ascertain the names of other registered charities and make sure that your name is exclusive.
In the event you’re organising a charitable company, you should also check that your charity name is offered to register as an organization name. Read our ‘guidelines on limited company names’ for more information.
Using a working or alternative charity name
Along with your principal charity name, you should use working/operating or alternative names. This includes abbreviations or acronyms (e.g the Royal Society for the Prevention of Cruelty to Animals uses RSPCA), or alternatives (e.g. Comic Relief is the operating name of Charity Projects).
In the event you wish to make use of any working or alternative names, you should provide them once you apply to register your charity.
Step 4: Select a legal structure
To establish a charity within the UK, you will have to pick a legal structure. This decision will affect the kind of governing document your charity adopts and the way your organisation operates.
There are four main types of charity structure:
1. Charitable company
A charitable company is a company body that is ready up as a non-public company limited by guarantee. It have to be incorporated at Firms House and registered with the Charity Commission.
Once incorporated, a charitable company exists as a legal ‘person’ that may enter into contracts and hold property in its own name (somewhat than within the names of its trustees). Additionally it is chargeable for its own debts. Which means that trustees have limited liability for the charity’s debts and actions.
That is the best structure if you would like to arrange a bigger charity that employs staff, controls substantial funds or assets, or engages in charitable activities that involve financial risk.
2. Charitable incorporated organisation (CIO)
A charitable incorporated organisation is a comparatively latest kind of corporate structure designed exclusively for charities. Nonetheless, it just isn’t an organization and just isn’t subject to company regulation.
CIOs exist as separate legal entities that may employ staff, enter into business contracts, and hold assets of their charity’s name. Trustees are also shielded from personal liability for the debts and actions of the CIO.
Charitable incorporated organisations must register with the Charity Commission, but they do not need to register with Firms House.
That is an excellent structure if you would like to enjoy a number of the advantages of a charitable limited company without the burden of dual registration, regulation, and filing obligations.
3. Charitable trust
A charitable trust is an unincorporated structure that has no separate legal status from its trustees. Which means that trustees are personally chargeable for all liabilities and actions of the charity.
Normally, a trust is ready up by a small group of individuals to administer money, investments, or property for the advantage of a selected charity or for charitable purposes.
A trust is most appropriate in case your charity:
- won’t have wider membership – it’ll be run by trustees only
- is unlikely to rent premises, own property, or employ staff
- won’t provide services or carry on any type of business, e.g. it’ll make charitable grants but won’t do some other kind of work
A trust will need to have a trust deed to indicate that it’s charitable. Nonetheless, you do not want to register your trust with the Charity Commission if its annual income is below £5,000.
4. Unincorporated association
An unincorporated association, or unincorporated charitable association, is the best and easiest charity structure to establish and run. Essentially, it’s a bunch of volunteer members who conform to perform a shared purpose, often of a social nature (e.g. sports club, community group).
Unincorporated associations do not need to include at Firms House, but they have to register with the Charity Commission if their annual income is greater than £5,000. As such, they set their very own rules and revel in greater freedom of operation than charitable corporations and CIOs.
They don’t have any separate legal personality, which suggests that individual members are personally chargeable for the association’s debts, contractual obligations, and actions. Furthermore, unincorporated associations cannot employ staff or own premises in their very own name.
Whilst this structure does have limitations, it costs absolutely nothing to establish. It’s an excellent option in case you expect to remain small and there’s minimal risk of liability, otherwise you simply need to test out an idea before registering as a charity.
Step 5: Create a governing document
By law, your charity will need to have a governing document. This can be a rulebook that sets out how your charity will operate. It’s legally binding and will explain:
- the organisation’s charitable purposes (‘objects’)
- who runs the charity (trustees) and who is usually a member
- how the charity is run
- the responsibilities, duties, and powers of trustees
- how one can arrange and hold meetings
- how decisions are made
- rules and procedures for appointing and removing trustees
- rules about expenses and payments to trustees
- how one can manage the charity’s funds, assets, and investments
- how one can resolve internal disputes
- dissolution provisions for closing the charity
The kind of governing document you create depends upon your charity’s legal structure:
- limited company – articles of association
- charitable incorporated organisation – foundation or association structure
- unincorporated association – structure
- charitable trusts – trust deed or will
The Charity Commission provides model governing documents for all sorts of charity structures. You need to use the suitable one as a template (really useful) or just as a reference for creating your individual.
The charity trustees must meet to approve and sign the governing document. An independent witness will have to be present in case you are organising a charitable trust.
Step 6: Register your charity
In England and Wales, you might be legally required to register your charity with the Charity Commission if:
- it has an annual income of no less than £5,000, or
- it is ready up as a charitable incorporated organisation
Different rules and processes apply if you would like to arrange a charity in Scotland or Northern Ireland.
Information required to register a charity
To finish the web application form, you will have to offer the next details about your charity:
- name of the organisation, including any working names
- address and get in touch with details
- trustees’ details
- a PDF copy of your governing document
- charitable purposes
- how the organisation carries out its purposes for public profit
- a replica of the certificate of incorporation and memorandum (in case your charity is an organization limited by guarantee)
- proof that your charity’s income is above £5,000 per yr (unless it’s a CIO)
- bank or constructing society account details
You will even need to incorporate a trustee declaration form to verify that each one trustees are eligible. This have to be signed by every trustee and attached to your online application as a PDF file.
The charity application form is complex and extensive, so be certain you’ve got all the required information at hand before starting the method.
For more information, take a have a look at the Charity Commission’s detailed guidance on how to register a charity in England or Wales.
How long does it take to register a charity?
When you’ve submitted your online application to the Charity Commission, you’re going to get an automatic email to verify receipt.
Your application ought to be assessed inside 10 working days (but it surely may take longer) to make sure that:
- your organisation must register as a charity
- you’ve got answered all applicable questions in full
- all of the data you’ve got provided is factual
- every trustee is eligible to act as a trustee
The Charity Commission Operational Standards state that they aim to determine nearly all of registration applications inside 30 working days. Nonetheless, this timescale just isn’t guaranteed. It depends upon their workload and the complexity of your application.
In case your registration is successful, the Commission will notify you of their decision by email and enter your organisation on the register of charities.
So, there you’ve got it… how one can arrange a charity in six steps
Establishing a charity is an enormous decision. It involves an incredible deal of planning and requires dedication from everyone involved, but striving to enhance the lives of others is all the time a worthwhile endeavour.
We hope this guide has been helpful and has shed some light on what a charity is and how one can arrange a charity in England and Wales.
If you’ve got any questions or need assistance registering an organization limited by guarantee, please leave a comment below or contact our company formation team.