Setting Up a Charity

• Choose your trustees – usually at least three
• Every charity has to have “charitable purposes for the public benefit”
• Name your charity
• Decide upon a structure
• Create a “governing document”
• If your income is over £5,000 a year you must register with the Charity Commission. You will also have to register if you set up a charitable incorporated organisation (CIO)

A charity’s trustees are responsible for the overall governance and control of the charity. As a general rule, the position of trustee is an unpaid role.

Trustees must ensure that they:

• act in the best interests of their charity, avoiding or managing conflicts of interest;
• responsibly manage resources and risks relating to the charity; and
• act with reasonable care and skill, taking professional advice and assistance when appropriate.

A trustee that is found to be in breach of their duties may be held personally liable for any losses that the charity suffers as a consequence.

As you would no doubt expect, all charities must have a charitable purpose, but what is a charitable purpose?

The Charities Act defines 13 broad purposes that are considered to be charitable. It is therefore necessary to ensure that your intended charity fits into one of these 13 purposes.

It is not only necessary for your charity to meet the charitable purpose test, it must also be considered to be for the public benefit. Therefore, the charity must be in the interest of the public in general or a sufficient section of the public, and beneficial.

Overcoming the public benefit test can take time and care to ensure that the proposals being put to the Charity Commission are approved. The Charity Team at Birkett Long has experience in ensuring that this requirement is met when incorporating a new charity.

Charities can come in a number of different forms and structures, which may include:

• An unincorporated association
• A trust
• A Charitable Incorporated Company (CIO)
• A Company Limited by Guarantee

There are various advantages and disadvantages to all of the above, and it is therefore important that when incorporating a charity you choose the right structure. Consideration should be given to the aims of the charity, its likely size and how it intends to operate when choosing a structure.

A charity can change structure after it has been incorporated but this can be a long and costly exercise. Making the right choice at the outset will enable the charity to focus on its objects, rather than constitutional or structural issues.

Birkett Long’s Charity Team will discuss your charity’s requirements and advise as to the most appropriate structure and then assist in incorporating the relevant legal entity.

A charity’s governing document or constitution provides the rules for how the charity will operate and guidance on how trustees should manage a range of issues. Typically the constitution will include:

• The charity’s Objects
• The charity’s Powers
• Rules relating to appointment of trustees
• How to deal with conflicts of interest
• Voting rights
• How the charity is to be managed

This is a detailed and comprehensive document and often benefits from expert advice at the outset to ensure that it truly reflects the wishes of those incorporating the new charity.

The final step to incorporating a charity is registration with the Charity Commission.

As you would expect, the Charity Commission has a rigorous process which needs to be followed before it accepts a new charity on to the Register of Charities.

The Charity Commission will require comprehensive information about the aims, objects and intentions of the new charity, along with details as to how it will operate, why it will be of benefit to the public and who will fund it.