Setting Up & Registering a Charity
Setting up a registered charity in the UK can appear to be an overwhelming task. Though founders of new charities are generally very clear about the problems they want to address and the people they want to help, their energy can often feel drained by the seemingly complex process of setting up their registered charity.
Charities in the UK are some of the most heavily regulated in the world and it is important that you and your co-trustees take some time to get to grips with the charitable sector and the law and regulation by which your new charity will be governed. However you do not need to learn it all at once and there a plethora of guides and books to help you on the journey. This page focuses on the start of that journey – the process of setting up and registering your charity.
Five key questions that you will need to answer before you can establish your charity:
First, are the purposes for which your charity is going to be established exclusively charitable in English law?
Not everything that is good or benefits society is necessarily charitable and you will need to ensure that your charitable objects (which will be set out in your governing document) fall within the descriptions of charitable purposes that are set out in the Charities Act 2011. These include the relief of poverty, the advancement of education, the advancement of religion etc. A full list of charitable purposes can be found here. As well as being on the list of accepted charitable purposes, your charity must be established for the public benefit. Whether or not a purpose is for the public benefit involves consideration of the benefits that will be provided, any detriment or harm that might arise, the section of the public that will be helped and the levels of private or personal benefit that might arise. Further information about the public benefit requirement can be found here.
Second, you will need to decide which legal structure is best for your organisation.
There are variety of ways in which new charities can be established but for new promoters the choice normally boils down to whether or not you wish to be unincorporated or incorporated. Unincorporated structures (such as unincorporated associations and charitable trusts created by trust deed) are the most straightforward and administratively simple form of charity. Such structures can still be appropriate for very small or grant making charities who will not be employing staff or taking on other liabilities. However unincorporated charities have two major drawbacks. They do not have a separate legal personality and they do not offer limited liability for your organisation. This means that are generally inappropriate for all but the most simple form of grant-making trust. Incorporated structures offer the benefit of limited liability which means that its members are only liable for the debts of the organisation up the level of their guarantee (usually a nominal amount of £1).
There are two principal types of Incorporated entity – a charitable company limited by guarantee (CLG) and a charitable incorporated organisation (CIO). A CLG is a type of company that is registered at Companies House and has to comply with company law, which also needs to be registered with the Charity Commission. A CIO is incorporated (like a company) but is registered only with the Charity Commission. More information on these different legal structures can be found here.
Third, you must select your first group of trustees.
The charity trustees are the people who will run and be responsible for the charity. Generally trustees give up their time on a voluntary basis and cannot financially benefit from their role as trustee (unless they have specific authority). Please check that your proposed trustees are not disqualified by law from acting (anyone who is an undischarged bankrupt, or has been removed by the Charity Commission, or has an unspent conviction for deception or dishonesty). You should select a group of trustees with a range of skills and experience that you can harness to run your charity. They will also need to be prepared to give enough time to help get your charity off the ground. Basic guidance for trustees on eligibility and explaining their duties and responsibilities as charity trustees can be found here.
Fourth, once you have decided upon the legal form you wish to take, you will need to prepare a governing document.
There are model documents available from the Charity Commission or you may wish to prepare something tailored for your organisation. The governing document will contain the charitable objects, the powers and the administrative provisions relating to the appointment of trustees, the holding of trustee meetings, prohibition of trustee benefits, provisions dealing with members (if necessary) and a dissolution clause which sets out what happens to the charity’s funds if its work comes to an end. You will need to prepare the constitution and confirm that your first trustees are happy with its terms.
Finally, you will need to agree on a new name for your charity.
Your name cannot be the same as or similar to an existing charity, so before you fall in love with your chosen name make sure that the name is available. You should also check that it is available at Companies House and that you can find a domain name that is available and that works with your chosen name. You also need to check that it does not contain any sensitive words or expressions, or be likely to cause conflict with other organisations already operating under a similar name.
Once these five steps have been completed, you will be ready to sign the papers to establish your new charity. You need to complete the relevant paperwork or forms to establish your particular type of legal entity (so, incorporation at Companies House for a company limited by guarantee and executing the Trust Deed for a charitable trust). (A CIO will be established on registration by the Commission.) Once the papers have been signed, you can then file your application to register your new organisation with the Charity Commission. This is an online application, and in part is designed to ensure that you and your fellow trustees have understood what it means to run and operate a registered charity.
If you would like to talk to someone about establishing your charity or for assistance with the registration process, please do not hesitate to contact a member of the Charities Team on 01895 207862 or via email at email@example.com.