The information needed to draft governing documents and register a new charity In the right circumstances, creating a UK charity and registering it with the Charity Commission might be appropriate. Family members can make annual, or one off, donations in a tax efficient manner and can then decide to what extent they wish to be involved in the administration of the charity.

We have evolved the Establishing a UK Charity - Checklist below to help clients crystallise their thinking about a proposed charity.

Overriding principles

  • Is the charity to be a trust or a limited company? In the UK it would be more usual to use a trust for grant making charities and a company for charities that will be entering into contracts, employing people etc.
  • Who will the original trustees be? Full names and private addresses are required (see below)
  • Agree the name of the proposed charity? It should not be too similar to a charity that has already been registered and if the charity is to be incorporated then the name must comply with company law.

Information needed to draft the governing documents

  • The proposed objects. Usually we recommend that the objects be widely drafted to increase flexibility. The Charity Commission will also want to know how the trustees intend to carry out the charity’s stated aims and we need to demonstrate that that the proposed aims are for the public benefit.
  • If the charity is to be a trust, are the donations made to be held as a permanent endowment? This means that the trustees will have no power to spend the capital on the charity’s objects and will only be able to spend the income earned each year. Obviously this is a lot less flexible.
  • The trustees. Are they to serve for a fixed term or indefinitely? If for a fixed term, can they be reappointed at the end of that term? Our recommendation is usually that trustees should be appointed for a fixed term, with the option of being reappointed, as it is usually easier to allow the term to expire and then appoint someone new rather than terminating the appointment. If they are to serve for a fixed term then retirement dates should be staggered.
  • Do you wish to include an automatic retirement age? This may be particularly relevant if the trustees are appointed for an indefinite term. If you do include this provision and a serving trustee reaches the automatic retirement age the age discrimination legislation will have to be complied with. There is a standard default retirement age of 65 – so that it will not automatically constitute age discrimination if trustees must retire at or after age 65. This will be reviewed in 2011.
  • It is also possible to include qualifications to trusteeship, for example, the nominated trustee must be a member of another body.
  • Under what circumstances is a trusteeship to be terminated? The standard governing documentation would usually allow for a termination of trusteeship in the following circumstances:
    • Disqualification (either under the Charities Act or the Company Directors Disqualification Act).
    • Incapacity.
    • Absence from meetings.
    • Resignation.
    • Age (see above).
    • Ceasing to be qualified (i.e. if the trustees must be members of an organisation).
    • Removal. There is a statutory power in the Companies Act for the members to remove a director. Further express provisions can be made if you wish. In relation to a trust document there is no automatic provision for the removal of a trustee. A provision can be included but you may feel that such a provision undermines the independence of the trustees.
  • In the case of charitable companies, who are the members to be? It would be common for the members to be the same people as the trustees and for new trustees to automatically become members and retiring trustees to cease to be members.
  • Trustees’ proceedings: How many times per year should the trustees meet? What is the quorum to be?
  • Trustees’ powers:
    • Following changes made in the Companies Act 2006 there is no requirement for a company to have a company secretary, however charitable companies and charitable trusts would usually have someone fulfilling this role (for a company this is likely to be a paid employee).
    • A treasurer is likely to be essential whether the charity created is a trust or a company and there may be other office holders you think will be necessary.
    • If the trustees delegate to committees, they will be legally responsible for the committees’ acts and for this reason it is prudent for at least two trustees to be a member of each committee.
    • It is usually appropriate for final decisions on major matters of policy to be reserved to the trustees themselves.
  • Trustee benefits:
    • Traditionally trustees do not receive any benefits from the charity but you may wish to include the possibility that professional trustees can be remunerated. - You may also want to permit some of the trustees to contract with the charity (as consultants or independent contractors) to supply goods or services of any kind.
  • Do you wish to include powers in relation to dissolution and/or amalgamation? We would advise you to include them unless you feel strongly that this is not appropriate.
  • The registered office will need to be agreed.

Completing the trustee declaration

  • We need the trustees’ full names, dates of birth, private address, occupation and details of any other names they have ever used.

Completing the application form

  • The address of the registered office.
  • Details of what rights the new charity will have to use or occupy any building (in particular their registered office). For example, will there be a licence to occupy put into place.
  • What is your first date of operation (if the charity has begun to operate by the time we apply for registration), when is your financial year end and what funds have been raised by the time the application is submitted.
  • If the charity has not begun to operate when we apply for registration then we need to give a proposed financial year end and the anticipated income (from donations etc) that will be raised in the first year.
  • Details of the proposed bank account and a letter from the bank confirming that once the charity has been registered a bank account will be opened by them in the name of the charity.
  • What is the area of operation? We suggest this is worldwide unless there is a reason to reduce the area of operation.
  • What is the name of the charity correspondent and what is their role (e.g. secretary)? What is the correspondence address, telephone number, fax and email address? If an email address is to be provided we need to confirm whether future communications can be sent by email.
  • How are we going to classify the charity (according to the Commission’s prescribed list)?
  • Are you likely to use professional fundraisers?
  • We need to enclose with the application copies of any literature that has been produced and provide information about the amount of funding pledged to date.

Timescale

  • The drafting of the documents themselves will take around two to four weeks to produce but finalising the terms of the documents before beginning drafting usually takes much longer.
  • If the charity is a company the incorporation process will take around one week.
  • Once all the documents are completed the Charity Commission aims to make a decision on the application within 40 days. The more information we provide in the application the more likely the Charity Commission are to be able to achieve this.