Registering a charity in the UK necessarily involves compliance with the Charities Act 2006 and the Companies Act 2006. This is due to the current overlap in law means that charities are governed by both. At some point this year, this is due to change with the implementation of a new charitable form known as a “Charitable Incorporated Organisation” the foundations of which were laid by the Charities Act 2006. The new body is set to allow people to register a charity without the necessity of registering with both Companies House and The Charity Commission. However, recent news shows a delay in its implementation.
Registering a Charity – A Company Limited By Guarantee
In the meantime, registering a charity most often involves the formation of a company limited by guarantee. This is a type of limited company which is designed specifically to allow people with non-profit ideas in mind. Unlike a company limited by shares, a company limited by guarantee does not issue dividends to its members. Instead they make an undertaking to pay a set amount should the business be wound up. This allows it to operate with more charitable objects and not solely to make a profit, as is the case with most companies limited by shares. In order to ensure that the company is set up solely for charitable reasons the law requires that a number of clauses are draft in to the company’s articles before any attempt at registering a charity is carried out. These clauses are put into the company’s memorandum of association and include:
- A charitable objects clause;
- A non-profit clause; and
- A dissolution clause.
Each of these clauses within the company’s memorandum of association binds the company to its charitable nature and ensures compliance with the law, preventing abuse of the body in a way which might contravene its charitable nature. The charitable objects clause in particular must be drafted in such a way to demonstrate that the objectives of the charity (company) are exclusively charitable and nothing more. It must be clearly worded as such, otherwise there is a risk that registration will be refused. The other clauses are relatively simple and obvious in nature. They ensure that the company does not distribute profit in the way a company would and the dissolution clause provides for what will happen with the charities assets, should it ever be wound down.
Registering a Charity – The Public Benefit Test
Another part of registering a charity is “the public benefit test”. This goes hand in hand with the charitable objects clause to ensure that the company is set up for the benefit of the public and the community. The test is clearly open to interpretation as what will be judged to be for the public benefit would change depending on who you talk to. However, this has its upsides as it means the test can change as society itself changes. The public benefit test is broken down into two simple parts which state that the charitable must have:
- An identifiable benefit(s); and
- That benefit must be for the public or section thereof.
Fulfilling the test is relatively straightforward. You just need to make sure that the benefits of your charity are clear and unambiguous. Then demonstrate that they are for the benefit of the public, rather than for the shareholders or owners of the company (as is usually the case).
Straightforward benefits for the benefit of the public include things like helping the sick and needy, supporting or advancing education, preserving or maintaining the environment or an animal species or other similar undertaking.
Registering a Charity – The Process
Once all these things are in place, you can carry out the formation of a company limited by guarantee. Once this legal entity is properly created in accordance with the Companies Act 2006 then you can carry out a charity registration with the Charity Commission.
Registering a charity with the Charities Commission will ensure you are issued with a charity number which gives you the proper legal recognition granted to charities.
Getting Started With The Company Warehouse
Here at TheCompanyWarehouse.co.uk, we have a specialist team who can help you with the process of registering a charity. Using our charity registration service, we provide you with all you need to start a company limited by guarantee, including drafts of the articles and memorandum of association including drafting of the non-profit and dissolution clause and guidance on what the charitable objects clause should include. All the relevant company registers and minutes as well as submission to Companies House. Our price includes the Companies House registration fee and guidance on how to properly register your newly formed company with the Charity Commission.
Order today by calling our charity registration team on 0800 0828 727 or take a look at our page on how to start a charity.