There are many reasons why a charity may wish to change its name; maybe the name is too similar to another organisation, or the name doesn’t easily get across what your charity is about. Maybe as time has gone on since you formed your charity, your purpose has changed, and you would like your name to reflect that.

Whatever the reason, it’s important to follow the correct process, let the appropriate services know, and are aware of potential implications of the change. It’s also important to note that the name change doesn’t affect the rights, obligations or liabilities of the board or committee. An organisation is bound by the commitments it makes regardless of a name change.

Note: Before changing your name, it is important to check that your name is not being used by another organisation, as you will be denied the new name if it is already taken. Onecheck is a great resource for this.

Who do I need to notify?

If you are an incorporated organisation it is important that you notify the Companies Office. If you are registered as a charity, it is important that you contact Charity Services and let them know too. This is to ensure that your details are publicly up to date on both registers.

If you are registered with both, you will have to apply for a name change with the Companies Office before you notify Charities Services.

It can also be useful to let your members or the public know of the name change, to ensure your community is kept up to date.

Note: We often see organisations wanting to use a te reo Māori name. We suggest consulting and getting advise on this as it is something that should be gifted (rather than using google translate!)

 

Updating your name through the Companies Office

If you’re updating your details online, you must have:

  • a RealMe login
  • an online services account with the Companies Office
  • authority to manage information for your charitable trust board.

If you do have the above, then you can change your organisation’s name following the below steps:

  1. Log in to your online services account.
  2. On the dashboard, select the charitable trust board you wish to update from ‘My Businesses’.
  3. On the ‘View Details’ page, select the ‘General Details’ tab, and click the ‘Change Name’ button.
  4. Enter the proposed new name, and to confirm it can be used, click ‘Name Availability Check’.
  5. If you have documentation to support your application, click ‘Upload’ to attach documents. Please note, these documents will not be available for public view.
  6. Complete the signatory details and click on ‘Submit’.

More information can be found here.

 

Updating your name through Charities Services

To update your name, simply login through the online portal and fill out the Update Details form online. You can also download and complete the paper form and send that in. Ensure that you have any information you may need on hand (for example if you are using the same name as another entity that will be wound up, ensure you have written consent). More information can be found here.


This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.

 

Succession planning is a critical component of effective governance for any board, whether it’s for a corporate entity, charity, or for-purpose organisation. In New Zealand, where governance practices are guided by both legal frameworks and best practice principles, succession planning ensures that a board remains dynamic, diverse, and capable of steering the organisation into the future. This article outlines some practical considerations to keep in mind when developing a succession plan for your board.

1. Primary Responsibility of the Current Board

Succession planning is one of the board’s most important responsibilities, ensuring continuity and stability during leadership transitions.

(a) Evaluating Leadership Roles

Start by assessing the current leadership. Who is your Chair and how long have they been in the role? It may be time to consider appointing a deputy Chair who can learn the ropes now and ensure a smooth transition when the time comes for the current Chair to step down. Planning ahead mitigates risks associated with abrupt leadership changes and maintains strategic continuity.

(b) Emphasising Diversity of Thought

When considering successors, resist the temptation to simply replicate the existing board members. Instead, focus on bringing in new perspectives. Diversity of thought fosters innovative solutions and more resilience. Actively seek out individuals who bring different experiences, skills, and viewpoints to the table.

(c) Mapping Out a Succession Plan

A clear, structured succession plan is essential. Consider implementing a rotation schedule for trustees, this could be legally enshrined in your Trust Deed. For instance, a trustee might serve for a term of three years, renewable for another three years, with a maximum of three terms (3+3+3), after which they must stand down for at least a year. This ensures regular infusion of fresh ideas while maintaining experienced leadership.

(d) Encouraging Healthy Board Renewal

Term limits and rotation schedules naturally create opportunities for board renewal. These mechanisms facilitate necessary discussions about new leadership without making it personal. Focus these conversations on the organisation’s needs rather than individual preferences to prioritise the entity’s long-term success.

2. Utilising a Skills Matrix

A skills matrix is a valuable tool for evaluating the board’s current composition and identifying gaps in expertise or experience. This can be used to decide where there may be areas to bring people in on. By regularly updating the skills matrix, you can keep your board aligned with the evolving needs of the organisation. Here is ‘needs matrix’ example from SportNZ.

3. Long-Term Vision: “Where Will We Be in 50 Years?”

While succession planning often focuses on the near to medium term, it’s crucial to consider the long-term legacy of the current leadership. The question, “where will we be in 50 years?” encourages the board to think beyond immediate challenges, nurture potential leaders, anticipate future trend and position the board to respond to long-term challenges and opportunities.

4. Conclusion

Board succession planning is not just about filling seats—it’s about ensuring that the board remains effective, diverse, and forward-thinking. By taking a proactive approach, utilising tools like a skills matrix, and thinking long-term, your board can continue to provide strong governance that drives the organisation’s success for decades to come.

If you would like to listen to a short podcast on this topic, the Institute of Director’s have released an episode featuring a Chartered Fellow of the Institute of Directors here where Steven Moe (the host of the show) talks through governance and board considerations.

 

If you need assistance in developing a succession plan tailored to your board’s needs or have legal questions regarding governance, contact one of our experts at Parry Field Lawyers.

 


This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.

The Incorporated Societies Act 2022 (“Act”) has created new requirements that all incorporated societies must meet in order to reregister under the Act. The most relevant requirements that may prevent your Residents Association from reregistering under the Act are discussed below.

Background

A Residents Association is a type of incorporated society that exists for the benefit of the community it serves.  It might maintain community facilities or common areas, or simply serve as a forum for members to come together and organise community activities. Some Residents Associations will own common land as well.

Most Residents Associations will be registered under the Incorporated Societies Act 1908, which means that they will need to prepare for and reregister under the Incorporated Societies Act 2022.  We have an Information Hub dedicated to the changes in the new Act and what organisations need to do in order to reregister – you can find it here.

There are some requirements under the new Act that may impact your Residents Association and your ability to reregister – here’s what you need to know.

Nominating a not-for-profit entity on wind up

Section 26 of the new Act sets out a list off requirements for what incorporated societies must include in their constitution.  We have written a series of six articles on these requirements, which you can find on our Information Hub.

The key requirement for Residents Associations to be aware of is set out in section 26(1)(l).  This explains that incorporated societies must nominate a not-for-profit entity (or a class or description of not-for-profit entities) to which any surplus assets are distributed to on liquidation or removal from the register.  The definition of a not-for-profit entity is set out in section 5.

Generally, the members of Residents Associations are homeowners in the subdivision or community, so Residents Associations like this who hold land on behalf of members wouldn’t be able to distribute property to members under this provision on wind up.

This will cause issues for many Residents Associations who own common land, as the “winding up” provision will often say that any surplus assets should go to the members – that way the residents will each get a share in the land when the society winds up.  If your Residents Association is in this situation just let us know – we are happy to support you in considering your options moving forward.

Purposes – can’t be for the financial gain of members

Under section 26(1)(b) of the new Act a society’s constitution must include its purpose.  This makes a lot of sense and may not seem like an issue on the face of it, but the new Act also sets out that the Registrar may refuse to incorporate a society if its purposes are unlawful.  An unlawful purpose includes where a society is carried on for the financial gain of any of its members.  Section 23 of the new Act then explains that a society must be treated as having the purpose of being carried on for the financial gain of its members where:

  • it distributes, or may distribute, any gain, profit, surplus, dividend, or other similar financial benefit to any of its members (whether in money or in kind); or
  • it has, or may have, capital that is divided into shares or stock held by its members; or
  • it holds, or may hold, property in which its members have a disposable interest (whether directly, or in the form of shares or stock in the capital of the society or otherwise).

The most relevant clause to Residents Associations is the third provision.  If the Residents Association’s assets are set to go to members on wind up, then those members would have a “disposable interest” in property.  A clause such as this or any other clause in the constitution that suggests members should get the Residents Association’s assets would then be in breach of the new Act.

Section 24 of the new Act provides a list of examples of when a society does not have a financial gain purpose.  We think that although some of these could be stretched to apply to Residents Associations, section 23(1)(c) is so clear that it would not make sense to interpret the new Act in that way.

What now?

As some Residents Associations won’t be able to reregister under the new Act with their current land ownership and constitutional structure, it’s time for each of these Residents Associations to consider their options moving forward.  This is something we are well placed to advise on, as we regularly come alongside both incorporated societies and property holding organisations to consider their structure options.

If you believe your Residents Association may be unable to reregister under the Act due to the reasons above, please feel free to contact Judith Bullin or Sophie Tremewan at Parry Field Lawyers. Our team are more than happy to assist you to make the changes needed to reregister under the Act.

 

We help with unincorporated and incorporated societies and answer questions all the time. If you would like to discuss further, please contact one of our team on judithbullin@parryfield.com or sophietremewan@parryfield.com  at Parry Field Lawyers.

The tax benefit of making donations: How does it work?

We help set up many charities and are often asked about the tax benefits. We go into this in our “Charities in New Zealand” book, but want to outline some key points here.

Charities benefit from receiving donations and donors often benefit from the ‘feel good factor’ of helping out worthy causes. Registered charities do not pay tax and their donors can benefit further by applying for a ‘tax credit’ to get a third back, either by applying directly to IRD or by way of ‘payroll giving’.

 

Direct donations

People often make donations to charities directly. The donor can then submit the receipt to IRD who will issue a ‘tax credit’, which effectively returns 33.3% of the donation to the donor. Find out more about claiming tax credits for direct donations.

 

What is payroll giving?

Payroll giving occurs when employers enable their employees to make donations directly from their gross wages. The tax benefit is that the amount of PAYE or withholding tax the employee pays is reduced by the amount of their donation. They also receive a ‘tax credit’ from the donation, which is 33.3% of the donation value.

Payroll giving is therefore a bit simpler as the donor does not have to submit their donation receipts to IRD to claim the tax credit.

 

What needs to be in place for payroll giving?

Employers will only be able to offer this service if they file their payroll taxes electronically. They can either use the myIR online service, or attach files from their own payroll software.

Even if an employer has the ability to use payroll giving, it is discretionary. Employers may also use their discretion to choose how the donations will operate, for example, they may designate specific charities that can be donated to, and they may designate a minimum donation amount.

Only ‘donee organisations’ can receive payroll donations.

 

What is a donee organisation?

IRD maintains a list of donee organisations. Charities are added to the list if they use at least 75% of their funds within New Zealand (that is, they operate “wholly or mainly” here), or for the public good if an organisation is not a charity. For more on the threshold, you can check to see if a charity is on the IRD donee organisation list here.

 

Other resources:

The IRD has put together this excellent guide to payroll giving.

It is also possible to claim tax credits on donations to charities supporting overseas causes.

We help with charity set ups and answering questions all the time. If you would like to discuss further, please contact one of our team on stevenmoe@parryfield.commichaelbelay@parryfield.comsophietremewan@parryfield.com, or yangsu@parryfield.com at Parry Field Lawyers

There are around 28,000 officially registered charities in New Zealand doing important work to make Aotearoa a better place. People donate around $1.5 billion annually to New Zealand charities to enable them to do their work.

When it comes to an organisation, the term ‘charity’ has special meaning. To call itself a registered charity, an organisation needs to go through a proper process, which is governed by the Charities Act 2005 (the Act).

This law exists to promote public trust and confidence in the charitable sector and to encourage and promote the effective use of charitable resources. In a nutshell, it is about ensuring good practice by charities, which is a great thing for everyone.

To obtain charitable status an entity must have legitimate charitable purposes, and these are set out in the Act as: relieving poverty; advancing education; advancing religion; or other purposes beneficial to the community.  In other words a cause may be good but it may not be capable of registering as a charitable entity.

This doesn’t mean that a cause that falls outside of these categories is not worthy; it simply means that by law that cause is unlikely to be able to become a registered charity – it may still be a charity which is incorporated with Companies Office though.

We realise this area of law can be confusing so have written a free guide about this for those who want to set up charities which is available here

 

Does charitable status matter?

There are some advantages for organisations to be registered charities. Funders and donors often feel more comfortable giving to a registered charity because they know that registered charities are required to adhere to good practice. There may also be tax advantages for the organisation, and for donors, who may qualify for tax rebates and be able to claim back 1/3 of what they give to the charity.

To help ensure charities are operating well, registered charities must submit annual reports to Charities Services. The reports are all publicly accessible on the Charities Register, so anyone can see how the charity is performing.

It is an offence to even imply that you are a registered charitable entity if you are not registered, because it is misleading. Being a ‘charitable trust’ does not mean an entity is a registered charity. The term ‘charitable trust’ is simply the legal structure. A charitable trust still needs to be registered to have genuine legal charitable status which is done by applying to Charities Services.

 

Registered charity or not?

It’s easy to check if an organisation is a registered charity by doing a quick search using the Charities Register.

 

Dealing with bogus ‘charities’

If you discover that an entity is wrongfully describing themselves as a charity to seek an advantage, you can email compliance@dia.govt.nz. Find out more about making a complaint on the Charities Services website.

We deal with charities and those who want to set them up a lot and have many free resources on our website here.

If you have any further queries please do not hesitate to contact one of our experts at Parry Field Lawyers- stevenmoe@parryfield.comyangsu@parryfield.comsophietremewan@parryfield.commichaelbelay@parryfield.com or annemariemora@parryfield.com

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

Advertising your fundraising effort

Your business is thriving  and you need substantial additional capital to fund the next stage of your growth.  You have read up on the Financial Markets Conduct Act 2013 (“FMCA”) (available here) and would prefer to raise funds through one of the Schedule 1 exemptions from product disclosure statement requirements (discussed here).  Being proactive, you have already approached your close business associates, relatives, and employees while also taking full advantage of your statutory small offers limit, but it is still not enough.

You decide that it is time to widen the pool of potential investors – you need to reach the deeper financial resources of Wholesale Investors (discussed here) by advertising your offer to them.  But how do you that and what are some of the risks in advertising to Wholesale Investors?

 

Inserting a Disclaimer

To begin with, it is important to be open and honest with the people who come across your offer that your investment is only open to Wholesale Investors.  Doing so will avoid potential misunderstandings and hopefully prevent a flood of enquiries from people that will not qualify for the Wholesale Investor exemption.  We have seen offers include a disclaimer similar to the one below to highlight that the offer is only available to Wholesale Investors:

DISCLAIMER: [These] offers are only open to investors who fall within the exclusions applicable to offers made to “wholesale investors” as set out in Schedule 1, clauses 3 (2)(a)-(c) and 3 (3)(a)-(b)(ii) of the Financial Markets Conducts Act 2013 (FMCA). You can obtain further information on FMCA requirements, and whether you come within the exclusions and their requirements at [our website]

 

Promotional Conduct

Making it clear that your offer is only open to Wholesale Investors is just the first step.  You also need to ensure that your promotional efforts are not misleading or deceptive (see S19 of the FMCA).  The recent case of Du Val Capital Partners Limited v Financial Markets Authority [2022] NZHC 1529 offers some key takeaways in respect of the S19 fair dealing requirements:

  1. In assessing whether your offer may be misleading or deceptive, your target audience matters. In this regard, your choice of marketing channels is relevant: advertising your Wholesale Investor-restricted offer in social media and other online channels may be a factor in the Financial Markets Authority (“FMA”) determining that your offers were targeted at inexperienced investors.
  2. You cannot assume that because your offer is restricted to Wholesale Investors, your advertising audience will be more experienced and knowledgeable. Wholesale Investors are not all inherently more sophisticated than non-Wholesale Investors.
  3. If your promotional material is misleading, it cannot be saved by subsequently making more detailed materials available to investors.

 

Final Caution

The FMCA requires that an offeror know its target audience and engages with them openly and honestly.  This includes ensuring that promotional materials are not misleading or deceptive.  If you have any questions on fundraising, please feel free to reach out to us if you would like specific input on your context.  We have helped many companies with their fundraising efforts and each situation is unique.  Please do not hesitate to contact one of our experts at Parry Field Lawyers- stevenmoe@parryfield.comyangsu@parryfield.comsophietremewan@parryfield.commichaelbelay@parryfield.com or annemariemora@parryfield.com

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

Following the introduction of the new Incorporated Societies Act 2022 (the “new Act”) there are many changes that will be relevant to your society.

One really big change is existing societies will need to reregister under the new Act. A consequence of not reregistering is that the society will cease to exist from either 1 December 2025 or two and a half years after clause 4 of schedule 1 commences, whichever date is later (the “transition date”). Companies Office guidance suggests the transition date will be April 2026. While there is still time, it would be prudent for societies registered under the Incorporated Societies Act 1908 (the “old Act”) to understand how to reregister under this new regime. If this is you, a review of your rules is needed to ensure it complies with these new regulations. We have written a series of articles on the requirements for your constitution under the new Act, which you can find here.

How do I reregister my society?

The first schedule to the new Act sets out the process for existing societies under the old Act to reregister as societies under the new Act. Until the transition date or until reregistration, the old Act will still apply to existing societies. Before that date, a society can apply to the Registrar of Incorporated Societies to be reregistered as long as it is not in liquidation. Provided all the requirements for incorporation under the new Act are met, the society will be reregistered.

What is needed in an application to be reregistered?

Clause 5 provides for the necessary documents and information needed in an application. Namely, that an application must be created in a manner prescribed by the regulations and have in it, or accompanied with it:

  • The information prescribed by the regulations; and
  • The society’s proposed name;
  • At least 1 contact person’s name and contact details;
  • A copy of the society’s proposed constitution; and
  • The fee prescribed by the regulations.

‘Regulations’ mean the regulations as set out in the new Act. An existing society may amend its rules in accordance with clause 9 or make a new constitution in accordance with clause 10 to ensure they comply with the new Act’s requirements. We have written a series of articles on the requirements for your constitution under the new Act, which you can find here.

Reregistration by the registrar

To issue a society with a certificate of incorporation and register a society’s name and constitution, the Registrar must be satisfied with the society’s application for reregistration. Additionally, the grounds in section 8 and 11 to 13 must not apply. These are grounds for the Registrar to refuse to incorporate a society, including:

  • the society is ineligible to be an incorporated society;
  • the society’s name does not comply with the requirements;
  • the society’s purposes do not comply with the new Act; and
  • the society’s constitution does not comply with the new Act.

However, if any of these grounds apply, the Registrar may still reregister the society subject to terms and conditions ensuring the grounds are addressed within a reasonable time. If the grounds are not addressed the society may be removed by the Registrar.

What happens to your society after reregistering?

Clause 11 of the new Act provides that upon reregistration a society will continue as the same legal entity – it does not create a whole new legal entity. Subject to the rights or obligations imposed on the society by the new Act or its constitution, the property, rights and obligations of the existing society are not affected by reregistration. Similarly, any proceedings the existing society is involved in (or will  be involved in) can continue (or commence) following reregistration, as set out in clause 11(5).

 What are the consequences of not reregistering?

Where an existing society does not reregister and is still incorporated under the old Act, upon the transition date, they will cease to exist and be deemed under the new Act to have been removed by the Registrar as per clause 12. If this happens its surplus assets will be distributed according to part 5 subpart 5 of the new Act. However, the Registrar, or the court in prescribed circumstances, has the power to restore an existing society to the register under section 185 or section 188. Note this cannot be done if six years has passed since the existing society ceased to exist. Clause 12(3) of schedule 1 sets out what happens where a society’s application to reregister has not been fully determined by the transition date.

Summary

With the new Act comes a lot of changes to the requirements for an incorporated society’s constitution. We have helped many incorporated societies over the years and would be happy to discuss your situation with you, especially when it comes to amending your society’s constitution so it meets the requirements set out in the new Act. You can contact us any time by email or phone.

We have a lot more resources at this page dedicated to the Incorporated Societies Act 2022.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers.

The Addington Farm is a not-for-profit urban farm that seeks to support the people and place of Addington so that it flourishes and grows in tūmanako (hope).  Located in the suburb of Addington they have converted backyards of houses into places that grow vegetables for the community with volunteers helping to grow them.

Wilby Le Heux is the Farm Manager and he invited Steven Moe of Parry Field Lawyers, who has a focus on assisting purpose driven organisations, to help Addington Farm become a charitable trust. Steven and the Impact Team at Parry Field assisted Wilby to consider the different legal structure options and sources of income and then develop a trust deed that suited The Addington Farm’s structure and purposes.

The Farm had started in 2018 under the umbrella of another organisation but it was time to create their own identity legally and start something fresh.  After considering the context and background, it was decided that a charitable trust would be best (how to set one up is set out in this article here).

Within a week Steven and law clerk Sophie Tremewan were visiting Addington Farm to have a tour of the urban farm and witness Wilby signing documents to incorporate the charitable trust (the visit is shown in the picture).

The Addington Farm involves the community to care for the mana of the whenua to promote principles of kaitiakitanga (stewardship), all the while allowing people from diverse backgrounds to connect and learn together https://addington.farm/

Farm manager Wilby Le Heux says “Parry Field Lawyers were incredibly supportive of our journey to set up a new charitable trust. They provided us the legal services and guidance to help us set up our own entity after outgrowing the umbrella services of another organisation.”

We enjoy collaborating with clients like this to help them set up and adopt structures that will suit them the best to achieve maximum impact.  If you would like to talk with one of our team about how we could help you drop us a line.

For more information on charities, take a look at our handbook on Charities in New Zealand here.

Paper for Legalwise session at Religion and the Law Conference
12 November 2021

By Steven Moe, Partner at Parry Field Lawyers

“I alone cannot change the world, but I can cast a stone across the waters to create many ripples.”  Mother Teresa

Introduction

Religious groups are filled with people who want to have positive impact on the world.  Often this is motivated by their faith.   In meetings and study groups, seminars and workshops individuals may learn a lot about examples in their faith tradition of people who helped others or gave back in some way in acts of service.  Common across different religions is themes of generosity, supporting others, helping the poor and acts of service.

While the reason for those individuals to do something positive usually has their faith as the foundation, we often find that the outworking of the new initiative may not necessarily be about advancing religion.  Instead it could relate to youth education, community services, environmental protection or mental health.

So if the religious group wants to encourage their members then how might it do so?  What are the key points to consider?  Should there be a link back to the religious group, or not?

In this paper we are going to discuss different legal structure options for new initiatives and how they can relate back to the religious group.  We will also talk about the reasons why it may be best if there is no such link.

The reason for preparing this paper is that we often see confusion on this point and what should be considered.  It doesn’t need to be that way though.

Structure of this paper

We have divided this paper into three parts:

Part 1:   Initial considerations and questions

Part 2:   Legal entity types

Part 3:   Setting up as a registered charity

Part 4:   Links back to the religious group

There are several cross links throughout this paper to others which have been written on specific topics but they key elements of those are also summarised here.  In particular we draw your attention to the “Charities in New Zealand : A Legal Handbook” downloadable here as well as a guide for Churches which is similar but with specific information here and this paper on governance for religious groups here.

Part 1:           Initial considerations and questions

The leadership of a group which is approached by an individual can help to empower them to achieve something good for the community.  Some of the key questions which could be asked include the following:

  • Who will be involved?

    • Is it one person with a concept or are there more people who see a need?
    • Can a team be developed?
    • Will this be a membership based organization where people are involved in that way or an initiative providing services or how will it work?
    • What role do you see our religious group as playing in the future?
  • What do you want to do?

    • Can you define in three bullet points the objectives?
    • What sort of business plan can be created to show how it would work?
    • Have you talked with the people you want to help – do they see the same need?
  • Is the name already taken?

    • Check if others are already using the name that is preferred because it might already be trade marked or in use by others – find that out early.
  • Assuming the person would like charitable status then which of the following four heads of charity would they aim to be involved in?

    • Reduction of poverty
    • Advancing education
    • Advancing religion
    • Purposes beneficial to the Community
    • Do you want to have a religious element or will it be secular? If there is to be a religious element then consider this
  • What funding streams might be available for this initiative?

    • Who will provide the seed funding to get the idea off the ground?
    • What sources of funding in the community are available?
    • Have you spoken with a funder – either private or community based?
    • Direct them to this information from Kate Frykberg on funding sources in NZ.
  • Could investors be interested in the idea and provide some impact investing?

    • On this topic of accessing impact investing funding sources see this overview here.
  • Is there a social enterprise type income stream where a business can also have impact?

    • This model is increasingly used to combine both purpose and profit in a sustainable way.
    • On this topic have a read of “Social Enterprises in New Zealand: A Legal Handbook” which is available here.
  • Have you performed a SWOT analysis or other testing of the idea?

    • There are lots of resources for entrepreneurs and templates – for example while written for a business audience this free business plan guide can help get ideas on paper, see here.
  • How will the impact be measured?

    • Can the idea be linked to objective criteria such as framing in terms of the Sustainable Development Goals (SDGs).

Asking some of these questions early on in the journey of the person who wants to start something will pay big dividends later.  They will not know all the answers right away but it will help to refine for them what it is that they are wanting to achieve which will be very useful for the next stage.

Part 2:           Legal entity types

“One of the great liabilities of history is that all too many people fail to remain awake through great periods of social change. Every society has its protectors of status quo and its fraternities of the indifferent who are notorious for sleeping through revolutions. Today, our very survival depends on our ability to stay awake, to adjust to new ideas, to remain vigilant and to face the challenge of change.”  Martin Luther King Jr.

There is an easy to understand metaphor when it comes to legal vehicles that can be used.  Without this it can seem a bit overwhelming to try and choose what type of entity will be best.  That is, imagine that you are wanting to buy a new car.  You wander around looking at all the different size cars, colours and features.

The most important question is to think about what you will use the car for.  Are you planning to go up skiing?  Well maybe get the 4×4.  Do you want to cruise around town in the summer?  Well maybe get the convertible.  Do you have 3 children?  Maybe get the seven seater van.

In the same way that you consider a new vehicle it is important to think about the legal vehicle you want to use in the same way.  Depending on where you want to take it and what you want to use it for should determine what legal entity type you want.

Let’s imagine we are now at the legal vehicle lot.  A few of the options to consider would be:

  • Charitable Trust: A simple and easy structure which we find often works the best for a new initiative the key ingredients are to decide on a name, who the trustees will be (usually 3-5 of them) and what the purposes are. The benefit of this is also that people generally understand that a charitable trust is set up to advance charitable objects so there can be less explanations required.  We’ve done a guide here on how to set this up.
  • Incorporated Society: While an option we find these can become very political as there are elections and members so we do not recommend this structure. It may be appropriate in a very member driven group such as sports clubs.  There are new changes coming in (finally) which will affect incorporated societies soon.  As a side point some people are confused thinking those changes will affect all charities – they won’t.
  • Company: Well understood, the limited liability structure is an option although there are certain assumptions that people will make about them – in particular that they are for profit. In fact, a company may be used to advance charity and be registered as a charity itself.  You will need to have a name, shareholder and directors.
  • Combination of Charity and Company: Increasingly we are seeing this combination of structures being used. It could be that the charity owns 100% of the company (in which case both need to register as a charity) or it could be that they are aligned and work together.  It is possible that the company be for profit and for purpose.

Of course it may be that the situation of a particular group has a certain way of arranging things – for example, it could be that they use unincorporated associations.  Some denominations may have ways of organizing the ownership of property as well which is unique to them (this is the case for the Baptist, Anglican, Presbyterian denominations).

It may also be that a religious group is part of an international movement and that they will want to have input on the structure as well and how leadership is chosen.

When it comes to a Founder and how they relate to the new charity we have written an in depth article about common issues we see, which is here.

While we have not focused on it there are other options as well such as the idea of a bare trust – this can be a helpful way for assets to be held, depending on the context.

Getting the legal vehicle chosen is really important as we have seen too many people set up an entity and then a year later be looking to switch to another form.  That can be done and most often when winding up the assets can be transferred to another entity – but that is inefficient, costly and takes time.  Why not get it right from the start with a bit of extra homework and consideration?

One of the key elements is to focus on the purpose and mission – let that guide the action taken and the vehicle that is chosen rather than the other way around.

Part 3:           Setting up as a registered charity

If the legal vehicle is chosen then the next stage is not automatic – registering it as a charity with Charities Services.  That key step is actually really important though to provide standing in the community as there is credibility from doing so.   Being able to talk to funders, donors, community leaders, volunteers and other stakeholders will be enhanced by having this status.

There are also major tax benefits of being a registered charity which cannot be overlooked.  The two key benefits are that  the entity will not pay tax and it will be able to give tax deductible receipts to donors.  This can be a major incentive to encourage generosity because if someone gives the new entity $3,000 then they can claim back $1,000 at the end of the financial year when filing their personal tax returns.

In the last year we have helped about 40-50 new charities set up and sitting on the Charities Services sector group have seen a lot of people struggle with the detail of this step – however with good advice it is definitely possible to get onto the charitable register and join around 28,000 other entities who have achieved that status.

Part 4:           Links back to the religious group

This is perhaps the most important question for the religious group – will there be ongoing involvement, or not?  In this final part we are going to raise some points which it is important to think about.

From the originating group’s perspective someone with new enthusiasm to start an initiative can be very helpful to further enhance what they do.  Selfishly it may feel like the new initiative is coming from a member and so of course it should be linked back to the religious group which has inputted into that person’s life.

If there remains an association then the religious group could use this as a way outwork their own mission in the world.  This could be in an aligned area where there is a need.  For example if someone sets up a youth focused charity then there could be lots of synergy with the religious group.

However, it is important to consider if the new entity will be under the “control” of the religious group.  That could result from having the ability to appoint all the new trustees of a trust, or remove them all or the power to force a wind up.  We have spent a lot of time on this article on this point so if this is of a concern have a read here.  The point is that if a religious group does control the new initiative then it may need to consolidate the accounts with their own.

Another consideration is that even if the new initiative starts with strong links it may be that over time there is less of a close link.  For example if a preschool is started it might initially be connected back to the Church but over time it might be that they become less connected.  We have seen this happen with social services in particular where the origins are with a religious group but then the new entity grows and grows and eventually dwarfs the starting point.  It is usually best for it to grow into its own stand along initiative by then.

It is also worth considering if what is planned actually has alignment back with the religious group.  For example, a youth focused charity trying to prevent youth suicide may find that its funding sources want for the work it does to not have an affiliation with a particular belief system.  Having the name of the group involved or including an “advancing religion” purpose as an afterthought in the Trust Deed may actually hinder the new entity when it comes to seek funding.

Having said that, some new initiatives do naturally link back and it may be appropriate to control them and consolidate accounts.  As an example a religious group might want to be more active in the community and meet pastoral needs so it might decide to start a funeral business.  The money generated from the business in profits could then go back to the religious group but perhaps key is that the business itself could make use of the facilities of the religious group both in terms of people, buildings, food preparation while also being there to support those at a vulnerable time who have lost a loved one.

Having considered all these points the key is that it should not simply be a given that the religious group stays involved in the new initiative.  Instead, it might be the place of the elders of that group to help shape and guide the person with the new idea but ultimately to let them fly free with their idea.  This is perhaps the most altruistic attitude that can be taken – rather than ongoing control, instead allowing something new to start.

As a final note we are aware that many religious groups themselves are not operating in an optimal way.  Assisting someone else with working out their vision and how to achieve it might actually be the springboard to reconsider the religious group itself.  For example, many groups that have been around for a long time may be unincorporated associations which potentially means that there members themselves have liability.  It can be worth considering the legal form of the entity, how its governance works, how decisions are made, the links with other groups and a myriad of other points which can help the religious group operate even better.

We hope this paper has been helpful and are happy to brainstorm and discuss with people about what might be the best option in their own situation!

Questions can be sent to stevenmoe@parryfield.com