Not for Profits - Parry Field Lawyers

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.com, michaelbelay@parryfield.com, sophietremewan@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. Should you require assistance, please feel free to contact Steven Moe stevenmoe@parryfield.com, or Yang Su yangsu@parryfield.com or any of the team 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

We have helped many overseas charities set up in New Zealand. Why is it an attractive place to set up? This is a very generous country with a population that is open to supporting others. Also, the regulatory environment makes it easy to start a charity. In this article we want to outline some of the key things to know from an overseas perspective if you are looking to set up here.

Before we dive in please note that with this focus we have not gone into the detail of the process to set up a charity itself which we already covered in detail in this article so read that one in combination with this one. Instead we are thinking about the key things to know if you are an overseas charity which is looking to set up in New Zealand.

What we find is that the following are the crucial points to consider:

Purpose – focus on New Zealand? Is the new charity being set up to do the work you do in another country on the ground here? Or are you looking to fundraise in New Zealand to send the funds back offshore? The answer to this is really important because a New Zealand charity can be set up easily BUT will only qualify for tax donee status (favourable tax position and ability to issue receipts to donors so they can claim back 1/3 of what they give) if 75% of the funds are used in New Zealand.
Purpose – focus offshore? If you plan to send the funds back offshore this is important to be clear about at the start. If the funds raised here are to go offshore then you may still qualify if you can come under Schedule 32 status (funds are to be used offshore for humanitarian purposes) – we go into detail about this here as we have helped close to 20 obtain this status.
Trustees: It will help with the application to show a connection to New Zealand so rather than having all offshore trustees it is best to have a majority who are here in New Zealand. It is possible to have only offshore trustees but if you do then this is likely to convert the trust into a foreign trust with some accounting implications (speak to your accountant about this).
Accounting and tax: picking up on that last point it is important to structure things well so that you are in the best position from a tax and accounting position so as well as talking to your lawyer make sure you get input from an accounting professional.
Connection to overseas entity: It will be important to think through how closely aligned the new entity will be. For example, should all new trustees be approved in writing by the overseas charity? Will there be an MOU in place about how things will run? Will there be a license agreement about the use of trademarks? All these things need to be thought through. It may be that instead of a close connection that it is intended that the new entity is to be independent – that’s fine too.
Understand the local context: Find out more about how things operate here for charities – you can do that by downloading our free book for Charities in New Zealand here. We also host a call every two months for the impact sector where many people share about what they are seeing – examples of these are here. It may help to get a better understanding of the society here too – for example the relations with Māori and the unique value that brings to the way we operate here. Many charities choose to include a clause about honouring the principles of the Treaty of Waitangi or translating headings in their Trust Deed. The point is it helps to get to know the local landscape and we can help with that process. One of our Partners hosts a podcast called seeds theseeds.nz which has hundreds of interviews with local people doing good so there are many stories to learn from.Our team is experienced with overseas entities coming here and setting up charities and social enterprises. We would be happy to assist you in your journey. For more information, please feel free to contact Steven Moe stevenmoe@parryfield.com or Michael Belay michaelbelay@parryfield.comWe also have free resources for start-ups, boards and companies including a “Start-ups Legal Toolkit” which covers the key issues we see people face when starting out.

We often help founders set up their charitable trust. They often have the same questions as the previous person we helped – so we have typed out some responses to typical questions here. If this helps you then feel free to share it with others as well and if you have a more detailed question not covered here then let us know and we can add the answer in.

Can a Charity Founder and the Board Chair also be the NGO Manager/CEO?

In theory this is possible but it is not best practise. Management (CEO role) is different to Governance (Chair role) and so there is a danger of blurring of the two roles. Also, if the founder is the CEO/Manager then they lose out on having a Chair who is able to advocate for them and provide good strategy. If they are the Chair then they would lose out on having an engaged and activated CEO. So it is best to split the roles up. The IOD have produced a lot of good material on topics of governance in Charities here.

If the Founder steps down as Chair but remains Manager, how can they be protected from being made redundant or forced out from the Charity

Often in the Trust Deed the Founder – in that document called the Settlor or Donor – have certain rights which are different to other Trustees. If they are a Trustee then they can usually not be removed as easily as other Trustees. However if the Founder is no longer a Trustee and is employed by the Trust then ultimately it is up to the Trustees to decide if they are doing a good job or if a change is needed. This may be a reason why the Founder would want to stay involved in the governance – but also underlines the importance of making the right choice of Trustees, but ultimately they have a duty to act in a way that helps the success of the Trust.

How can a Founder protect their connection to the Charity – for example does there need to be a clause that without them the Charity doesn’t continue? Or have a founding honorary role?

They could be appointed as Patron or a similar title for ongoing connection. It seems unlikely that future Trustees would force such a person out but they need to act for the best interests of the Trust not the individual who founded it. It is possible there could be good reasons for the Charity to move forward without a Founder eg criminal convictions or fraud by them. Hopefully the Founder will have entrusted the vision and articulated it so well that the Charity is not entirely linked with the Founder so that it can go on beyond the person and last much longer. Founders who hold on tightly to the entity can often find that this ultimately damages the overall potential – the Charity is more than a person and needs to be given room to grow and adapt in ways that are at present not known.

Would there need to be a process for recruitment for a Manager and the Chair so whoever would be a candidate couldn’t simply automatically become Manager?

This may come back to the distinction between management and governance mentioned earlier – Chair of the Board of Trustees should ideally be separate to the Manager/CEO role. Each position should be recruited for separately. In a small charity this may not be possible as the Founder/Chair/Manager can be blurred since someone – usually the one with the original vision – needs to actually drive it along at the start.

How to prevent conflicts of interest arising within the Charity and what are the risks?

Good practice is to have some independent Trustees involved in the Charity who will not be employed by the Trust or involved in other ways that the Founder might be. Also, a conflict of interest register should be kept where any conflicts are noted. Each meeting any conflicts should be raised as well. The risks of not disclosing conflicts is that there could be negative publicity later on if a person acts in a way that benefits them personally but is to the detriment of the Charity.

If there is also a related company to the Charity then should it be owned by the Charity?

It depends. Mainly the question to answer is about funding sources and use of money that comes in. If the Company is owned by the charity then there can be no private gain to an individual. Instead a Company can be owned separate to the Charity and the Charity can use the Company to perform some aspects of fulfilling the purposes. If this is the case then there needs to be independence on the Charitable Trust so decisions made that benefit the Company are made by people who will not privately benefit as eg Shareholders of the company. We described the options and considerations in more detail in a short podcast here.

We hope these responses are helpful and provide guidance on the interrelationship between a Founder, a Charity and other stakeholders. If you have any questions then let us know

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Steven Moe – stevenmoe@parryfield.com, or Michael Belay – michaelbelay@parryfield.com at Parry Field Lawyers.

Charities can be a powerful vehicle for bringing change. We have been fortunate to have helped and worked with many clients in this space and can testify to the positive impact they can produce. Given our experience with charities we have produced a handbook on Charities in New Zealand. You can download it here.

The handbook is intended to serve as a practical guide to help start-ups and existing charities from a legal and practical perspective. It is divided into several key sections and provides information on establishing your charity, operating your charity and much more.

If you have further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292 or Kris Morrison at krismorrison@parryfield.com.

Be sure to check out our other free guides too, such as Startups: Legal Toolkit and Social Enterprises in New Zealand: A Legal Handbook. We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.

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