Charities often rely on donations and grants to enable them to do their work. Many donors, especially those who make substantial grants, may require that the charity is a registered charity.
The reasons for this vary. It may be that the donor wants to benefit from the tax credit they would receive from giving to a registered charity. It might be because they want the assurance that the donee organisation has passed the requirements of Charities Services to be a registered charity, with good standards of governance in place to help ensure the funds will be used as intended.
Some groups may not want to formalise their initiative by formally setting up or registering as a charity. Others may want to register, but it can take around three months to receive charitable status from Charities Services from the date of application. This can mean that newly established charitable trusts not yet registered with Charities Services are unable to receive funds from some donors. Without funds, charitable trusts are not able to get started with their intended work.
When facing just this situation and looking for a solution, a trustee of an as yet unregistered charitable trust (A) asked if it would be possible for another registered charity (B) to receive funds on its behalf as the donor would only provide funds to a registered charity.
It’s a great question. The biggest obstacle is likely to be that the donor may not agree to provide the funds to B on behalf of A. If it is agreed, we advise having a legally binding contract to confirm that the funds are being held by B ‘on trust’ for A to be provided to A when A is a registered charity.
The most important consideration, especially for B is that the charitable purposes of A must be similar to those of B. This is because what a registered charity does should be to advance its purposes, including fundholding.
The key takeaway – be aware that it takes time to apply for and be granted charitable status and try to factor that into your plans, including when you want to begin your charitable work and when you can accept funding.
We have an extensive suite of free information to assist charities in New Zealand, including our guide Charities in New Zealand a Legal Handbook. We have also prepared many articles for charities. Simply type ‘charities’ into our search (top right-hand corner of our homepage) to discuss a range of topics.
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.
If you would like to discuss further, please contact one of our team on stevenmoe@parryfield.com, sophietremewan@parryfield.com, michaelbelay@parryfield.com or annemariemora@parryfield.com at Parry Field Lawyers.
