When it comes to changing your founding document, some rules state that permission must first be sought from IRD. This is a hangover of the past when it was required and has sometimes caused confusion as to whether it is actually necessary these days, or not.
The good news is that IRD no longer requires charities to seek approval before amendments can be made to their rules. One reason for this is that with close to 30,000 registered charities they just do not have capacity to review every such rule change. The IRD have stated in their Operational Statement (OS 06/02) that:
“…Inland Revenue strongly recommends that [charitable] organisations remove any requirement in their rules for Inland Revenue to consent to rule changes. To enable this to happen, Inland Revenue hereby consents to an amendment removing any such rule. Inland Revenue will not otherwise give specific approval to any rule changes.”
Charities Services has confirmed this by saying here:
“Tip – Do you have a clause in your rules that says you must get approval for changes to your rules from Inland Revenue? If you do, please note that this is no longer required, because Inland Revenue has agreed to the removal of such clauses. Check their website www.ird.govt.nz for more details.”
A charity registered with Charities Services must still notify them of any changes to its rules, however this doesn’t mean consultation or approval from Charities Services is needed in advance.
Its timely to remember that changes to the Charities Act now require boards to confirm every three years that their rules are “fit for purpose” – that includes both founding documents like Trust Deeds as well as other documents such as policies or charters.
So it might be the right time to review your rules and ensure, as a whole, they are fit for purpose, and are able to sustain your charity in the future. Changes in the charitable sector, as well as the implementation of the Trusts Act 2019, has meant that an organisation’s rules may no longer be up-to-date, and officers can be given more protection by altering the duties of Trustees that otherwise apply. The reference to IRD approval is just one example of an existing clause that may no longer be relevant or enforceable.
We review, amend and draft rules for many charities regularly, and help organisations implement rules that are workable and efficient. We would be happy to help your organisation update their rules or draft new ones.
Please note that this article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact us by completing the enquiry form or call us on 03 348 8480.
