Charities Commission

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Your rules and the Charities Act

Updated April 2008

Download the information sheet (PDF, 480KB) to print this document.

The Commission does not require specific wording in your rules to consider your organisation charitable. But we must be satisfied that your organisation meets certain criteria.

What do we mean by rules?

In order to be considered for registration as a charitable entity, you need to send us a copy of your rules along with your application form.

Your organisation’s rules are the document or documents that set out its purposes, what it does, and how it operates. They may be your governing document, constitution, trust deed, charter, or an Act of Parliament (if your organisation was specifically set up under one).

The Charities Act 2005 allows a range of organisations to apply to register with us. In many cases, those organisations also have to comply with other legal requirements relating to their rules. This will be the case if they are registered under the Incorporated Societies Act 1908, the Charitable Trusts Act 1957 or the Companies Act 1993.

When you apply for registration under the Charities Act, we read your rules to identify whether you have a “charitable purpose”. “Charitable purpose” as defined in section 5(1) of the Charities Act includes:

“. . . every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community.”

Refer to our guidance on charitable purpose for more details about this.

The Commission does not require specific wording in your rules. However, we must be satisfied that your organisation:

  • has a charitable purpose that falls within one of the four purposes set  out in section 5(1) of the Charities Act
  • provides a public benefit and
  • is not carried on for the private pecuniary (financial) benefit or profit of an individual.
Important note: If you are an incorporated society, a registered charitable trust, or a company and you wish to make any changes to your rules, you must send these changes to the Companies Office for their approval first.

Purpose clauses

Purpose clauses, often called “objects” clauses, state what an organisation aims to achieve.

You should clearly identify a list of purposes in your rules and the list should begin with the organisation’s main purposes.

All purposes must be lawful and should not be so vague, general, or uncertain that they do not clearly show a charitable aim (for example they should not say “to fulfil social needs”).

You may wish to show how your organisation’s purposes fit with the four categories of charitable purpose like this:

  • “To relieve poverty by. . .”
  • “To advance education by. . .”
  • “To advance religion by. . .”
  • “To be beneficial to the community by. . .”

as appropriate.

You should list your main purposes first, followed by any purposes that are secondary or incidental to your main purposes.

A non-charitable purpose which is secondary to a charitable purpose and is not an independent purpose, will not stop your organisation from qualifying for registration.

For more details about secondary purposes see our guidance on charitable purpose.

We suggest you keep your purpose clauses separate from any “powers” clauses “. “Powers” clauses set out the things that your organisation may do to achieve its purposes, for example, employ people; borrow and invest money; purchase, lease, and hire land, buildings and vehicles.

Private profit clauses

To register your organisation under the Charities Act, we must be satisfied that your organisation is not carried on for private financial benefit or profit to an individual.

Your rules should clearly reflect this and provide that your organisation may only act to advance its charitable purposes. The payment of reasonable salaries and other expenses to advance your charitable purpose is acceptable.

If a trust wants to be able to make payments or provide benefits to its trustees, its trust deed must clearly show that this is allowed.

An example of a combination of clauses that would be acceptable is as follows:

  • Any income, benefit, or advantage must be used to advance the charitable purposes of the organisation.
  • No member of the organisation, or anyone associated with a member, is allowed to take part in, or influence any decision made by the organisation in respect of payments to, or on behalf of, the member or associated person of any income, benefit, or advantage.
  • Any payments made to a member of the organisation, or person associated with a member, must be for goods or services that advance the charitable purpose and must be reasonable and relative to payments that would be made between unrelated parties.

Winding-up clauses

We suggest all organisations include a winding-up clause in their rules.

If your organisation is an incorporated society, you will already have a winding-up clause, as it is required under the Incorporated Societies Act.

If your organisation is a trust, you are not required to have a winding-up clause in your rules.  If your rules have a clause that refers to winding-up in accordance with section 27 of the Charitable Trusts Act, that is, as the court directs, this is acceptable.

Here are three different examples of winding up clauses:

  1. A winding-up clause should state that any remaining property after debts and liabilities have been settled must be given to a purpose or purposes that are charitable under New Zealand law, for example:

    • If any property remains after the winding up or dissolution of the organisation and the settlement of all the organisation’s debts and liabilities, that property must be used to further the purposes of the organisation and in accordance with its rules.

  2. If your organisation wishes to give remaining property to another organisation, that organisation must have charitable purposes, for example:

    • If any property remains after the winding up or dissolution of the organisation and the settlement of all the organisation’s debts and liabilities, that property must be given or transferred to another organisation that is  charitable under New Zealand  law or for some other charitable purpose recognised under New Zealand law.

  3. If your organisation wishes to give remaining property to another organisation, that has similar purposes to yours, they must also have charitable purposes, for example:

    • If any property remains after the winding up or dissolution of the organisation and the settlement of all the organisation’s debts and liabilities, that property must be given or transferred to another organisation that is charitable under New Zealand law and has purposes similar to those of the organisation being wound up.

Amendment clauses

We suggest all organisations include a clause in their rules that allows their rules to be changed.

If your organisation is an incorporated society, you will already have a clause in your rules that explains the way in which those rules can be changed. This is required under the Incorporated Societies Act.

Although a charity registered with the Commission must notify us of any changes to its rules, we do not need to be consulted before a change is made.

Please do not put a clause in your rules saying that any amendments must be approved in advance by the Commission.

When you notify us of a change, we consider whether the change affects your registration as a charitable entity. If you change something that might affect your registration status, we send a formal notice to your address for service and give you the opportunity to have your say on the matter.

If you have a clause in your rules that says you must get prior approval of proposed amendments from Inland Revenue, you should check their website www.ird.govt.nz for the current legal status of such clauses. Inland Revenue has agreed to the removal of any such clauses.

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