Home » Applying for registration? » Preparing to register »
Charitable purpose and your rules
Your rules are the documents that set out your charity's purposes, what you do and how you operate. For example, they may be your trust deed, constitution or charter. If your organisation was specifically set up under an Act of Parliament, your rules may be set out in that Act.
When we receive an application for registration, the organisation’s rules document is assessed, as are the activities, to ensure that the charity meets specific registration requirements. While we do not require any particular wording in these rules, they must satisfy the following criteria:
When applying for registration as a charitable organisation, you must send us a copy of your legal rules with your application form. These rules need to name your organisation and directly relate to your organisation (rather than an umbrella body or affiliated organisation).
You need to send us the most recent version of your organisation’s rules.
If your organisation is incorporated (under the Charitable Trusts Act 1957, Incorporated Societies Act 1908 or Companies Act 1993), you should also ensure that you have provided the current version of your rules to the Companies Office.
Your rules need to identify your organisation’s aims (often called “purposes” or “objects”.) You should clearly identify a list of purposes in your rules and the list should begin with the organisation’s main purposes.
All purposes should show a clear charitable aim. They shouldn’t say things like “to fulfil social needs” because this is too vague, general and uncertain to clearly demonstrate a charitable aim.
You may wish to show how your purposes fit within one or more of the four categories of charitable purpose like this:
It's important to note that your organisation may still qualify for registration as a charitable entity, even if some of its purposes are not charitable. This is the case as long as the non-charitable purposes are undertaken to further a charitable purpose and are not independent (can be pursued separately from the charitable purposes) purposes.
We suggest you keep your purpose clauses separate from any “powers” clauses.
Read our guidance on Charitable purpose for more details.
The Supreme Court recently re-confirmed that an organisation’s purposes may either be identified through its statement of objects, or understood from the activities it undertakes. For this reason, Charities Services asks registration applicants to provide information about their activities.
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.
Powers clauses must not allow the organisation to undertake activities that further non-charitable purposes or provide private benefits.
To register your organisation under the Charities Act, we must be satisfied that it is not carried on for private pecuniary benefit or profit to an individual.
Your rules should show that your organisation may only act to advance its charitable purposes. The payment of reasonable salaries and other expenses (provided these payments are reasonable) 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.
Here is an example of a combination of clauses that would be acceptable:
Your rules should not include clauses that would allow private pecuniary profit for individuals or other organisations.
For example, Charities Services is unlikely to accept clauses which would allow the organisation to:
Companies must also have clauses in their rules that either:
Here is an example of a clause that prevents distribution of dividends or payments to shareholders:
Here are examples of clauses that restrict the transfer and issue of shares to registered charitable entities or trustees of a trust for charitable purposes:
We suggest that all charities include a winding-up clause in their rules. This sets out what will happen to the assets if the charity ceases to operate and is voluntarily or involuntarily wound up.
If your organisation is a society or company you are required to have a winding-up clause in your rules. If your organisation is a trust, you are not required to have a winding-up clause in your rules, however we strongly recommend including one.
To meet the requirements of the Charities Act 2005, winding-up clauses must direct all assets to charitable purposes or charitable organisations.
We do not accept winding-up clauses that allow funds to be given to organisations with “similar purposes”. “Charitable purpose” has a special meaning in law and two organisations may have similar purposes, but the specific nature of each organisation may mean that one organisation's purposes are charitable whereas another organisation's purposes are not.
Here are examples of winding up clauses that meet registration requirements:
A general winding-up clause:
A winding-up clause that distributes remaining property to another organisation:
A winding-up clause that distributes remaining property to another organisation that has similar purposes:
Another acceptable option for trusts is for the winding-up clause to refer to winding-up in accordance with section 27 of the Charitable Trusts Act (that is, as the court directs).
Governance clauses explain how your organisation is managed. They should include the following information:
A conflict of interest is any situation in which an officer’s personal interest or loyalties could affect the ability to make a decision in the best interest of the charity. Refer to the Charities Services resource ‘Conflict of interest’ for more information.
We suggest all charities include a clause in their rules that sets out the procedure for changing their rules. If you do not include an amendment clause this could cause you difficulties should you be required to change your rules to meet registration requirements or you wish to amend your rules at a later date.
Although a charity registered with Charities Services 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 Charities Services must approve amendments.
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.