Social enterprise
Updated June 2026
Social enterprises often use business methods to achieve social good, but they are not automatically charities.
This page explains when social enterprises may be able to register as charities in New Zealand.
When social enterprise purposes and activities can be charitable
Social enterprises can use business or trading activities to achieve social, community, or environmental outcomes.
An organisation will not fail the charitable purpose test just because it carries out commercial activities. For example, a charity may run a business if the income is used to advance its charitable purposes.
However, not all social enterprises meet the requirements for registration. To be eligible for registration under the Charities Act 2005, an organisation must:
- have exclusively charitable purposes
- carry out activities that advance its exclusively charitable purposes
- provide a public benefit
- not be carried on for the private benefit of any individual or group.
We assess applications against the criteria set out in the Act.
How commercial activity and private benefit affect registration
A charity can carry out commercial or profit-making activities if those activities support its charitable purposes.
The key issue is whether the organisation is set up and operated to advance charitable purposes and provide public benefit, rather than to generate private financial benefit.
Private benefit must be ancillary or incidental. This means any private benefit must be limited and arise only as part of achieving a charitable purpose, not as an end in itself.
A charity can generate profit and pay for goods or services. However, profits must be used to further charitable purposes, and payments must be reasonable and based on arm’s length market rates. A charity generally cannot distribute profits, dividends, or other financial gains to private individuals.
An exception may apply if shareholders are themselves registered charities, or if shareholders hold the money on trust for a charitable purpose that is specified in the charity’s rules.
Including clauses to prevent private profit
We recommend that all charities have rules that prevent activities from being carried on for private financial benefit or profit to an individual.
These rules help show that the organisation is not carried on for private gain.
For example:
- if the organisation is a trust and wants to make reasonable payments or provide other benefits to its trustees, its trust deed must clearly show this is allowed
- if the organisation is a company, its rules must either prevent dividends or payments to shareholders, or restrict current shareholders and the transfer and issue of shares to registered charities or trustees of a trust for charitable purposes.
Examples of how we assess applications
These examples show how the registration requirements may apply to different types of social enterprises.
Example 1: social enterprise with charitable focus
An organisation runs a business to employ people experiencing long-term unemployment. All profits are used to fund training and support programmes. In this case, the commercial activity supports a charitable purpose and may be acceptable.
Example 2: social enterprise with private benefit
An organisation runs a business with a social mission but distributes profits to private shareholders. In this case, the private benefit is likely to prevent registration as a charity.