Thinking of starting a charity? A starter’s guide
Stewardship, 1 Lamb’s Passage, London EC1Y 8AB t: 020 8502 5600 e: enquiries@stewardship.org.uk w: stewardship.org.uk
What it takes to be a charity: Will the organisation have a charitable purpose?
Is the purpose for the public benefit? Does the purpose fully fit one of the 13 descriptions listed in the Charities Act?
Not a charity
NO
YES
But is it a Christian charity?
Is the purpose the advancement of the Christian faith or for another purpose but with a Christian ethos? Probably a charity but outside scope for Stewardship
NO
YES
Things to think through before calling Stewardship
What legal structure do you want – Trust; Company or; charitable incorporated organisation? Who do you want as trustees?
Should you register with the Charities Commission?
Will you want to include a statement of faith?
Will you be working with children or vulnerable adults?
Now you are ready to complete the application form What happens now?
If you encounter significant difficulties please call 0208 502 8567
Charity… is it the way to go? You’ve got a grand plan; your aim is to help others; and you want to set up an organisation that will bring your plan to the world. Surely establishing a charity is the way to go, and surely Stewardship is the best partner to help you set it up? Well, on both counts… perhaps.
A duck or a swallow: what it takes to be a charity Charities are a special form of organisation that exists to benefit the public rather than specific individuals. As a consequence they receive tax breaks and other advantages not available to other types of organisation. Often they share many of the same characteristics as other organisations but there are certain traits that make them special. Think of a duck and a swallow. Both are birds, both has feathers, wings and beaks. Although similar in description, a duck is most definitely not a swallow. Similarly, neither is an organisation a charity simply because you want it to be one. Firstly, your organisation must exist for charitable purpose only. If the purpose is part charitable and part non-charitable then the organisation is not a charity. A charitable purpose has to be for the public benefit AND has to fall within the descriptions set out in the Charities Act. Public benefit To be of public benefit, your organisation must benefit the public in general, or at least a sufficient section of them, and not give rise to more than incidental personal benefit. If your organisation is in essence about the founder or is a business operation from which you are seeking to make a living the fact that it may do good work and you may consider it to be of immense public benefit is not sufficient. Your organisation is not a charity. Descriptions of charitable purposes The Charities Act lists 13 descriptions of charitable purposes. Remember that the purpose of your organisation must completely fit one or more of these to be considered a charity. The full list of all descriptions can be found on the charity commission’s website. At Stewardship, we tend to work in the main with prospective charities that fall into the following categories;
The advancement of the Christian religion. The prevention and relief of poverty.
In certain circumstances, Stewardship will work with charities having other purposes (see later).
So, there’s a good chance it’s a swallow… but is it a Christian swallow? OK, if you have got this far, then there is a good chance that your desired organisation may indeed be a charity, but will it be a Christian charity? Stewardship is itself a charity and its primary charitable purpose
is the advancement of the Christian faith. Therefore, to fulfil its own purpose, it is limited to helping those ‘would-be’ charities that accept and adhere to the Nicene Creed and;
Share the same purpose (i.e. the advancement of the Christian faith). This will tend to cover churches, evangelical organisations and Christian training organisations or; Have another purpose, but be motivated by the Christian faith and operate with a Christian ethos evidently running through the organisation. So, organisations with, for example, the relief of poverty, or the relief of those in need as their primary purpose may still fit the bill, so long as the organisation has a Christian ethos which could be interpreted as advancing the Christian faith. This is more than simply being an organisation run by Christians, but must be one where the Christian ethos is clearly evident and openly apparent or; Have another purpose, but be motivated by the Christian faith and operate with a Christian ethos backdrop. This can sometimes be the case where a charity expects to apply to secular grant funders.
If you still think that what you want to set up is likely to be a Christian charity and that Stewardship can help, then read on as we consider some of the more common issues that we see charity start-ups grappling with.
What is the most appropriate legal structure? Of the four legal structures available to prospective charities, the charitable incorporated organisation (CIO) is the new kid on the block but is proving hugely popular with most new start-ups opting for this legal structure. Without good reason to opt for a different structure, the CIO is likely to be the most obvious choice. The key characteristics of CIOs and other structures are set out below and Stewardship has written a paper stewardship.org.uk/trust-company-or-CIO entitled Trust, Company or CIO – a guide to the distinctions which will give more detail on what each structure offers and what the requirements are. A further paper stewardship.org.uk/CIOs-for-church-charities CIOs and church structures sets out in more detail the pros and cons of the new CIO structure.
Charitable incorporated organisation: The governing document will be a constitution, the trustees are generally protected against contractual liabilities and the organisations will be required to register with the Charities Commission ONLY. Since becoming available, this structure has proved to be very popular.
The three remaining structures are far less popular, but may still be appropriate in certain circumstances;
Trust: The governing document is a trust deed or a will and the structure itself offers no financial protection to the trustees. Other than for private arrangements to distribute family assets or small exclusively grant making charities, we see very few organisations opting for this structure. Unincorporated association: The governing document is a constitution, there is normally some form of membership and again the trustees are offered no financial protection. Stewardship is hardly ever involved with this type of structure.
Company limited by guarantee: The governing document is the articles of association (perhaps supported by a memorandum of association). Trustees (or directors) are generally protected against contractual liabilities and the company must register with Companies House, and in most cases also with the Charities Commission. This means complying with Charity and Company legislation. Largely because of the protection offered to the trustees, and until the availability of the CIO, this was the structure most often opted for.
So now you know that you are seeking to start-up a Christian charity; you have an idea what legal structure is likely to be the most appropriate, what else should you be thinking about before you contact Stewardship for an application form?
Who do you want as trustees? Trustees are important, as they are legally responsible for the affairs of the charity. They don’t need any particular skills or qualifications but ought to be involved in the affairs of the charity and have sufficient time available to play an active part at meetings. For UK charities;
We recommend a minimum of three trustees The majority of trustees (e.g. 3 from a board of 5) should be o Unconnected to each other – i.e. not family members, nor in a business relationship o Unpaid* o Living in the UK
* It is possible to pay some trustees or their families, not for their role as trustee but for other services they carry out for the charity. For example the senior pastor at a church may serve the church charity as trustee, but also receive payment for their work as pastor. However, this should still be limited to a minority of trustees. For more details regarding the appointment, powers and responsibilities of trustees, please see our paper stewardship.org.uk/trusteeduties or refer to the Charities commission website gov.uk/charity-trusteewhats-involved.
Should you register with the Charities Commission? If you decide to use the CIO structure, then you must register with the Charities commission. This should not be seen as a reason not to use this structure; indeed there are a number of positive benefits to being registered. For further discussion, please see our blog [insert link]. For other forms of charity, you will need to demonstrate an income level of at least £5,000 per annum before registering. This can be evidenced via a bank statement or the annual accounts.
Will you want a statement of faith? Many Christian charities include a statement of faith within their governing document requiring the trustees and in some cases staff, to adhere to it. If you did want one, what should it include? The Evangelical Alliance has a statement of faith, and often this is accepted in full or at least forms the basis of any statement for most Christian charities. To see the statement, please refer to www.eauk.org/connect/about-us/basis-of-faith.cfm.
Will you be working with children or vulnerable adults? For those charities that work with children (under 18s) or with vulnerable adults, the Charities commission will require;
That you have a suitable safeguarding policy That as a minimum trustees are checked under the DBS regulations*
*It is good practice to also have the checks in place for employees and volunteers, especially those working with the children or vulnerable adults. If you need any help in drafting such a policy and/or conducting DBS checks, we would recommend that you contact the Churches’ Child Protection Advisory Service (ccpas.co.uk).
Completing the Stewardship application form So, by now you have;
Determined that the organisation that you need is a charity. It is a swallow. Understood that Stewardship can only help charities that exist for the advancement of the Christian faith, or have another purpose but exhibit an evident Christian ethos in the way that the organisation operates. Settled on the most appropriate legal structure. Probably a CIO. Decided on who you want to be your trustees (please ask them first). Decided on a statement of faith if desired. Drafted a suitable safeguarding policy if required.
Armed with this information you can now go ahead and complete the most appropriate Charity Formation application form. All variations of this form can be found on the Stewardship website at stewardship.org.uk/support-services/charity-formation which also sets out the fees and costs associated with setting up a new charity.
What happens now? Once the application form is completed and received. Stewardship will work with you, the client, and with Anthony Collins (Birmingham based lawyers) to bring the charity into being. The whole process, from setting up the legal entity and registering with the Charities Commission will take somewhere between 11 to 20 weeks.
Contact us If you run into any difficulties, please contact our charity formation team on 020 8502 8567.