Step 1 – Register/Re-register as a Company “Limited by Guarantee”
For the purposes of registering as a charity with the Charities Regulator, a Company must be registered as a Company Limited by Guarantee. In the case of an existing LTD company, this will necessitate adopting a new Constitution and filing a Form D20 with the CRO.
What is a Company Limited by Guarantee?
A Company Limited by Guarantee or ‘CLG’ from a practical perspective means that the liability of the members is limited to the amount which they have guaranteed (typically a very small amount usually, €1.00 per member). This is the reason why CLG’s are the preferred company form for charities. Another distinguishing feature of this type of company is that it has a very specific purpose or “object”. For example, under the new constitution for the Company the “objects” of the Company will be confined to the running and promotion of charitable purposes. This means that the Company must act in furtherance of this purpose at all times and not stray beyond this objective. This position can be compared to a private limited company that is free to undertake any purpose as it does not an objects clause.
Step 2 – Register with Charities Regulator
You can access the Charities Regulator here and set up an account: https://www.charitiesregulator.ie/en/information-for-charities/myaccount
For example a business plan with cash flow projections is required, accounts, details of the trustees, trustee declaration forms, conflict of interest policy. It is common for the Charities Regulator to come back with some queries before the application is approved.
Step 3 – Revenue
Where a charity is registered with the Charities Regulator, the charity can apply for a Charitable Tax Exemption and claim certain tax reliefs and/or benefits. If a charity employs staff, the charity will have to deduct Income Tax, PRSI, USC under the PAYE system in the normal manner.
Step 4 – Ongoing compliance with Charity Law and Company Law
Company Law Considerations
The Company will still need to adhere to all the obligations imposed on CLG’s under the Companies Acts 2014 and its filing obligations with the CRO for example.
What are the responsibilities of directors in CLG’s?
It’s also worth stating that although the board may serve on a voluntary basis, the directors, officers or trustees of charitable and not-for-profit organisations are obliged to make themselves aware of the organisation’s obligations under company law. Furthermore, legislation does not distinguish between those directors who are volunteers and those who are remunerated, with the same duties and responsibilities applying in terms of compliance with corporate governance requirements and legislation, such as the Companies Act 2014 and Charities Act 2009.
Charity Law
Charitable Trustees and Directors
As a registered Charity the directors will also be registered as trustees of the Charity and will therefore have dual responsibilities – that being of company law and charity law.
refer to: https://www.charitiesregulator.ie/en/information-for-charities/charities-governance-code for detailed guidance on the steps to achieving compliance.
What is a Charity for the purposes of the Charities Act 2009 ?
Generally, in order to come within the definition of a ‘charitable organisation’, a body must:
• promote a charitable purpose only;
• apply all of its property in furtherance of that purpose (except for moneys expended in the operation and maintenance of the body, including remuneration and superannuation of its staff); and
• not remunerate charity trustees.
What is a Charitable purpose?
‘Charitable purposes’ include the prevention or relief of poverty or economic hardship, the advancement of education, the advancement of religion, and other purposes of benefit to the community. Section 3(11) gives 12 categories that come within the community benefit test. The list includes the protection of the natural environment, the advancement of the arts, the promotion of health, and the promotion of civic responsibility.
Each purpose must be of public benefit in order to be a charitable purpose. There is a statutory presumption that a gift for the advancement of religion is of public benefit. All other charitable purposes must be shown to be intended to benefit the public or a section of the public.
What Charities need to register with the Charities Regulator?
Section 39 requires that a charitable organisation that intends to operate or carry on activities in the State must register with the Charities Regulatory Authority. The Charities Regulatory Authority maintains the Charities Register, and information on each registered charity can be viewed by the public.
What reporting requirements does a Charity have?
All charities must also comply with their obligation under section 52 of the Charities Act 2009 to prepare and submit to the Charities Regulatory Authority a report in respect of its activities in each financial year.
- Financial transparency is one of the key ways to reassure donors that their contributions are being used as intended. A charitable organisation must file its annual report with the Charities Regulatory Authority within ten months after the end of each financial year. The regulator will require information on how the company is funded. If fundraising is carried out by way of public collections the regulator will want to review the controls in place – there should be controls in place!
The annual report sets out information regarding a charity’s activities for the reporting period, the number of employees and volunteers involved, the charity’s sources of income, fees charged, and financial information.
For additional information: https://www.charitiesregulator.ie/en/information-for-charities/annual-reporting
What key dates do you need to be aware of?
2019 – will be a year of learning and preparation for charities.
2020 – will be the first year that registered charities are expected to comply with the Code.
2021 – will be the first year that registered charities are expected to report on their compliance with the Code.
If you would need any assistance registering as a charity or need assistance putting in place a charities ‘corporate governance plan’, please contact dcunningham@cunninghamsolicitors.ie
The content of this article is provided for information purposes only and does not constitute legal or other advice.