Forming your own Charity – how to satisfy the Charity Commission

Being philanthropic is part of our DNA. When we see somebody struggle our natural instinct is to help and many people do this by donating to charities in their lifetime or leaving charitable legacies in their wills. Other people decide to create their own charity to achieve their philanthropic aims and there has been a noticeable increase of this happening in England and Wales. As at October 2023, there were over 169,000 charities registered in England and Wales and collectively their income was circa £89 billion.

As more people wish to establish their own charities, the Charity Commission (responsible for registering and regulating charities) has become ever pickier on the nature of charities it is prepared to register. An application form and supporting documents must be submitted and, frustratingly, it is not uncommon for the Charity Commission to revert with follow up questions to get to the core of the charity’s aims and to determine whether it is truly in the public benefit.

Our top 10 tips on how to satisfy the Charity Commission’s requirements based on our experience with registering our clients’ charities:

1. Income

Check the estimated income of your charity. If the anticipated annual income is £5,000 or more, the charity must be registered with the Charity Commission.

The charity must already have a minimum income of £5,000 before it is registered and the Charity Commission will want to see proof of this. A bank should be able to open an account for a charity once the governing document (see below) has been signed by the trustees. A scanned copy of a bank statement showing the charity’s name, bank details and account balance should be submitted with the application.

If the charity is established by a Charitable Incorporated Organisation (“CIO”), this must be registered regardless of its level of income. The bank account for a CIO will be opened after it has been registered with the Charity Commission.

2. Proof of funds

In our experience, our clients have a surplus of funds that they wish to transfer to the charity. This could be generated from the sale of a business or receipt of an inheritance. This is often used as the start-up funds for the charity and income is subsequently generated and/or further funds arise from fundraising/donations.

From the outset the Charity Commission will require evidence that funds have been allocated to the charity. A letter from the bank / financial advisor explaining that specific funds/shares have been ring-fenced for the charity is usually sufficient for proof of funds. It is important to have this in place to give confidence to the Charity Commission that the charity is genuine and has access to appropriate funds to run. If the funds are to be raised, the application should explain in detail the methods of fundraising and how much is expected to be raised.

3. Unique name

The charity’s name must not already be used by another charity. You can check the availability of a name on the Charity Commission’s register. Be careful that there are no intellectual property right issues arising from the proposed name.

4. Trustees

The Charity Commission recommends a minimum of 3 trustees / members one of whom will be the chair. Be careful that no conflict of interest arise which might impact on achieving the charitable objects. The trustees will have ultimate responsibility for the charity and must ensure that the objects are met. Depending on the structure of the charity, the trustees may have full personal liability.

5. Charitable Objects

Each charity must have a purely charitable object/objects and must be for the public benefit. The objects clause is often difficult to draft; it is essential you clearly understand and envisage the charity’s aims. The objects will be close to the creator’s heart and we often find including a personal explanation of why the objects are so important help to show that the charity is genuine.

There are 13 recognised charitable objects including the prevention or relief of poverty, the advancement of education or religion, the advancement of the arts, or the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage. A full list of the 13 charitable objects can be found on the Charity Commission’s website.

The objects must be specific and address:

• The charity’s outcomes;
• The method of achieving these outcomes;
• Who will benefit;
• The remit of the benefits (i.e. which country/countries the charity would benefit).

It is important to carefully draft your objects so that the beneficial class does not inadvertently discriminate against people with a protected characteristic under the Equality Act, such as race, gender etc.

Some charities may wish to only assist certain people, such as ethnic minorities from deprived economic backgrounds. If this is the case, the application must clearly explain why that group of people have a particular need and disadvantage over other groups.

6. Governing document

The governing document is a legal document that creates your charity, details the charitable purposes and explains how it will be managed. The Charity Commission provides a template governing document on their website; it is important to tailor this to your charity.

Constitutions are prepared for CIOs. 

7. Decision-making policy

The charity must have a decision-making policy. This sets out the charity’s priorities, the principles that the trustees will use when determining how the charity achieves its objects, due diligence requirements and fairly standard administrative clauses.

8. Specific application questions

The application form is split into sections, such as trustees’ details, financial information, objects, and criteria the trustees will use to decide who benefits or otherwise what work the charity does or supports. It is important to give detailed and measured answers. If not, the Charity Commission is very likely to revert with follow up questions.

9. Advertising

Some charities can be somewhat invisible beyond its Charity Commission registration. It is important to identify how you will make the charity known to beneficiaries and other charitable organisations identified in your objects. For example, you may choose to advertise your charity using specific websites where potential beneficiaries can use search engines for suitable charities.

10. Amending objects

Over time a charity’s objects can naturally evolve or the trustees can consciously decide to amend the objects depending on circumstances. Any amended objects must be approved by the Charity Commission and the governing document must be updated accordingly to ensure that the trustees do not act outside of their powers.

Setting up your own charity is worthwhile; it is a way in which you can leave a lasting legacy for the public good. The registration challenges should not prevent you from doing this and it is hoped that the above tips assist.

Further information

Should you require assistance or have queries please contact Sameena Munir or a member of our Private Client team.