Governing document templates
Use one of the Charity Commission’s model governing documents, either:
- as a template (recommended) – this makes it easier to register your charity
- as a reference – to see what a governing document looks like and what it must contain
Start by choosing the right governing document for your charity type:
- constitution (for unincorporated associations)
- charitable incorporated organisation (CIO) foundation or association constitution (for CIOs) – see below
- memorandum and articles of association (for charitable companies)
- trust deed or will (for trusts)
If you use a model governing document, complete the template in full. Select all of the options that apply to your charity, and sign and date it where required.
If you’re setting up a charity associated with a national organisation, it may have its own governing document template you should use. You must use that template in full without changing or adding to it. Alternatively, ask your national organisation if you can use one of the commission’s model governing documents instead.
What governing documents need to contain
Only write your own governing document if there isn’t a template that’s right for your charity. If you apply to register your charity, the commission will expect your governing document to contain certain sections (‘provisions’ or ‘clauses’):
||What it needs to contain
||Your charity’s name and (in the case of a trust or an unincorporated association) power to amend the name
||What your charity is set up to achieve (its purposes must all be charitable for the public benefit)
||What the trustees can do to carry out its purposes (for example, raising funds, buying and selling property, borrowing money, working with other organisations)
||How many trustees there are, who can be a trustee, how they are appointed, how long they can hold office and if they can be reappointed
|Charity meetings and voting
||How many meetings are needed, how they are arranged, how a chair is appointed, how votes are made and counted (including minimum numbers for this)
|Membership (if applicable)
||Who can be a member, age restrictions, ending someone’s membership, how membership meetings are called
||How the charity meets its legal accounting requirements, who controls the bank account, who can sign cheques and if two signatures are needed, other internal financial controls
||How trustees must not benefit from the charity (excluding reasonable expenses) without commission approval or unless it is authorised in the governing document
|Amendments (if applicable)
||How the trustees can change the charity’s governing document, when commission approval is needed, how amendments are recorded
||When the charity can be closed, what happens to any remaining assets (charitable assets can only be used for charitable purposes)
When an employment is terminated the employee may enter into an agreement with the former employer to accept a payment “in full and final settlement” of all of the outstanding claims against the employer. In doing this, the employee accepts that the sum payable satisfies claims and legal rights that arise either under the terms of the employment or statutory provisions. The employee therefore gives up his or her rights to pursue claims before an Employment Tribunal or in the courts. Agreements of this kind find their origins in The Trade Union Reform and Employment Rights Act (1993). This legislation refers to “compromise contracts or agreements” which bind both parties to the agreement.
By agreeing not to pursue claims before a Tribunal or Court, the employee is giving an undertaking that restricts conduct. It follows that any sum given in respect of that undertaking falls within Sections 225 to 226 ITEPA 2003 (see EIM03601). Such a sum is not within the terms of Statement of Practice 3/1996 (see EIM03610) because the parties themselves are attributing a value to the undertaking. So where the agreement attributes a specific sum to this undertaking it is taxable.
Such an attribution is not very common. Usually, no specific sum is attributed to this undertaking in the agreement so there is no charge in respect of it.
Compromise agreements often contain a “repayment clause”. Such a clause provides that if the employee does later initiate proceedings before a Tribunal or Court – despite signing the agreement – then the sum paid under the agreement must be repaid to the employer. In a normal case, do not argue that such a clause means that a sum is being attributed to the undertaking not to pursue claims. In virtually all cases, the sum paid under the agreement can be fully attributed to settlement of the claims being dealt with. So there is no sum remaining to be attributed to that undertaking, even where there is a repayment clause.
If the employee does repay such sums, there is no provision in the legislation that gives any deduction for that payment.
To be a charity, an organisation must be established for charitable purposes only, which are for the public benefit. A charity cannot have a political purpose. Nor can a charity undertake political activity that is not relevant to, and does not have a reasonable likelihood of, supporting the charity’s charitable purposes. An organisation will not be charitable if its purposes are political
Whilst a charity cannot have political activity as a purpose, the range of charitable purposes under which an organisation can register as a charity means that, inevitably, there are some purposes (such as the promotion of human rights) which are more likely than others to lead trustees to want to engage in campaigning and political activity.
Here are some examples which might illustrate what would be accepted or rejected by the Charity Commission
An organisation set up to oppose a new runway at an airport applies for charity registration. The commission would reject the application as having a political purpose, as it would oppose the government’s policy on airports.
An organisation set up to protect the environment applies for charity registration. The organisation carries out a range of activities, including some political activity aimed at securing a change in the government’s policy on airports. The commission would accept the application if it was clear that securing a change in government policy was not the continuing and sole activity of the charity, but part of a wider range of activities aimed at furthering its charitable purposes.
An organisation which has been established to protect life and property by the prevention of all abortions applies for charity registration. Since the purpose can only be achieved through a change in law, the commission would reject the application as having a political purpose.
More details can be found here
You cannot change your charity’s financial year or period if your latest annual return and accounts (if required) are overdue.
Rules for charities that are not companies
If your charity is a charitable incorporated organisation (CIO) or unincorporated (not a company) you can change the financial year or period to run for more or less than 12 months.
It needs to be a minimum of 6 months, and no longer than 18 months.
You can only:
- change the dates for your current financial year
- make a change once every 3 years
Changing your financial year or period will also change your deadline for filing the annual return and accounts.
Rules for charities that are companies
If your charity is incorporated (a company) you can shorten your financial year or period as often as you’d like.
The minimum period you can shorten it to is 1 day.
You can lengthen your company’s financial year to a maximum of 18 months, but this can only be done once every 5 financial periods.
Rules for newly registered charities
If your charity is newly registered, and you have not submitted an annual return you will need to request permission to change your financial year.
To sign in and change your financial year you will need your:
This password gives people in your charity access to detailed information about your charity and individuals connected with it.
When giving access to this password you need to have measures in place to make sure the system is only used for proper purposes, and that the information accessed through the Commission’s services will be treated carefully and sensitively and in accordance with legal requirements including the General Data Protection Regulations (GDPR).
Read the privacy notice before you use the service.
If you are an employer running payroll, you need to:
- report to HM Revenue and Customs (HMRC) on the previous tax year (which ends on 5 April) and give your employees a P60
- prepare for the new tax year, which starts on 6 April
Update employee payroll records
For each employee working for you on 6 April, you’ll need to:
- prepare a payroll record
- identify the correct tax code to use in the new tax year (The most common tax code for tax year 2021 to 2022 is 1257L. You can find out more about tax codes here)
- enter their tax code in your payroll software
You should include in your payroll:
- all employees you pay in the tax year, no matter how much you pay them
- any employee who has worked for you in the current tax year (since 6 April) even if they have already left
Trustees or charity officers contact the Charity Commission for different reasons. These include applying to register a charity, updating the recorded details of a charity or using one of the electronic forms to apply for a service. When you contact the commission, it expects you to always:
- prepare carefully – this includes reading relevant commission guidance, ensuring you have all the information you need before contacting the commission and being clear what it is you want or need from the commission
- provide information which is true, complete and correct
When the Charity Commission contacts you, it needs to be confident that its regulatory concerns have been fully addressed. This means the commission expects you to:
- fully cooperate with it
- provide full, frank and honest answers to its questions
- provide information or documents it has asked for by the date specified
This will help ensure the commission’s engagement with your charity is completed as soon as possible.
Sometimes the commission may decide to check some of the information you have given it with other people or organisations, or it may ask for evidence to prove what you are telling it is correct. This is standard practice.
If you cannot meet a deadline the commission has set, you must let it know immediately and before the deadline expires. You must also ensure that you answer the commission’s questions fully and honestly. This means you should not provide limited or partial responses.
- do not cooperate with the commission
- do not provide information the commission has requested, or
- provide partial, inadequate or no response
the commission is likely to conclude that the regulatory concerns are not resolved or allayed. If you do not provide the information requested, or provide limited, partial or inadequate responses the commission will often consider this a regulatory concern in itself. This may result in it deciding to take stronger regulatory action.
The courts have made clear that they expect trustees to cooperate with the regulator.
The commission will consider non-cooperation as evidence of mismanagement or misconduct, which is a matter the commission takes seriously.
It is a criminal offence under section 60 of the Charities Act 2011 for anyone to knowingly or recklessly provide false or misleading information to the commission. This includes suppressing, concealing or destroying documents.
The main advantage of CIOs over charitable companies is that CIOs don’t have to register with and send accounts to Companies House as well as the Charity Commission.
Changing to a different charitable structure usually involves setting up a new charity, transferring your original charity’s assets and liabilities to it then closing your original charity.
The conversion process should be simple and straightforward in most cases. As part of this process, the new CIO Constitution and Special Resolution will need to be included before submission to the Commission.
Using this process means that the charity continues to exist but in a different form. This means you’ll be able to keep the charity’s existing name and charity number.
You should also be able to keep the charity’s existing bank accounts and in most cases the new CIO should receive any legacies left to the original charitable company.
To change a company into a CIO you need to apply to the Charity Commission here.
The Commission will liaise with Companies House to ensure that necessary records are updated correctly. This will mean that the date of conversion of the charitable company to a CIO – as shown on the public register of charities – will match the date of removal of the charitable company at Companies House.
Please note that due to limited resources, your application may be rejected if:
- complete documentation is not sent or received
- your charity is not in compliance with its reporting requirements to the Charity Commission and Companies House
- your charity has made any changes to the new CIO governing document that would require the Charity Commission’s approval including:
- name change, except a minor change such as removing limited or company and replacing it with CIO and also if the name is not one that is regulated on the business register and no approval has been submitted with the application
- any additional trustee benefits especially if there is an express prohibition in the company’s governing document
- amendments to the dissolution clause that will change the spirit of the intention of who receives the funds on dissolution
More information about changing your charity’s structure can be found here
Set a budget and follow it
Your charity should have a budget. Check that it is being used. It helps make sure you have realistic plans based on how much money your charity:
- currently has
- plans to raise
- plans to spend each year
By checking how much your charity receives and spends against the budget, you can identify problems in good time and agree what to do about them. It’s particularly important to do this where you see big differences between the budget plans and what is actually being spent.
Our publication Mr Claw in the World of Charity Accounting explains charity budgeting and planning in more detail. We still have a few copies available, so contact us here if you would like a copy.
Get the funds you need
Your charity may get the funds it needs in different ways.
This can include:
Make sure you know what the rules are for getting funds in these ways and that your charity complies with them.
If your charity does not spend all its income
Check that your charity has a reserves policy. This explains whether your charity is aiming to keep a reserve of unspent income, what it will be used for and why this is reasonable. Check that your charity sticks to the policy or can explain why if it does not.
Make sure that your charity’s annual report explains the policy and says how much money (if any) it has kept in reserve, what it is for and when the charity will use it.
If you want more information on Reserves, see the Charity Commission’s guidance here
You have to make deductions from your employee’s wages if a court orders you to. This could be to pay off:
- unpaid maintenance payments
- a county court judgment
How it works
- You’ll get a document from the court telling you to make deductions from your employee’s pay.
- Work out how much you have to deduct each time your employee is paid.
- Start making deductions the next time you pay your employee. Pay them their reduced wages on their normal payday.
- Make the payment to the court.
- Stop making deductions when the debt has been paid off.
You and your employee can be fined if you do not deduct their wages, or if you deliberately give false information about their earnings.
Full details can be found here