Charitable trust boards

What is a charitable trust board?

Charitable Trusts Act 1957, s 2 (definition of “charitable purpose”); ss 7, 8

A charitable trust board is a type of incorporated body registered under the Charitable Trusts Act 1957. This means that the trustees, or the society’s members, agree to hold money or assets and carry out activities for charitable purposes.  

As of October 2023, it will no longer be possible to register as a charitable trust board under the Charitable Trusts Act 1957.  

Existing charitable trust boards can choose to:  

  • re-register under the Incorporated Societies Act 2022 (in which case this Act will start applying to them) or  
  • continue operating indefinitely under the Charitable Trusts Act.   

This section sets out the position for trusts already registered under the Charitable Trusts Act. 

What qualifies as a “charitable purpose” is explained elsewhere in this chapter (see: “Charities and charitable status / Who can register as a charity”). However, in the case of charitable trust boards, a “charitable purpose” also includes any religious or educational purpose, even if it wouldn’t otherwise qualify as “charitable” under New Zealand law. 

Sometimes a charitable society will take an additional, intermediate step and establish a trust, so that the trustees appointed can then be incorporated as a charitable trust board. In those cases, the membership of the charitable trust board consists of the trustees, rather than all the members of the society that set up the trust. 

To be able to register as a charitable trust board, the trustees or the society must not be registered under any other Act. 

The Charitable Trusts Act is administered by the Registrar of Incorporated Societies. 

Registering as a charitable trust board (no longer possible from October 2023)

Charitable Trusts Act 1957, ss 13, 14, 19, Schedule 2

To register and incorporate as a charitable trust board, your trust or group must apply to the Registrar of Incorporated Societies (part of the Companies Office). The application must be in the form shown in the Charitable Trusts Act 1957 (Schedule 2). 

Once they are registered and incorporated, the trustees or society members become a body corporate under the name of the charitable trust board. This means the board takes on a separate legal identity distinct from those individuals. The board also enjoys “perpetual succession”, which means it continues to exist despite changes to its membership (until it’s wound up), and it also has its own “common seal” (official stamp). 

When a board is registered, all property held by the trustees or society members is vested in the board for the same purposes as before. The board’s liability is limited to the assets of the trust or society (although board members can be personally liable in some cases – for example, if they’ve been negligent or acted illegally). The board is liable for any transactions that are entered into in the board’s name and that the board is authorised to enter into by the trust deed or constitution. 

Board’s powers and duties

The powers of a charitable trust board will be the powers set out in the constitution of the society or the trust deed of the trust.

Board members must comply with the requirements of the Charitable Trusts Act. If they’re also trustees, they’re also bound by the general duties applying to trustees under the common law and the Trustee Act 1956 (see above, “Trusts / Trustees: Their powers, duties and liabilities”).

Choosing an appropriate management structure for a charitable trust board

What management structure is appropriate will depend on whether a charitable trust board is based on a society or a trust:

  • Society-based charitable trust boards – If a charitable society incorporates as a board under the Charitable Trusts Act, best practice suggests that a committee consisting of a few of the members should be responsible for managing the board. In effect, this should be no different from the way in which the society managed itself before it became a charitable trust board, or if it had been registered under the Incorporated Societies Act 1908 (see: “Choosing the right legal structure for your group / Incorporated societies” ).
  • Trust-based charitable trust boards – A board consisting of the trustees may not need to have a management committee, because all the trustees will be required or entitled to participate in decision-making.

Duties and liabilities of trustees / officers

The Charitable Trusts Act does not impose any general duties on the trustees or officers of a charitable trust board. The trustees or officers are in a similar position to company directors, and owe duties to the charitable trust board in the same way as directors owe duties to the company (see: “Companies”). These duties are to: 

  • act in good faith and according to the rules of the board
  • exercise their powers for a proper purpose and with reasonable care
  • not cause or allow the board’s affairs to be carried out in a way that creates a substantial risk of loss to the board‘s creditors
  • not agree to the board taking on an obligation unless it’s reasonable to believe the board will be able to perform it
  • not obtain any unauthorised personal financial gain from their position as officer of the board or make any unauthorised use of confidential information.

Reporting requirements

There’s no requirement for charitable trust boards to file annual financial statements with the Registrar of Incorporated Societies. However, a number of reporting requirements will apply if the board is also registered on the Charities Register, which is a precondition for having charitable status for tax purposes (see: “Charities and charitable status / Administrative responsibilities of registered charities”).

Winding up a charitable trust board (Liquidation)

Charitable Trusts Act 1957, ss 24-27

In some cases, a charitable trust board may be wound up (liquidated) by the courts – for example, if it can’t pay its debts. 

When a board is based on a charitable society, rather than on a trust, the board can also be wound up voluntarily by the board itself. For most trust-based boards, the trust deed will also give the trustees (that is, the board) the power to wind up the trust. 

The liquidation provisions in the Companies Act 1993 (Parts 16 and 17) apply to a liquidation of the board as if the board were a company. 

The board’s debts must be paid from its funds or assets. If there’s any surplus, this must be distributed to another charitable organisation in New Zealand. A charitable trust board must specify in its trust deed or constitution that any surplus assets will go to a charity with similar aims to its own. If a charity is deregistered, there will be a tax on its net assets (see “Charities and charitable status / Removal from the Charities Register”). 

Under the Companies Act, officers of a charitable trust board may be personally responsible (liable): 

  • if they’ve misapplied money or property belonging to the board 
  • if they’ve been negligent or breached a duty or trust, or 
  • if proper accounting records haven’t been kept.