What is a Charitable Trust Board?

A charitable trust board is a group of trustees in charge of the governance for a non-profit with a charitable purpose. A trust is one of several legal structures available to non-profit organisations in New Zealand and offers both benefits and limitations.

Charitable trusts are both a charity and a trust and are assigned a legal identity once registered, meaning that they can enter into contracts and agreements with other individuals and entities. As registered charities, they are primarily set up for the purpose of conducting charitable activities, are run by a Board, and can benefit from tax exemptions. A charitable trust board must establish trust rules by creating a trust deed and registering with the Charitable Trust Register.

Starting a Charitable Trust Board

Charitable trust boards consist of a group of individuals who agree to hold assets or money for another person or group and carry out activities for charitable purposes. These organisations are created when funds or other assets are held by trustees to achieve a specific purpose. They have no members and instead are run by a group of trustees who sit on the board.

As the leaders of a charitable entity your trust board must develop a written set of rules that describe in detail the charitable purpose of the organisation, what you do, how you make decisions, and how you operate. These rules may be in the form of a trust deed or constitution and are legally binding.

Under Aotearoa New Zealand law, if you apply to Charitable Services and register as a charity your official document will be reviewed to determine whether your rules follow existing laws. Your charitable purposes must fall within one of the following categories:

• relieve poverty
• advance education
• advance religion
• or be beneficial to a community.

To learn about charitable purposes, visit Charities Services.

Before a charitable trust board can operate, your group will need to set up and register the charitable trust, hold a meeting to decide what type of entity you want to form, what name you plan to give it, and who will be assigned as the trustees to act as Board members. You will then need to create your trust deed or constitution and approve the written rules and the decision to apply for incorporation or charitable status.

A treasurer, secretary, and chair must also be appointed before the application is submitted. If you choose to register as an incorporated society, you will need to apply through the Companies Office. If you are registering as a charitable organisation, your application must be made to Charities Services.

Who Should Be on a Trust Board?

Charitable Trust Board members are called trustees. The Institute of Directors New Zealand recommends trust boards have between four to six trustees and notes that more than eight can lead to lower participation due to a sense that board members are making less of a contribution during discussions, which can lead to lower quality decisions over time.

Trustees should be professional and committed to a high standard of governance. To add value to the organisation, a charitable trust board should have a good mix of skills and experience in areas like finance, sales and marketing, and general management. A strong chair can support a strong culture that prioritizes transparency, confidentiality, self-evaluation, and long-term professional development and training.

It is essential for Charitable Trust Board members to understand the trust deed and the organisation’s purpose and needs. The deed should be read by trustees and used to guide decisions.

Charitable Trust Boards must also have clear agendas during meetings and share information with the those who attend meetings. For more Board meeting resources, browse our articles or visit the Our Cat Herder Board Portal Blog.

Duties and Liabilities

Trustees are given certain powers under the Act to make decisions and run organisation, including making repairs to trust properties, selling, leasing, or mortgaging them, investing trust funds to increase revenue, hiring administrators and staff, reimbursing themselves for expenses they incur, granting powers to experts such as attorneys when unable to perform their duties, or entering into contracts with individuals or entities.

Board trustees have a duty to act for the benefit of the trust, manage it carefully, including complying with the trust deed and other legal obligations, maintain the organisation’s accounts, remain impartial when making decisions that affect beneficiaries. They should stay informed about the terms of the trust deed and focus on the purpose of the trust.

In general, however, charitable trust board members have limited liability, as long as they make decisions carefully and within the organisation’s written purpose. Any revenue generated must not be for the personal gain of trustees or members. However, if you have concerns about the activities your charitable trust board is engaging in and suspect a breach of New Zealand law such as fraud or theft, you should report it to the police. If an expense or debt is incurred on behalf of the trust for reasonable purposes, the trustee has the right to be reimburses from the trust property or use it to pay the expense or discharge the liability.

Law Changes for Charitable Trust Boards

In New Zealand, charitable trust boards can incorporate, register as a charity, or both.

In 2019, Parliament approved the new Trust Act (Trusts Act 2019). The Act (in effect from 30 January 2021) offers more guidance about the role of Board trustees. One such change is the way information is shared with beneficiaries. Charitable trust boards must now consider confidentiality, the nature of a request for information, the effect it can have on the beneficiary, and the intention of the settlor when deciding how to share information about the trust.

Despite having protection from financial and legal liability, trustees are accountable to the trust and its beneficiaries. The new Trusts Act 2019 requires existing Charitable Trust Boards to update their rules and gives boards the power to remove or appoint negligent trustees or those who engage in breach of trust or misconduct.

How will the Incorporated Societies Act 2022 impact by society-based trust board?

As of October 2023, new organisations will no longer have the option to incorporate as a society-based charitable trust board. Existing trusts may continue to operate in the same way or re-register as an incorporated society under the new ISA 2022 rules. Under the Incorporated Societies Act 2022 charitable trusts must:

• Create and share a written constitution.
• Develop a written dispute resolution process.
• Have a minimum of 10 members in the organisation.
• Appoint a committee responsible for managing operations.

Registered charitable trusts are overseen by Charities Services through the Charities Act 2005 and are considered charitable entities. They have legal obligations such as filing an annual return, submitting financial statements, and notifying the agency of changes made to their name, address, written rules and purposes (trust deed), or officers. Board trustees must also pass on surplus assets to other charitable organisations if the entity ceases its operations. Once incorporated, trust boards are listed in the Registrar of Incorporated Societies, which has similar requirements to Charities Services.

Resources

The New Zealand Companies Office has a Law Changes Hub to help non-profits affected by changes in the new Incorporated Societies Act.

The CommunityNet Aotearoa website provides a template for a trust deed.

To make sure your new trust name is available for registration, you can search the Charitable Trust Register or the Companies Register.