Changes to the Charities Act – What your organisation needs to know

20 June, 2012 | Peter Smith

The Charities Amendment Act 2012 has made some important amendments to the Charities Act, including adding the definition of an officer.

Definition of Officer
The definition of officer under the Act has been extended to include:

“A person occupying a position that allows the person to exercise a significant influence over the management or administration of the charity (for example a treasurer or chief executive).”

There has also been change to the definition of prohibited or disqualified persons so that any individual who is prohibited from being a director or promoter of a company is also disqualified from holding office on the board of a charity. Examples of disqualified directors are those convicted of fraud or those who are reckless or incompetent in the performance of their duties.

As part of the compliance for charities there is now a duty on a charity to notify to the Charities Commission any change that disqualifies an officer from being an officer of the charity.

Risk Management of Charities

The changes to the law will mean changes to the risk management of charities. Officers of every charity including board members, chief executive officers and chief financial officers will have to regularly declare their status as not being disqualified as officers and any change in that status will need to be immediately notified to the Charities Commission. A declaration or statement to this effect should be made by each trustee or officer before each Board meeting and an agenda item requiring such declarations or statements should be on each Board agenda.

Changes to Meaning of Charitable Purpose

Prior to the 2012 amendment to the Act there had been some controversy over whether or not the following were charitable purposed under the Charities Act.

• Maraes
• Amateur sport
• Community Advocacy

Maraes

A Marae is now a charitable purpose. If the physical structure of the Marae is situated on land that is a Maori reservation referred to in the Te Ture Whenua Maori Act 1993 and the funds of the Marae are only used for the purposes of administration and maintenance of the land and maintaining the physical structure of the Marae, these purposes are now confirmed as charitable purposes.

Amateur Sport

The promotion of amateur sport may now be a charitable purpose if it is a means by which relief of poverty, advancement of education or religion or any other matter beneficial to the community is pursued.
As it has been held by the Courts that matters beneficial to the community involve the promotion of health, the opportunity now exists for the promotion of amateur sport to be a charitable purpose. The 20th and 21st centuries have seen communities develop an understanding of the significant benefits that come with involvement in amateur sport.

Getting the Courts to recognise these benefits as being charitable has been another matter and it will be interesting to see how the law develops over the next few years in terms of recognition of the promotion of amateur sport as a charitable purpose.

Community Advocacy

The Courts have held in the past, that community advocacy is not a charitable purpose. The amendment to the Charities Act makes it clear that a non charitable purpose such as community advocacy that is ancillary to a main charitable purpose will not prevent an institution from qualifying for registration as a charitable entity.

In other words, while a trust or incorporated society set up with community advocacy as its main purpose will not be permitted to register as a charitable entity, a trust or society established for, say, relief of poverty may have community advocacy as a subsidiary purpose and therefore remain able to be registered as a charity.

If your organisation has previously been denied charitable status because of its connection to amateur sport and/or community advocacy, the opportunity may exist with Smith & Partners help, to reapply for charitable status.

If you have any questions regarding the above, or wish to seek advice regarding charitable trusts, please contact Trust Law expert, Peter Smith by phone on 09 837 6882 or email peter.smith@smithpartners.co.nz