Trust Deed Constitution for a Charitable Trust
This Trust Deed Constitution for a Charitable Trust is designed for use where it is decided that the charity should not be set up in a corporate form, and that it would be more appropriate to use instead the Constitution for an Unincorporated Charity.
Since the charity will be in the form of a trust and not in a corporate form, it will not have an independent legal identity/personality. This means that its trustees will be more at risk of personal liability for debts or other liabilities than trustees of an incorporated organisation. However, if they act honestly and reasonably and the charity has sufficient assets to meet liabilities, the trustees will not normally become personally liable. It is advisable for the charity to take specific legal advice on this point, and also to take out suitable insurance.
Assuming that the charity’s annual income exceeds £5,000, it will need to register with the Charity Commission but one of the advantages of setting up a charity in the form of a trust (rather than in corporate form) is that its administration and regulation will be simpler and less expensive since it will not be subject to any requirements of company law.
This Trust Deed Constitution for a Charitable Trust takes into account the needs of charities and the requirements of charity law, and it follows very closely the Charity Commission’s Model Trust Deed for Charitable Trusts. (Crown copyright in the Commission’s Model is hereby acknowledged.)
Setting up a charity using a Trust Deed will be appropriate where:
• the charity is set up with a specific sum of money by a group of people who become its trustees
• the trustees hold any property for the benefit of the community for whose benefit the charity is set up
• the charity makes grants
• the organisation and administration of the charity will be fairly simple
• the charity will not have a membership
• the annual income of the charity may be substantial. (A charity whose income will not exceed £5000 should instead use the Short Form Constitution for a Small Unincorporated Charity in this Sub-folder)
• the charity will not need to raise finance by borrowing or from subscriptions
• freehold or leasehold land or other substantial property may be held (but it will not be in the name of the trust itself but instead in the names of the trustees or some of them)
• the charity will have few or no employees
• the charity will not enter into commercial contracts, deliver services, or engage in activities involving commercial risks
Where the charity is to be involved in such contracts or activities, consideration should be given, and legal advice taken, as to whether it should be formed as a company instead; that would provide better protection from personal liability for the charity’s debts which may make it easier to recruit trustees.
If a company is to be used instead, the charity could adopt the Charity Articles of Association-Private Company Limited By Guarantee.
The charity’s purposes (as described in the Trust Deed) must be charitable and it must have demonstrable public benefit, otherwise it will not be a charity in law. The Charity Commission website includes guidance on public benefit and on what purposes are charitable.
If it is a charity in law, it may refer to itself as a “charity”, but not otherwise. If HMRC has also formally recognised it as charitable and it has a tax number, it may state that it is recognised by HMRC but it must not publicly quote its tax number or suggest that it is “registered” or has “charity status”. If it is recognised by HMRC it may claim gift aid on payments made to it.
This Trust Deed provides for the charity to be run by three or more trustees.
This template is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.
Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.