It’s important to know your charity’s legal structure (eg trust, association, CIO, company) because it affects whether:
the charity itself can enter into contracts or employ staff, or the trustees must do these things personally
land is held by the charity itself or by the trustees (or someone the trustees appoint for that purpose)
trustees’ liability is limited
trustees have specific legal duties that go with that legal structure
11.1 Different legal structures for charities An ‘incorporated charity’ is one that’s set up in a legal form which makes the charity itself a legal entity. This is called ‘legal personality’, and means the charity can own property or enter into contracts in its own name. Incorporation gives trustees more protection from personal liability. Some incorporated forms can limit trustees’ liability to third parties. The law places duties on board members to prevent the abuse of limited liability. An ‘unincorporated charity’ doesn’t have legal personality, so can’t hold property or enter into contracts in its own name. Trustees’ personal liability is unlimited. This table summarises the characteristics of different legal forms and what they mean for trustees.
Legal form or structureIncorporated (legal personality)Title to land held byContracts/employment in the name ofLiability to third parties limitedAdditional duties on trustees TrustNoTrustees for the charityTrustees personally (for the charity)NoNo AssociationNoTrustees for the charityTrustees personally (for the charity)NoNo CompanyYesThe charityThe charityYesCompany law Charitable Incorporated Organisation (CIO)YesThe charityThe charityYesCharities Act and CIO regulations Corporation created by Act of ParliamentYesThe charityThe charityYes unless excluded by the ActNo Royal charter bodyYesThe charityThe charityIncorporation gives some protectionNo Community Benefit SocietyYesThe charityThe charityYesCo-operative and Community Benefit Societies Act Find out more: Charity types: how to choose a structure Running a limited company: Directors’ responsibilities Royal Charter charities
11.2 Unincorporated charities (trusts and unincorporated associations) - holding land Charities set up by a trust deed, constitution or similar governing document are unincorporated. This means they are not legal bodies in their own right and can’t hold property in their own name; it must be held for the charity by trustees. If the charity trustees do not want to hold legal title for any land or other property themselves, they can appoint a nominee, holding trustees (other individuals) or a custodian trustee (a company or other corporate body that has power to hold property for the charity). The governing document may explain how to do this. Holding and custodian trustees aren’t charity trustees; they can’t make decisions about the management of the charity or its property, and must follow the lawful directions of the charity trustees. You may find it simplest to vest the land in the Official Custodian for Charities. Read about The Official Custodian for Charities’ land holding service. Apply to transfer land or property to the Official Custodian.