Philanthropy Ireland thanks Paraic Madigan, Chairman of STEP (Society of Trust and Estate Practitioners) and Partner at Matheson Ormsby Prentice, for his input into this section.
We recommend that individuals seek legal advice from practitioners who are experienced in the field of charity law.
Legal forms for Irish charities
Charitable organisations are not currently defined by a specific legal form in Ireland, though this will change once the Charities Bill has passed. Charitable organisations may be set up as one of the following:
- An unincorporated association;
- A company limited by guarantee having no share capital;
- A trust.
Establishing your own philanthropic organisation
The majority of philanthropic organisations establish as a charitable trust or a company (limited by guarantee and not having a share capital). Charitable trusts are governed by trust law, and companies by company law. Both legal forms are similar in that they are administered according to a governing document (trust deed or
memorandum and articles of association), and are overseen by unpaid officers (trustees or directors), who may or may not recruit staff.
Detailed guidance on setting up your own philanthropic organisation will soon be available on this Web site.
Setting up a charitable trust
Charitable trusts are useful where there is a one-off transfer of funds. The person transferring the funds establishes a ‘deed of settlement’ where funds are transferred to trustees. Alternatively, a ‘declaration of trust’ can be made by the trustees themselves. The deed of settlement or declaration of trust sets out the charitable purposes of the trust.
Setting up a company limited by guarantee
Using a company limited by guarantee can be useful where the donor may wish to change the charitable purposes in the future, or where money is to be spent for a limited time only. However, the primary advantage in forming a company limited by guarantee is to limit the liability of members – typically if a philanthropic organisation is to own land and buildings, hold events, employ staff, or send people on trips overseas, then the limited liability provided by a company limited by
guarantee make this legal form more appropriate.
The company is established by lodging the Memorandum and Articles of Association with the Companies Registration Office. These documents should also set out the organisation’s charitable purposes.
Steps in establishing a philanthropic organisation
The following are the main steps in establishing a philanthropic organisation:
- Choosing a legal form (trust or company);
- Drawing up of governing document defining charitable purposes;
- Drawing up a Statement of Activities and a Financial Statement;
- Appointment of trustees (trust) or directors (company);
- Providing details of proposed activity, including governing documents, Statement of Activities and Financial Statement to the Revenue Commissioners when seeking tax exempt status;
- In the case of a company, the company is incorporated;
- Application for a tax registration number which is then submitted to the Charities Section of the Revenue Commissioners;
- The Revenue Commissioners issue the company or trust with its charity number (the CHY number).
The role of the Revenue Commissioners
As described in the tax section of this guide, the Revenue Commissioners are responsible for deciding whether charitable organisations are eligible for tax relief. If organisations are eligible for relief, they receive a CHY number from the Revenue. Some of the criteria that the Revenue Commissioners use in granting tax exemption status are given below:
- The organisation’s purposes must be exclusively charitable;
- A majority of the trustees/directors are resident in Ireland;
- The organisation must be non-profit making or distributing;
- The charitable purposes must be for public benefit (i.e. not restricted to a very small defined group of people) although the Charities Act, 1961 provides that it shall be conclusively presumed that a gift for the advancement of religion will occasion public benefit, (in this regard, the definition of religion is tightly construed);
- The requirement for public benefit may vary considerably as between the different categories of charities.
The following are characterised as charitable purposes by the Revenue Commissioners:
- Relief of poverty;
- Advancement of education;
- Advancement of religion;
- Other purposes of a charitable nature beneficial to the community.
To gain a CHY number, a philanthropic organisation must submit its governing document (which can be in draft form) to the Revenue Commissioners for approval.
The future of Irish charity law
In 2007, the government published a Charities Bill to modernise charity law in Ireland. The bill contains features such as:
- Ireland’s first statutory definition of charitable purposes;
- The establishment of a Charities Regulatory Authority and a Register of Charities;
- Qualification and disqualification of charity trustees;
- Accounting and reporting requirements for charities.
Please note that the Charities Bill had not become law at the time of writing of this guide. When the Bill is passed into law, this section will be updated.