To set up a charitable company in the UK, you need to incorporate a private limited company at Companies House and then apply to register your charity with the Charity Commission.
Most charitable companies are limited by guarantee, rather than limited by shares. This is because they use their surplus income to achieve their non-profit aims, whereas limited by shares companies distribute profit to their shareholders.
In this guide, we explain what it means to be a charitable company and then discuss the steps required to register a charitable company in England & Wales.
What is a charitable company?
Charitable companies are normally set up as private companies limited by guarantee. This is one of the most commonly used legal structures for charities – the others being charitable incorporated organisations (CIO), unincorporated associations, and trusts.
Existing as a corporate body, a charitable company has the same legal capacity as an individual person. This means that the charity can do things in its own name, such as:
- enter into commercial contracts
- provide charitable services under contractual agreements
- lease or own land, property, and other assets
- control investments
- employ staff
- assume liability for its own actions and debts
- sue or be sued
One of the biggest benefits of this corporate status is that, in most cases, the charity’s trustees cannot be held personally liable for its actions or debts. The company itself is responsible.
However, unlike commercial (‘for profit’) companies, which operate for the benefit of their shareholders, charitable companies operate on a non-profit basis. This means that they:
- cannot distribute their surplus income to their members (who are known as ‘guarantors’)
- can only use their assets to carry out the charitable purposes set out in their articles of association (their governing document)
- must operate in the best interests of the charity at all times
Charities are subject to more rules and regulations than other types of non-profit organisations, so we would always advise that you first check if setting up a charity is the best option for what you want to do.
Steps required to set up a charitable company
The steps below explain how to set up a charity in England & Wales. Different rules apply if your charity is going to be based in Scotland or Northern Ireland.
1. Select your charity trustees
Trustees are volunteers who are responsible for governing a charity and deciding how it is run. Most charities require at least three trustees.
Finding the right charity trustees is important. They need to be committed to the role and possess the relevant skills, experience, and knowledge to lead and control the charity.
By law, they must be at least 16 years old. In small charitable companies, it’s common for the trustees to also be directors and guarantors of the company.
2. Decide what your charitable purposes are
Charitable purposes are what your charitable company is set up to achieve, i.e. the aims of the charity. The purpose(s) of your charity must:
- fall within at least one of 13 descriptions of purposes set out in the Charities Act 2011
- be ‘for the public benefit’
You must include your charitable purposes within the ‘objects’ clause of your company’s articles of association. The Charity Commission will refer to these purposes to decide if your company is eligible to register as a charity.
3. Choose a name for your charity
Your charity name is incredibly important, so you should think carefully about what to call your charitable company.
There are also certain rules and restrictions that you need to be aware of. Your charity name must not:
- be identical or similar to the name of an existing charity or company
- include words that you do not have permission to use (e.g. a trade mark or ‘sensitive’ words and expressions)
- include offensive words or acronyms
- be misleading (such as suggesting that the charity does something it does not)
To ensure that the preferred name of your charitable company is available, you will need to search both the charity register and the Companies House register. You can use the name-search tool on our homepage to search the Companies House register.
4. Create a governing document
The governing document for a charitable company is called the articles of association. This is the legal document that sets out the rules of the charity and how the company should be run.
You can use the Charity Commission’s model articles of association, either as a template (this is recommended) or as a reference if you plan to create your own articles.
5. Register a company
To set up a charitable company, you need to incorporate a private company limited by guarantee before applying to register as a charity with the Charity Commission.
Our Limited by Guarantee Package is ideal for setting up a charitable company in England & Wales. Simply call our Customer Service Team at 020 7871 9990 and we will complete your company formation application over the phone.
The following information will be required:
- the proposed name of your charitable company
- Standard Industrial Classification (SIC) code for your company
- a registered office address
- details of every director – it is common for the directors to also be guarantors and trustees
- details of every guarantor – these are the company members who will act as trustees of the charity
- details of people with significant control (PSCs)
- a copy of your proposed articles of association
We will send your completed application and a copy of your articles to Companies House to be processed. Typically, applications are approved within 24 hours (subject to processing times on the day).
You will receive a confirmation email with copies of your company formation documents, as soon as your company registration has been approved.
6. Apply to register as a charity
The final step is to apply to the Charity Commission to register as a charity. This is the most complex stage of the process, so it will take some time to complete the online application, provide supporting documents, and obtain charitable status.
To be eligible to apply, your charitable company must have an annual income of at least £5,000.
When you apply, you will be required to provide the following information:
- your charitable purposes
- how your charitable company is run for the public benefit
- proof of the charity’s annual income
- name of your charity
- bank or building society details
- most recent accounts
- contact details
- name, date of birth, and contact details of every trustee
- a copy of your articles of association
- signed trustee declaration form
The Charity Commission provides full guidance explaining how to register a charity once it has been set up, and what happens after you apply.
Applications are normally assessed within 48 hours, to ensure that your charitable company is eligible to register and that you’ve provided all of the necessary information. You will be notified of their decision by email.
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Setting up a charitable company is not as straightforward as forming a standard company for commercial purposes, but the entire process can still be carried out online. The complexity is simply due to the additional regulations and requirements placed upon charities.
If you would like to speak to us about our Limited by Guarantee Package for your charity, please get in touch with our company formation team. They will be happy to answer any questions you may have, or help you to set up your charitable company.