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Winding up a Charitable Trust: Key points
23 May 2017 Post by: Steven Moe

When a charitable trust has been going for a long time it may be that it eventually “runs out of steam” either through the purpose having been achieved, the situation having changed or a lack of fresh volunteers to continue.  What are the next steps for the board of a charitable trust in such a situation?  This note sets out the key points to consider and what the steps are.

Step 1: Review what the Trust Deed says

The Trust Deed will provide guidance on what happens on the dissolution or wind up of the trust.  This is a key step and is important because those rules will need to be complied with.

Usually there will be some provision that the assets of the charitable trust can only be distributed to some other trust which is also charitable.

Therefore anything left over usually needs to go towards “…carrying out charitable purposes within New Zealand similar to those set out in this deed …”

Step 2: Do what the Trust Deed provides: Likely a Deed of Distribution

We will not go into detail here apart from to say that the Trustees will need to comply with the rules and fulfil what they say – for example, they might need to identify another charity that could receive any amounts on wind up.  Normally we would expect this to be done via a deed of distribution signed by the trustees.  If there was a vesting date (that means the ‘end date’) then there would be a deed bringing the date of vesting forward.

One point to note is that accounting advice should be taken about whether there will be any tax consequences of deregistration to ensure that there is no later liability that results after deregistration that was not anticipated.  While we cannot give tax advice, we note that this is unlikely where the charity is distributing any assets it held within twelve months of being deregistered as a charity.

Step 3: Wind up Trust by Trustees Resolution

Once the assets had been distributed we would expect the Trustees to sign a short resolution to wind up the Trust.

Step 4: Notify Government departments

In the same way that a new charity needs to register with certain government departments the same process needs to be undertaken in reverse.

Charities Services require that an officer complete a deregistration form which can be accessed on the online account of that charity.

The Companies Office provides that a board can apply to be dissolved by the Registrar by confirming:

  1. The board is no longer carrying on its operations.
  2. All liabilities (debts) of the board have been discharged/paid off.
  3. All surplus assets (after payment of liabilities) have been distributed.

Form CT5 can be used to do this and it is accessible here: http://www.societies.govt.nz/cms/customer-support/forms-and-fees/charitable-trusts-forms/form-ct5-request-to-dissolve-a-charitable-trust-pdf

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you.

Steven Moe
stevenmoe@parryfield.com

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions.
Copyright © Parry Field Lawyers 2017.

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