Winding up a charity/Te Whakamutu Kaupapa
A registered charity may wind-up at any stage. This means that the charity will discontinue their activities and cease to exist. The process of winding up will be different for each charity depending on its legal structure and rules.
There are a number of reasons a charity may wind-up, for example:
- the purposes are no longer relevant or services are no longer required
- the charity is not financially sustainable
- a lack of members or support
- the charity is becoming a company or changing their legal status, for example, from a Trust to a Society
- merging with another charity
- the charity has been put into liquidation
- they simply wish to wind-up.
How does a charity wind up?
Once the decision has been made to wind up, the charity will need to settle all their finances, collect any credits owed and pay all debts.
It is also very important to carefully read the charity’s rules to see if it contains a 'wind-up clause'. If the charity has investment, cash, or land assets, they will need to follow the wind-up clause or ensure assets are used for exclusively charitable purposes. One way to do this is to transfer assets to a Registered Charity.
A registered charity must let Charities Services know they are going to wind up so the charity can be removed from the Register. You can deregister by logging on to your account(external link), and clicking on the “Deregister” tab on your charity’s dashboard.
If the charity is incorporated either as a Charitable Trust, Incorporated Society, or a Company, the Companies Office will need to be advised. You will also cease to qualify for some tax exemptions and benefits. Contact Inland Revenue if you are unsure of your tax obligations.
Changing legal structure
A charity cannot simply change from one legal structure to another. A new organisation would need to be set up and go through the application process to become a registered charity. At this point the original charity could wind up and assets could be transferred to the new registered charity. Remember, it is important to carefully read your charity’s rules and follow the wind-up clause, if included.
For more information on the deregistration process click here.