The purposes in an organisation's rules are really important and this page explains why broadly worded purposes may not be acceptable.
The written purposes of an organisation, as set out in its rules, are important in that they determine the type of activities that the organisation may carry out. These rules will bind not only the people currently involved in the organisation but the people who are involved in the future. Having very clear purposes is important so that the charitable objects of an organisation are not lost in the future.
Having a broad purpose that can be interpreted in a number of different ways can be problematic if one of the ways that the purpose could be interpreted is not charitable. We have included some examples below and note that the ideas and logic applied in these examples applies equally to other broad purposes.
Example: Promote Social Wellbeing
If an organisation had a purpose to “promote social wellbeing” this could be interpreted in many ways. One organisation might use this purpose to mean helping the elderly from becoming isolated from the community. This is a charitable purpose. Another organisation might use this purpose to mean promoting social events or promoting friendship or fellowship. These are not charitable purposes (while they may be worthy purposes, the promotion of entertainment or friendship are not charitable). This is why purposes should be clear that they are limited to charitable purposes, for example “to promote social inclusion for elderly people at risk of isolation”.
Example: Raise the Standard of Life
A purpose that is not exclusively charitable is “to raise the standard of life”. An organisation could undertake many activities in the name of raising the standard of life, some of these might advance charitable purposes and some might not. One organisation might use this purpose to mean helping families in poverty by providing them with fruit and vegetables and healthy cooking classes. This is a charitable purpose of advancement of health and relief of poverty. Another organisation might use this purpose to mean promoting businesses in a community so that these businesses will grow and bring money and jobs to the community. This is unlikely to be a charitable purpose unless the community in question is deprived relative to the rest of New Zealand. This is because, unless the community is deprived, the private benefit to the business owners is unlikely to be incidental to the public benefit to the community, i.e. there is too much private benefit. The first organisation could instead use an exclusively charitable purpose such as “to relieve poverty and advance health for local families”.
Example: Catch all purposes
To promote the education, spiritual, health, economic and social development of the community. This purpose is not exclusively charitable. The promotion of health and education are charitable, and the promotion of spiritual development may be charitable, but the promotion of social and economic development is too broad to be considered charitable at law.
It is common for organisations to include a long list of possible areas that they may wish to cover in the future. This is especially true for organisations starting out and/or those representing communities such as iwi or hapū. A purpose should be written in a way that is expressly charitable and describes how the organisation achieves the purpose. For example, to promote education by providing classes in Te Reo Māori.
Broad purposes that are expressly charitable will be accepted but organisations will need to provide detailed information about the intended activities to meet registration requirements and keep us up to date if those activities substantially change after registration.
Many organisations choose to have a “principles” section in their rules. This section often includes more broad terms that articulate the way that the organisation will carry out its purposes. For example “honouring the Treaty of Waitangi” or “contributing to a fair and equal society”. This is acceptable as long as one of the purposes of the organisation is not to carry out the principles.