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Charity incorporation

An incorporated charity has a legal structure, usually a company limited by guarantee in Northern Ireland. This means the charity is a separate legal entity and can enter into contracts, own property, and take on responsibilities in its own name.

In contrast, an unincorporated charity has no legal personality. Trustees must act on its behalf and can be personally liable if something goes wrong.

As a charity grows, becoming incorporated can help protect trustees from personal liability and make it easier to manage contracts and assets -  if it's in the charity’s best interest.

Key considerations

  • Unincorporated

    Incorporated

    No legal personality

    One corporate legal personality

    Organisation cannot enter into contracts in own name/ on own behalf

    Can enter into contracts in own capacity limiting trustee exposure/liability

    Not eligible for certain funding

    Benefit from certain funding not available to unincorporated charities

    Trustees enter contracts and are personally liable

    The corporate vehicle is liable

    Simpler structure with less bureaucracy, e.g. association or trust

    More complex structure with other regulators / additional reporting requirements, for example reports to Companies House

  • Charity trustees might choose to incorporate for several reasons:

    • Some funders require it.
    • The charity owns property, manages assets, or employs staff  - which may be easier to manage with a corporate structure.
    • Incorporation protects trustees from personal liability.

  • Incorporating a charity isn’t just setting up a company. It is a legal process that needs careful planning. Trustees must:

    • act in the charity’s best interests.
    • follow charity law and the charity’s governing document.

    If the charity trustees decide to incorporate the charity, important steps will have to be followed.

    1. Set up a new company with similar charitable aims.
    2. Register the new company with the Commission - it gets a new charity number.
    3. Transfer assets from the old charity to the new one - this may need Commission approval.
    4. Close the old charity once assets are transferred - notify the Commission.
    5. Follow company law as well as charity law.
    6. Meet any reporting and accounting rules which may apply.

     

    Trustees should get professional legal advice and support before starting.

  • Transferring assets

    If the charity’s governing document doesn’t allow asset transfers, trustees must apply to the Commission for permission under Section 46 of the Charities Act (Northern Ireland) 2008.

    If the document bans transfers outright, the Commission may need to approve a formal change.

    Trustees and conflicts of interest

    Often, trustees of the old charity become directors of the new company. This can create conflicts, such as:

    • Transferring assets to a company they now run.
    • Granting themselves legal protection.

    To manage this:

    • Use different people as directors.
    • Keep conflicted trustees in the minority.
    • If conflicts can’t be managed, apply to the Commission for approval.

    Transactions involving assets

    If trustees/directors are the same people, and assets like land or buildings are being transferred, the Commission’s written consent is usually needed before members can approve the transaction.

  • Because incorporation involves legal steps and possible conflicts, trustees are encouraged to:

    • Contact a helper group.
    • Get independent legal advice.
    • Follow all guidance carefully to avoid legal issues or challenges.

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