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To incorporate or not to incorporate

Doug Langford outlines some useful guidelines around incorporation of church activities.

I have been asked on a number of occasions whether a particular activity should be set up within an incorporated organisation or not. The answer is generally that it can be set up within the prescribed Church functions but this is not always obvious.

The Church is well organised. The procedures are well documented. The Book of Order is quite prescriptive.
The structures are quite implicit.

Ultimately the responsibility for all of the activities of the Parish falls under the governance of the church council (the session or board or managers). The church council cannot abrogate their responsibilities and have to accept the ultimate responsibility for all matters that are carried out in the name of the parish.

Yes, the church council can delegate specific tasks to a group or committee and they can appoint persons to that group. Equally they can appoint replacement persons. The committee can be set up to complete a particular task or to maintain a particular function. The role of the committee can be changed as circumstances change – it can have a stable mandate or one that is changed to suit the emerging situation.

The circumstances that I have outlined are typical of the life of a committee. The members of the committee have one objective and that is to serve the church council that has appointed them. I shall call this the parish model.

The alternative is to set up a trust and formally create a separate entity, normally by way of incorporation. This can be done also by the setting up of a company and, where it is for a function of the church, set it up in such a way that it has charitable status. For the purposes of this discussion, we shall simply treat either type as one and the same thing (although there are differences between them).

Where do the differences between the parish model and separate trusts lie? A separate entity is required to have a constitution – a set of rules by which it operates. The constitution will normally set down the procedure for the appointment and retirement of trustees and the term of their appointments. There is generally more control in a situation where the parish appoints the members of the trust for a finite term. However, some appointments are not for any stated term and do not come up for review. Because trustees are required to use their judgment in all situations and effectively cannot be directed how to act, situations can arise where the trustees act in a way that is prejudicial to the parish. Is this really desirable? I think not.

The situation in respect of land holdings is somewhat different from most trustee functions. Also generally the holding of land is a long-term function and it is not generally convenient to keep changing the trustees for land. Because trusts cannot be registered in respect of land, land has to be registered in a way that requires formal registration. The Presbyterian Church Property Act 1885 set up the mechanism for the ownership of Church property and applies to land situated north of the Waitaki River. The Otago Foundation Trust Board has similar functions in respect of land situated south of the Waitaki River. The consequence of registering land in the name of personal trustees is that the trustees change over time and it can be both very time consuming and expensive to update the trusteeship when dealing in the land is contemplated and the registered trustees have moved out of the area or have died. So why would you place the church in this situation?

I have seen some situations where it is claimed that a separate entity is required. This has been cited in respect of a preschool where funding is provided by the Ministry of Education. My experience is that this claim has arisen as a result of a misunderstanding of the structure of the parish and when the structure has been explained, the Ministry of Education has accepted the parish model as fully satisfactory and has funded it accordingly.

The advent of the registration requirements of the Charities Commission has brought yet a further perspective to these issues. The model that the Presbyterian Church has adopted is one where the registration of the presbytery is all-inclusive and extends to cover all of the activities of each of the parishes listed by them. It follows that separately incorporated activities require their own registration – simply another responsibility that is avoided when the parish model is used.

Therefore on balance, the parish model has proven to be robust. It places the responsibility firmly and fairly with the church council, precisely where it should be and in a way that ensures that the church council remains in control.

I cannot see any good reason why the parish model should not be the preferred model in almost every situation.