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Charity

General characteristics

An organisation that exists to benefit the public, or a section of the public that is demonstrably in need, through the pursuit of certain objectives that the law recognises as charitable. These objectives are derived from the preamble to a repealed statute of 1601, augmented by court rulings and a handful of statutes since.At present legally charitable purposes fall within the "four heads of charity", i.e: the advancement of education; the relief of poverty and need; the advancement of religion; and other purposes beneficial to the community, including public safety, the promotion of racial harmony, the preservation of the environment, providing recreation and leisure facilities, and urban and rural regeneration in areas of need.The Government is currently proposing a major up-dating of the list of purposes that are charitable in law.

Charities receive some fiscal and other benefits from the state and may have an advantage in raising funds from certain sources. However, they are subject to the jurisdiction of the courts and are subject to significant restrictions on what they are permitted to do and how they may expend their resources.

Ownership:Members own the Charity. Charities must be structured in a way that ensures that resources are directed to the welfare of beneficiaries, not members of the organisation. Consequently "self-help" charities can be problematic. In this respect they are governed by trust law, as all charities are public trusts.

Examples of use

All manner of organisations are charities, from public schools to village halls, animal welfare organisations to relief agencies working in developing countries.Many charities have subsidiary trading companies to engage in commercial activities and channel the profits back to the parent charity.

Legal forms used

A charity must first adopt one of the standard legal forms; charitable status is an additional badge of credibility. Trusts, associations, and companies limited by guarantee may apply to the Charity Commission to become registered charities (England and Wales only). Societies for the benefit of the community may apply to the Inland Revenue to be recognised as exempt charities.A charity's trading subsidiary will be a company (limited either by guarantee or by shares).

Profit distribution

None. (A trading subsidiary will be able to pass profits over to its parent charity.)

Participation issues

Charities are required to be responsive to the needs of their beneficiaries, and to the wishes of those who have donated funds and resources to the charity. However, if a charity is also a membership organisation, those members will have certain constitutional rights. Thus participative issues in a charity can be relatively complex.

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