Recently, I was talking with someone who wanted me to tell them if they had been conned as they had given money to what they thought was a charity, but turned out to be a private company. Or rather, a not-for-profit private company. They had checked, so they thought, but had mistaken a company number for a charity number.
What do these numbers mean? And does having only a company number mean that the donation hasn’t gone to a worthy cause?
When a charity registers with the Charity Commission it is given a number it’s Charity number. 1 When you see a charity number you can be assured that the Charity Commission has agreed that the purposes (Objects) of the organisation are entirely charitable. The organisation now has to provide a set of annual accounts, the trustees must write an annual report that details how the work of the charity has been for public benefit. The Charity Commission regulates the activities of the charity and how it is run.
To be a charity in England and Wales the organisation must satisfy the definition of a charity in the Charities Act
The Charities Act says that a ‘charity’ is an organisation which
- is established for charitable purposes only and
- is subject to the control of the High Court’s charity law jurisdiction
What if a group calls itself a charity, but doesn’t have a charity number?
Firstly, it is important to understand that many legal structures (a charity is of itself not a legal structure, but exactly what these are is beyond the scope of this short piece) cannot register with the Charity Commission until they reach an income threshold- currently £5,000 annual income. If the organisation has only charitable purposes, then in law it is a charity even if it does not refer to itself as such. There are innumerable small, unregistered charities in the UK that operate without ever reaching the income threshold that would allow them to register. They do amazing work in their communities.
The main thing that both registered and unregistered charities have in common is that they are run by volunteers- trustees. Trustees cannot be paid.
Some Charities are also registered limited companies. This means that they are registered with Companies House as well as the Charity Commission and have to file annual reports to both regulators. By becoming Charitable Companies, Charities can provide their trustees with limited liability and enter into contracts as a separate legal entity. They are still run by volunteer trustees, but some of these will also be directors of the limited company- they remain unpaid.
However, there are many organisations who do similar work to Charities and Charitable Companies, but that are not themselves a charity.
There are a growing number of Social Enterprises. These can come in many forms which I cannot go into detail with at the moment, but they can range from straightforward sole traders and partnerships, through to limited companies, co-ops and Community Interest Companies and more. A common aspect for all is that they are businesses that aim to make a profit, but also have a social purpose.
It is what a social enterprise does with its profit that makes them different to a mainstream business. A social enterprise will either reinvest that profit into the social side of the work that they do or donate that profit to create social change- sometimes both. Although generating income from trading in goods or services, many social enterprises will also fundraise by asking supporters for donations or even apply for grants in the same way as a charity. However, many forms of social enterprise are ineligible to apply for most grant funding and so may rely on trading and supporter donations.
Social Enterprise UK states that a social enterprise “must generate the majority (more than 50%) of their income through trade.”2
Just like with Charities, not all will have a company number. However, many will. If the social enterprise is a company limited by guarantee or by shares, they will be registered with and regulated by Companies House and have a company number. Co-ops and Community Benefit Societies will be registered with and regulated by the Financial Conduct Authority and have a registration number that can be checked on the Mutuals Register. 3
An increasingly popular form of social enterprise is a Community Interest Company (CIC). This is a company limited by Guarantee or by Shares registered with Companies House and also with the CIC regulator. The CIC regulator ensures that the company is operating in the Community Interest and the company has to provide an annual Community Interest Company Report to the regulator that can read on the CICs Companies House filings. It is, however, a very light touch regulator, especially when compared with the Charity Commission.
Unlike charities, which although they may have paid staff are ultimately run by a board of unpaid volunteer trustees, social enterprises can pay the people who run the business and so is popular with people who want to address a community need, but also earn an income at the same time. If limited by shares, they can also raise funds by issuing shares and pay dividends to shareholders.
Many social enterprises have chosen not to be a charity so that they can be more flexible, nimble, responsive, impactful and perhaps more political in their approach to a social need. No social enterprise should ever refer to itself as a charity or as charitable. If they do, they are at best being disingenuous- perhaps intentionally, but far more likely due to ignorance on the part of those running them.
Displaying Company and Charity information
If a charity is registered with the charity commission it must display its registered name and address on its website, in emails, promotional material, etc. most choose to also provide their charity number. Charitable companies are registered with Companies House as well as the Charity Commission and so file accounts to both regulators and have a company number as well as a charity number. Companies, including Community Interest Companies, must display the name, address and company number.
Being confident in our donation
If, like my friend, you wish to give money to a company claiming a social purpose, remember you can check up on their activities on the Companies House website.4 As we have seen, just because they are a company does not mean that anyone is pulling a fast one. There are many companies doing great community work. If you support the cause and wish to give, you can confidently support a company just as much as a charity. But if you are concerned, find out more about them before you give- check on the Charity Commission website for information about charities, on the mutuals register for co-ops and CBS and on the Companies House website for information on companies, including CICs.
Know who is regulating the organisation you are giving to. Make use of the Charity, Mutual or Company number to give you confidence in the organisation you are giving. And if they don’t have a number, at least now you may have some idea why that might be.