Chapter 4 - Deregistration process

4.1 Section 32 of the Charities Act sets out the grounds for deregistration. Charities Services may deregister a charitable entity if:

• it is no longer “qualified for registration”;
• there has been a “significant or persistent failure” to comply with its obligations under the Charities Act or any other Act;
• there has been a “significant or persistent failure by any one or more of the officers of the entity to meet their obligations under the Charities Act;
• it has engaged in “serious wrongdoing”; or
• it has requested that it be deregistered.

4.2 However, deregistration will not happen without the entity being given the chance to have its say on the matter.
What is meant by “qualified for registration”?

4.3 A charity is no longer qualified for registration if it fails to meet any one of the requirements of registration specified in Chapter 2.
What is meant by “significant or persistent failure”?

4.4 A charity may be deregistered if there has been a “significant or persistent failure” by the entity, or one or more of its officers, or one or more of its collectors to meet its obligations under the Charities Act or any other Act.

4.5 The obligations specified in the Charities Act include the duty:

• of telephone and internet collectors to disclose the charity’s registration number when asked for it (section 39);
• to notify changes to the Charities Unit (section 40);
• to provide annual returns that include both a complete annual return form and financial accounts (section 41); and
• to assist Charities Services when it asks for information while carrying out its functions (section 51).

4.6 The obligations specified under any other Act may relate to matters that indicate a significant failure by an entity in its operation as a charity.

4.7 The most common reason for compliance action in relation to “significant or persistent failure” is the failure to file an annual return (annual return form and a set of financial accounts).

What is meant by engaged in “serious wrongdoing”?

4.8 Section 4(1) of the Charities Act 2005 defines “serious wrongdoing” as:

(a) unlawful or a corrupt use of the funds or resources of the entity;

(b) an act, omission, or course of conduct that constitutes a serious risk to the public interest in the orderly and appropriate conduct of the affairs of the entity;

(c) an act, omission, or course of conduct that constitutes an offence; or

(d) an act, omission, or course of conduct by a person that is oppressive, improperly discriminatory, or grossly negligent, or that constitutes gross mismanagement.

4.9 Charities Services considers that the types of activities that may be considered to be serious wrongdoing under section 4(1)(b) and (d) to include:

• persistent failure to keep proper financial records;
• filing financial reports that are largely inaccurate;
• inability to account for the way public donations are used;
• presenting largely inaccurate information to the public about the charity’s purpose or activities;
• money laundering;
• allowing funds to be used to assist illegal activities or terrorism;
• making or allowing private financial profit;
• persistently working outside the rules of the charity; or
• knowingly allowing an officer who does not qualify in terms of the Charities Act to remain as an officer, unless a waiver has been granted.

Notice of deregistration

4.10 Under section 33 of the Charities Act, Charities Services must give the entity notice in writing of its intention to remove it from the Register. The notice must include the reason and give the entity at least 20 working days after the date of the notice to reply with an objection. If Charities Services proceeds to deregister the entity, it will advise it in writing, fully explaining the decision.

4.11 A deregistration decision applies going forward. It is not possible to set an effective date of deregistration retrospectively.

4.12 The following details will be shown on the Register after an entity has been deregistered:

• the name of the charity and its registration number;
• the reason for deregistration; and
• the effective date of deregistration.

4.13 In all cases when a charity wishes to go back on the Register after it has been deregistered, it will need to follow the application process in full.

Deregistration – statistics

4.14 Since the Charities Register opened, 3,902 charities have been deregistered. The table below provides statistics on Charities Services’ deregistration decisions, as at November 2012.

4.15 Although the most common reason for deregistration is the failure to file an annual return, there are likely to be fewer instances of these types of deregistration in the future. Until recently, Charities Services automatically deregistered charities if they had failed to file one annual return.

4.16 Under a new approach, registered charities will be given more opportunity to file their annual returns. They will be served with two reminders before being issued a Notice including all of the relevant measures that might be taken if the annual return is not supplied. This would include the $200 administrative penalty, publication of a notice on the Register (or elsewhere) and, in cases of “significant or persistent failure” to comply with the Charities Act, deregistration. If at the expiry of that further time, an annual return is still not filed, the processes for each of the relevant measures can be implemented (such as the imposition of the administrative penalty or the issuance of the Notice of Intention to Remove).

4.17 In the next chapter we describe the tax consequences of deregistration.