With recent changes in the law surrounding company formation, and the laws having to do with obtaining charitable status for a company, registering a charity in Jamaica looks a lot different than it did a year or so ago. This article will provide a high-level overview of forming a company to be used as a charity, and the process for obtaining charitable status.
Company Limited by Guarantee
One of the most common legal vehicles used to form a charity, is a company limited by guarantee not having a share capital. In this type of company, there are no shareholders, but rather, members, who agree to guarantee the liabilities of the company up to a limited amount.
The process for incorporating a company limited by guarantee in Jamaica is fairly simple, and looks, in many respects, like incorporating a company limited by shares. The process involves the completion of three (3) sets of documents being:
- 1. Business Registration Form (BRF);
- 2. Form 1B- Articles of Incorporation (Form 1B); and
- 3. Beneficial Ownership Return Form B (BOR Form B)(the latest addition since 2023).
The BRF will capture information including the name of the company, the location of its registered address, the nature of the business, details on the directors, and the secretary’s details. The Form 1B, will garner further information not captured by the BFR, including the exact purpose for which the company is formed, restrictions on the business the company can carry on, the monetary limit of the members’ liability/guarantee, maximum or minimum number of directors, the number of proposed members on incorporation, and details of those members (name, address, nationality occupation). Attached to the Form 1B, the company will generally include schedules, which set out the constitution of the company, including provisions on meetings, quorum, voting, directors’ duties, and what happens to the assets of the company on winding up (very important for charities), among other things. If not most important for charities, however, the schedules must also speak to the charitable (overwhelmingly so) objects and purposes of the company. The BOR B, the newest form for the incorporation process, will request details on the beneficial owners of the interest in the company, and these may be the members themselves, or other persons for whom the members are holding the beneficial interest.
Once these documents are completed, submitted to the Companies Office of Jamaica (”COJ”), approved, and the company is incorporated, the company can then move to the next step, which is applying for charitable status through the Department of Cooperative and Friendly Societies (“DCFS”).
Applying for charitable status
Charity applications are guided by the Charities Act, processed through the DCFS, and require the following documentation:
- 1. The Charities Application Form 1 (requests details including charitable purpose and reason for applying, particulars of board members, existing donors, and sources of funding);
- 2. Completed and certified/notarized fit and proper questionnaires for all directors and the company secretary, along with passport-sized photos;
- 3. Certified (by the COJ) copies of the company’s incorporation documents (Certificate of Incorporation and Articles of Incorporation with the relevant schedules);
- 4. A detailed plan of the charitable activities to be carried out, or the plan for the disbursement of donor funds;
- 5. Prior year financials (would be applicable if the charity application is not made within a year of incorporation);
- 6. A copy of the administrative and operations management policies and procedures of the charity; and
- 7. Application fee.
The detailed plan, copy of the policies, and application fee, are fairly new features of the charity application process.
Once all this documentation is submitted to the DCFS, the application will be processed. One feature of the processing of the application, however, is that the DCFS must obtain a “no objection” to the granting of charitable status from the Tax Administration Jamaica (“TAJ”). Why is this? Charitable status affords the charity certain fiscal incentives, including exemptions in taxes to be paid to the government for activities related to the charity. Consequently, the TAJ will examine the application and supporting documents to essentially evaluate whether the activities are substantially charitable and legitimate to warrant the receipt of the relevant incentives. Where the TAJ is satisfied as to the charitable purpose, they will issue a “no objection” to the DCFS, who will continue processing the application. If the TAJ is not satisfied, they will issue a requisition highlighting the reasons for the objection, and the changes required to be made. Upon receiving this requisition, within the specified time, the company can either challenge the TAJ’s objection, or make the changes, which usually involves amending the company’s Articles of Incorporation (and more specifically the schedules).
Once the TAJ issues the “no objection”, and the DCFS continues to process the application, and finds all documentation in order, the DCFS will produce a “Certificate of Registered Charitable Organisation”, which will set out the tax relief that the charity is entitled to benefit from, including relief under the Customs Act, Income Tax Act, General Consumption Tax Act, and Transfer Tax Act.
The process of forming a charity, and applying for registration as a charitable organisation, is an intricate one, and often requires a fairly considerable amount of time to get all the documentation right. Should you wish to form a charity, you should consult an experienced attorney-at-law to assist with the process, and explain the organisation’s obligations beyond registration.
Lisa Rhooms is the Managing Partner at Grant, Henry & Rhooms, and the head of the firm’s Commercial Law Department. She may be contacted at lisa@ghrlegal.com or www.ghrlegal.com. This article is for general information purposes only and does not constitute legal advice. Should you wish to seek legal advice, you may schedule a free consultation with our offices.