Charities are subject to increasing regulatory control and therefore require specialist legal and commercial advice to ensure full compliance.
Setting Up a Charity
If you wish to set up a charity you must apply to register it with the Charity Commission. Charities are governed by strict rules such as:
- Any paid employees must be authorised
- A charity must provide publically accessible information regarding its finances
- Charities must be open, inclusive and serve all or at least a sufficient proportion of the general public If you wish to operate a charity by way of a company, the Registrar of Companies will require further steps to be undertaken in view of the company’s status as a charity which our lawyers can advise you on.
The Structure of a Charity
There are four main types of platforms used to organise the structure of a charity and the responsibilities and liabilities of the members. They are:
- Unincorporated Bodies/Associations
- Companies limited by guarantee
- Charitable Incorporated Organisations (CIO)
- Community Interest Company (CIC)
Companies Limited by Guarantee
If you decide to form a company limited by guarantee, then the charitable company will become a separate legal entity from its members. Rather than purchase shares in the company, the members of the charity will agree to pay a limited sum of money (a guarantee) if the company goes into liquidation, thereby limiting each members liability to the guaranteed amount.
Charitable Incorporated Organisations (CIO)
Governed by the Charities Act 2011, Charitable Incorporated Organisations (CIOs) are a new form of charity structure. Much like forming a company limited by guarantee, a CIO limits the responsibility of the charity’s members for any debt and liabilities the charity may obtain. It is envisaged that charities formed by a company will be eventually phased out and replaced with CIOs. The key difference between a CIO and a company is a CIO does not need to be registered with the Companies House and is therefore not required to file annual accounts.
Community Interest Company (CIC)
A Community Interest Company (CIC) is a platform that is suitable for organisations that operate purely for the benefit of society and reinvest all the proceeds of the organisation back into the community. A CIC must sign an “asset lock” which ensures that all assets that belong to the organisation are used to benefit the community and/or the organisation’s activities. A CIC has the same operative structure as any other limited company, for example, they may have a paid or unpaid director and file annual accounts that are available to the public.
At Saracens Solicitors we can assist you in choosing the right platform on which to structure your charitable organisation. By selecting the right structure you will be able to manage your charity in a way that can best serve the people or community it has been set up to benefit.
The Relationship between Trustees in
A trustee of a charity is a member of the board who make decisions, plans strategies and manages the business side of the organisation. To be a trustee you must be over the age of 18 years and be free of criminal convictions involving fraud or dishonesty.
In order to avoid disputes and manage workloads, it is vital that the duties and expectations of trustees are clearly set out. Saracens Solicitors can draft a bespoke constitution document suitable for your charity governing the relationship between the trustees. Alternatively, we can amend / update an existing constitution to bring this in line with the new companies’ legislation. Further, we can advise individual trustees on their duties owed to the charity itself.
The Trading of Goods and Services
by a Charity
In order for a charitable organisation to benefit people it generally needs to make money. Many charities accomplish this by selling goods in charity shops or purchasing of property and/or investments. However, there are strict laws concerning the involvement of charities in trade and investment, including conducting proper due diligence and risk assessments. Our commercial lawyers can help you navigate this often complex area of charity law and advise you with regards to effective tax planning.
Our team can also advise you on any fundraising or sponsorship agreements that the charity may enter into to generate revenue so you can be assured that your organisation is meeting its statutory compliance obligations with both the Charities Commission and the law surrounding companies.
Dissolving a Charity
If you are dissolving your charity you will need to take advice on your legal obligations in regard to managing the assets and liabilities during the dissolution and filling in the required forms correctly. Our experienced commercial lawyers can assist you with this and all other legal aspects of the dissolution procedure.
To talk to one of our lawyers about your charity or not for profit organisation please fill in the form to request a call back or phone us directly on 020 3588 3500.