Transcript Document

Charitable
Incorporated
Organisations
Alice Faure Walker
February 2013
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Background
Pros and cons
Setting up a CIO
Running a CIO
Converting to a CIO
Case studies
History/background to the CIO
What is the CIO?
• A new incorporated legal form
designed especially for charities
Why was it needed?
Legal forms for charities
• Unincorporated
– Trust
– Unincorporated association
• Incorporated
– Charitable company limited by guarantee
– Industrial and Provident Society
Why an incorporated legal form?
• Legal identity
• Limited liability for trustees
BUT
• More administration (and regulation)
Problems with the charitable company limited by guarantee
• Dual regulation
– Companies House
– Charity Commission
• Company law
– Unsuitable for charities?
– Assumes that members have a financial interest
How could this be improved?
• Private action public benefit, Cabinet Office
Strategy Unit 2001/2002
– A new incorporated legal form just for
charities, with a single regulator
• Draft Charities Bill 2004
• Charities Act 2006
• Relevant provisions and regulations in force 2
January 2013
Compare with a charitable CLG
• Pros
• Cons
• Differences
Compare with a charitable CLG
• Pros
– Single Regulator
– No company law
• No reporting to Companies House (annual and event driven)
• Less risk of fines and offences
• More suitable regime?
– Tailored especially for charities
– Receipts and payments accounts for smaller charities (with a
statement about outstanding guarantees and charged debts)
– Lower costs
• Currently no registration or filing fees
– No income threshold for registration
• From January 2014 CIOs may register even if their annual
income is below £5,000
Compare with a charitable CLG
• Cons
– New and untested
– Gaps in the law
– No Register of Charges – may deter lenders
– Not formed until registration
– Changes to constitution not made until registered with
Commission
– Dissolved if ceases to be a charity - within three months
– Not available for exempt charities (eg academies)
Compare with a charitable CLG
• Differences
– Members have fewer rights
• Rights to amend, approve transfer/amalgamation with
another CIO, dissolve/wind up
• No automatic rights to: accounts; call meetings;
circulate resolutions; appoint proxies; remove the
board
– Members’ duty
• Members of a CIO have an express duty to exercise
their powers in a way which they believe in good faith
would be most likely to further the purposes of the CIO
– Privacy
• Broadly speaking, only the members and trustees may
inspect the register of members of a CIO
Compare with a charitable CLG
• Differences
– Electronic communications
• Company members must give express individual consent to
email communications: a CIO’s constitution may provide that
supplying an email address to a CIO acts as deemed consent
– Conflicts of interest
• CIO regime is more restrictive
– Charity trustees may not benefit personally unless made
prior disclosure to all trustees
– Charity trustees may not take part in a trustees’ or
members’ decision if they would benefit (what if they would
all benefit eg membership fees or trustee indemnity
insurance?)
Compare with a charitable CLG
• Minor differences
– Majorities for written resolutions
• CIO rules require unanimity: company law requires a similar
level of majority to a resolution passed at a meeting (e.g. 50%
or 75%)
– Flexibility to change legal form in future
• Companies will be able to convert to CIO (when relevant
legislation comes into force): no framework for CIO to convert
to a company
– Chair’s casting vote
• No casting vote at members’ meetings for post October 2007
companies: CIOs can include a casting vote
Compare with a charitable CLG
• More minor differences
– Consensus voting
• CIO regime allows the constitution to provide for this
at trustees’ and members’ meetings
– Statutory duty of care for trustees of CIO
• Still a two tier structure!
Charity law
• The usual rules of charity law apply to a CIO e.g:
– Public benefit
– Restrictions on non-primary purpose trading
– Restrictions on campaigning
– Restrictions on trustee benefit
• Guidance on accounting requirements is available at
www.charitycommission.gov.uk/Charity_requirements_guidance/Acco
unting_and_reporting
Setting up a CIO
• Documents you will need
– Charity Commission application form
– Declaration for trustees
– Constitution
Setting up a CIO – constitution
• CIO constitution
– Charity Commission model
• No power to remove trustees in foundation
model
• Conflict of interest provisions may cause
problems?
– Bespoke constitution
• Foundation vs Association model
– The role of the membership
Setting up a CIO – constitution
Key elements:
• Name
– Charity Commission may refuse to register on account of
name
• Principal office
– Physical place
• Objects
• Powers
– A CIO may do anything which is calculated to further its
purposes or is conducive or incidental to doing so. May
wish to include express powers.
Setting up a CIO – constitution
Key elements:
• Not for profit
• Trustee benefit
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Restrictions
• Members’ guarantee
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No guarantee or nominal amount
Setting up a CIO – constitution
Key elements:
• Members
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Appointment
• Who will they be?
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Removal
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Taking decisions
• Meetings
• Decisions outside a meeting
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Electronic communications
Setting up a CIO – constitution
• Trustees
– Eligibility
– Appointment
• How are they appointed?
• Term of office
– Removal
– Decision-making
• Registers and record keeping
• Amendment
• Dissolution
Setting up a CIO - Timetable
• When will the Charity Commission accept applications?
- Currently - new charities with income over £5,000
- From 1 March – existing unincorporated charities with income over
£250,000
- From 1 May – existing unincorporated charities with income over
£100,000
- From 1 July – existing unincorporated charities with income over
£25,000
- From 1 October – existing unincorporated charities with income
over £5,000
- From 1 January 2014 – new charities and existing unincorporated
charities regardless of income level
Setting up a CIO
• Procedure
– File application with Charity Commission
– Wait!
Running a CIO
• Meetings
• Trustees’ meetings
– Who can call a meeting?
– Notice period
• How is notice given?
Running a CIO
• Trustees’ meetings
– Procedure
• Chair
• Quorum
• Voting
• Remote attendance
• Conflicts of interest
– Disclosure
– Not vote?
Running a CIO
• Trustees’ meetings
– Decisions outside meetings
• Written
• Email
• Consensus decision-making?
• Delegation
Running a CIO
• Member’s meetings
– Which decisions are made by members?
• Appointment/removal of trustees?
• Amendment of constitution
• Transfer to/amalgamation with another CIO
• Dissolution and winding up
Running a CIO
• Members’ meetings
– Who calls?
– Notice period
• Use of email/websites to give notice
– Procedure
• Quorum
• Chair
• Voting
• Conflicts of interest
• Postal or email voting
• Proxies
Running a CIO
• Meetings
– Decisions outside meetings
• Majority required?
– Some notice periods and majorities prescribed by the
CIO legislation
• eg amendments to constitution require 14 days
notice and 75% majority
Running a CIO
• Registers
– Trustees
• Required
– Trustee interests
• Good practice
– Members
• Required
– Who can inspect?
Running a CIO
• Records
– Minutes
• Publicity requirements
– Name and status to be disclosed on business documents,
emails, website etc
– Offence for failure to comply
• Charity Commission
– Accounts within 10 months of year end
– Details of changes in particulars which appear on the
register – file within 28 days
– Constitutional changes – file within 15 days
• Dissolution
Converting from an existing unincorporated form
Reminder of the reasons for incorporation
• Pros
– Limited liability
– Note the limited scope of trustee indemnity insurance (see
“Duties of Charity Trustees” available at
www.bwbllp.com/knowledge/2012/08/09/resources-fortrustees)
– Legal identity
– Succession planning
• Cons
– Upheaval
– Greater administrative burden
– Privacy
Converting from an existing unincorporated form
Process
• Create a new legal vehicle
– Registration with the Charity Commission
• Transfer of assets and liabilities etc
– List assets, liabilities, registrations, contracts (eg staff, bank
accounts)
– Decide on mechanism for transfer
• Transfer document
• Obtain third party agreement where required (eg funding con
tracts, grants)
• Change registrations (eg Ofsted, Information Commissioner)
− Pensions
− Permanent endowment
Converting from an existing unincorporated form
Wind up existing charity
• Register of mergers?
Conversion of company limited by guarantee to a CIO
• Why would you?
• Not yet available – 2014
• No change of legal identity
Case studies
More Information
• Charity Commission
www.charity_commission.gov.uk/Start_up_a_charity/Do_I_n
eed_to_register/CIOs
• BWB
www.bwbllp.com
Contact
Alice Faure Walker
[email protected]
Bates Wells & Braithwaite London LLP
2-6 Cannon Street
London EC2V 6YH
www.bwbllp.com
Tel: 020 7551 7777