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partnerships:azp:constit [2017/06/12 10:20]
partnerships:azp:constit [2017/06/12 10:20] (current)
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 +# Constitution
 +
 +Development Trusts need a legal and management structure which balances
 +the two elements of their work: on the one hand carrying out a range of
 +economically,​ socially or environmentally useful projects, on the other
 +generating income to sustain their operations
 +
 +As such, Trusts have to be small businesses which also do unprofitable
 +work. They have to be independent and entrepreneurial - yet able to call
 +upon charities and sponsors for support not available to the private
 +sector.
 +
 +Development trusts have been defined as:
 +
 +Independent,​ not-for-profit organisations which take action to renew an
 +area physically, socially and in spirit. They bring together the public,
 +private and voluntary sectors, and obtain financial and other resources
 +from a wide range of organisations and individuals. They encourage
 +substantial involvement by local people and aim to sustain their
 +operations at least in part by generating revenue. (Creating Development
 +Trusts, HMSO, 1988).
 +
 +The structure most Trusts adopt is that of a company which does not
 +distribute profits - known as a company limited by guarantee - which may
 +also be able to achieve charitable status. Some Trusts have an
 +associated trading company in addition, if they are a charity and their
 +income generating would jeopardise their charitable status.
 +
 +Strictly speaking, there is no particular significance in the use of the
 +term Trust in this instance. It is a convenient shorthand for a
 +non-profit distributing organisation with wide-ranging objectives; it
 +does not signify some particular organisational model.
 +
 +The company limited by guarantee
 +--------------------------------
 +
 +This form of company is similar in some ways to a conventional company
 +limited by shares. Its operations are governed by the Company Acts, and
 +it has a Board of Directors.
 +
 +However, instead of shareholders it has members, and instead of buying
 +shares and receiving dividends they offer a guarantee - usually a
 +nominal £1 - as the limit of their liability.
 +
 +Since there is also generally a provision that assets of the company can
 +only be passed to a similar company if it is wound up, there is no way
 +to distribute profits for private gain.
 +
 +Funders and supporters of the Trust can be sure that any surpluses are
 +either ploughed back into the company to meet its objectives, or
 +distributed for charitable purposes.
 +
 +Charitable status
 +-----------------
 +
 +Being a charity is a matter of status, not of organisational structure:
 +it is possible to secure charitable status for a number of different
 +structures. The issue is essentially whether the objectives of the
 +organisation are accepted as charitable by the Charity Commissioners,​
 +and it has an appropriate constitution. Because of its not-for-profit
 +nature, a company limited by guarantee with charitable objectives can
 +apply for charitable status. Among the advantages of charitable status
 +are:
 +
 +-   It presents an image of probity to other people and so helps to gain
 +    their support.
 +-   It opens up sources of funds. Generally charities will only give to
 +    charities, and other donors prefer to give to charities.
 +-   If there are any surpluses, a charity will not be charged
 +    corporation tax, while a non-charitable company limited by guarantee
 +    may be.
 +-   ​Political neutrality. Trustees must act in the best interests of the
 +    charity, and where people come from different organisations to sit
 +    on the Board of the Trust their responsibilities as Trustees can be
 +    used to persuade them out of a '​delegate'​ stance.
 +
 +Among disadvantages are:
 +
 +-   ​Limitation on trading unless in pursuit of objectives.
 +-   ​Charities should not campaign politically.
 +-   ​Obtaining charitable status can take some time.
 +
 +Members of the Trust
 +--------------------
 +
 +The precise rights and duties of members will depend upon the memorandum
 +and articles of association of the Trust - its constitution. These can
 +be drafted to allow organisations or individuals - or both - to be
 +members. Members can be given rights to elect the directors - or this
 +right can be restricted to a particular class of member, perhaps the
 +main sponsoring organisations. The structure of a company limited by
 +guarantee is highly flexible and can be tailored to the particular
 +circumstances of the Trust concerned.
 +
 +Responsibilities of the Board and Trustees
 +------------------------------------------
 +
 +The Board of directors of the Trust company take responsibility for the
 +actions of the Trust, but - provided they are not negligent - the
 +personal liability of the directors is limited to the extent of their
 +guarantee (usually £1). The directors usually concentrate on policy
 +issues and may delegate action to staff and/or sub-committees. In a
 +charitable company the Board of directors also act as Trustees of the
 +charity, and as such have additional responsibility to ensure Trust
 +funds are only used for its charitable purposes. Since Trusts are
 +action-oriented organisations where swift decision-making is important,
 +there is a strong case for limiting the size of the Board, preferably to
 +less than 12. Other interests can be invited to join sub-committees or
 +act as specialist advisers to the Trust. Generally the aim should be to
 +have only two layers of control - the directors and the staff. Don't
 +build too much complexity into the constitution - set up sub-committees
 +when they are needed. The relationship of the chair of the Board and the
 +senior member of staff (perhaps termed executive director) is crucial to
 +the success of a Trust. The chair is responsible for effective
 +decision-making by the Board, the executive director for servicing the
 +Board and management of staff. The two must be able to work closely
 +together.
 +
 +Representation on the Board
 +---------------------------
 +
 +Directors should be chosen for the benefits they can bring to the Trust
 +in terms of their contacts, personal skills and standing within the
 +community. They should be capable and committed individuals - not
 +committee time-servers. There is a case for having a range of different
 +skills represented on the Board - finance, project development,​
 +community involvement - so the Board can make a significant contribution
 +to the work of the Trust, not rubber-stamp staff proposals. The
 +consensus among those running existing Trusts is that it is wise to
 +avoid a majority of local authority officers or members on the Board, in
 +order to safeguard its independence. Legislation aimed at stopping local
 +authorities setting up subsidiaries does, in any case, prevent this in
 +most cases. There are restrictions on the level of control, through
 +representation or finance, which local authorities can have over Trusts
 +without incurring financial penalities. In order to maintain its
 +independence and control over its affairs the Trust should provide its
 +own secretarial and financial services.
 +
 +Trading companies
 +-----------------
 +
 +A charity should not trade unless it does so as a means of directly
 +achieving its objectives (for example, a workshop for the blind). For
 +this reason some Trusts set up parallel trading companies which can sell
 +products or services and covenant profits back to the Trust. If this is
 +done, it is important that the two are linked closely through joint
 +directorships to stop the trading company going its own way. A separate
 +company can also be used if there is to be an active campaigning arm, or
 +where some activities like job creation don't fit into the narrow limits
 +of what is legally charitable.
 +
 +Staff
 +-----
 +
 +In general a Trust needs one or more full-time paid staff to operate.
 +Once the Trust has a substantial work load, it will probably need more.
 +For example:
 +
 +-   An executive director who is in overall charge, developing policy
 +    with the Board, fund-raising,​ and representing the Trust to the
 +    world.
 +-   A project officer who may have specific professional skills.
 +-   An administrative assistant.
 +
 +Many Trusts also offer opportunities to volunteers to work on projects,
 +help in the office, produce publications or even run a shop if the Trust
 +has one.
 +
 +Legal advice
 +------------
 +
 +Setting up a Trust requires specialist legal expertise. It does not form
 +part of the day to day work of most solicitors in private practice or
 +the public sector, and consequently it is wise to use a solicitor
 +familiar with companies limited by guarantee and securing charitable
 +status. This will avoid delays in drafting an appropriate charitable
 +objects clause for the memorandum and articles, and considering options
 +on membership and voting rights. The Trust should also keep its legal
 +adviser in touch with any major problems which arise, in order to avoid
 +longer term crises.
 +
 +Checklist
 +---------
 +
 +The following are the main questions to be considered in drafting the
 +memorandum and articles - that is, the constitution - of a Development
 +Trust. They are intended only as a guide to the issues to be covered,
 +since there are potentially large variations in the internal structure
 +which could be adopted. The issues raised should be discussed with a
 +solicitor specialising in companies limited by guarantee.
 +
 +### Name and status
 +
 +-   What is the name to be and is the word '​limited'​ to be omitted?
 +-   Is it intended to apply for charitable status?
 +
 +### Objects and powers
 +
 +-   What are the objects?
 +-   Is there any geographically defined beneficial area for the objects
 +    and if so is it narrowly or broadly defined?
 +-   Are there any special additional powers needed in addition to the
 +    usual?
 +
 +### Membership
 +
 +-   Is membership open to all living or working in the '​beneficial area'
 +    .
 +-   Does the Board have a discretion to refuse membership?
 +-   Is there to be any provision for junior members, group members, and
 +    any special definition of group members?
 +-   When is membership terminated: automatically on moving out of the
 +    district, on arrears of subscription,​ any other?
 +-   Does the Board have powers to end membership on its own or only
 +    suspend with appeal to a general meeting?
 +
 +### The Board
 +
 +-   What is the composition of the Board?
 +-   What is the Board of Directors to be called e.g. management
 +    committee, council, etc?
 +-   Is there any restriction on the normal full powers of the Board,
 +    e.g. limit on borrowing?
 +-   Is rotation on Board annual/​bi-annual/​ one third retiring each year?
 +-   Can the Board co-opt additional members and if so how many?
 +-   Can the Board remove any member, e.g. for failure to attend meetings
 +    regularly?
 +-   What are the individual Board officers, e.g. Chair, Secretary,
 +    Treasurer?
 +-   Are Board officers elected by the Annual General Meeting or by the
 +    first meeting of the Board following the AGM?
 +-   What is the Board quorum?
 +-   Does the chair have a casting vote?
 +
 +### Meetings
 +
 +-   Is the quorum for general meetings a fixed number or percentage of
 +    membership?
 +-   Does the chair have a casting vote?
 +-   Do employees get notice and minutes?
 +-   May employees attend meetings?
 +-   Who other than members and auditors gets notice of General Meetings?
 +
 +### Dissolution
 +
 +-   Are there any special rules for passing of assets on dissolution?​
 +
 +© David Wilcox <​david@partnerships.org.uk>​. Tel +44 (0)1273 677377.
 +Fax: +44 (0)1273 677379. These information sheets may be freely
 +distributed with this attribution,​ but not republished as a whole.
 +[Partnerships Online](../​index) : [The Guide to Development Trusts
 +and Partnerships](../​pguide/​index):​ [other
 +sheets](../​pguide/​sheets)
 +
  
partnerships/azp/constit.txt · Last modified: 2017/06/12 10:20 (external edit)