The legal and governance structure of your charity or social enterprise can affect the legal implications on directors/trustees, employees and the organisation itself.
It is vital for charities and social enterprises to have the right legal and governance structure if they are to achieve their objectives effectively.
We can help you to understand your options and determine the right structure for your organisation.
Should we incorporate?
Many existing charities are unincorporated charities, yet they own property, employ people, enter into contracts and provide services to members of the public, which opens the organisation up to the risk of a claim being made against them by a third party. The legal status and structure of your charity will result in varying outcomes and liabilities of any such action.
Where a charity is unincorporated, it is not a legal entity in its own right and in these cases, liability in respect of any claim will rest with the trustees of the charity personally, and if the charity has a membership, possibly also the members as well. These risks can, to an extent, be mitigated by insurance - however they cannot be removed entirely and there will be situations in which insurance will not be available.
Unincorporated status can also lead to problems regarding property ownership, and is sometimes an impediment to trustee recruitment.
Considering your options
There is a very wide of range of incorporated legal structures potentially available to charities and social enterprises, all with different features and implications, including:
Charity structures:
- Charitable Incorporated Organisation (CIOs)
- Charitable Company Limited by Guarantee (CLG)
- Charitable Community Benefit Society (CCBS)
Non-charitable structures:
- Community Interest Company (CIC)
- Company limited by shares or guarantee
- Community Benefit Society (CBS)
- Co-operative Society
Our specialist team has extensive experience of working with organisations using each of these structures.
Becoming an incorporated organisation, such as a Charitable Incorporated Organisation (CIO), provides the trustees of an unincorporated charity with protection from claims by third parties against the charity by, in most situations, transferring liability to the new entity. They provide corporate status with the Charity Commission acting as a single regulator and are governed by charity law. CIOs are intended to be simpler to administer compared to charities that are companies limited by guarantee, which are subject to both company law and charity law, and therefore need to comply with both the Charity Commission and Companies House requirements.
Charitable companies limited by guarantee are now able to apply to become CIOs. The conversion process is intended to be quick and straightforward, and allows the existing charity registration number to be retained. However, in our experience the process is not always completely straightforward, as in some cases amendment to the existing charity’s governing document is needed first to align with a CIO constitution. It is also now possible for CICs to convert to charity status as a charitable company or a CIO and we have recently helped a number of CICs convers successfully to charity status.
How can we help?
We can advise on all aspects of the incorporation process, including:
- Advising on the most appropriate legal and governance structure
- Preparing the new constitution/governing document
- Dealing with formation and registration of the new incorporated entity
- Dealing with the transfer of assets, liabilities, staff and contracts to the new entity
- Dealing with closure and dissolution of the ‘old’ unincorporated organisation.
Why choose Tozers?
We are one of very few law firms in the South West with genuine specialist, in depth, charity law. Tozers is recognised as a leading firm for charity law expertise by the independent Legal 500 and Chambers legal directories.Our charity and social enterprise lawyers are specialists, focussed on this sector. We work with you to understand your needs and desired goals, helping deliver them efficiently.
Our team is led by James Evans, who is one of very few senior charity law specialist lawyers based west of Bristol working exclusively with charities, social enterprises, education institutions and other ‘social purpose’ organisations.
Our team has a wealth of knowledge in relation to charity law and regularly speak at seminars and conferences and well as hosting our own networking events.