town centre partnerships models and governance
TRANSCRIPT
Town Centre Partnerships –
Models and Governance
Legal considerations and incorporation
options
Overview
• Legal structures – what are the options?
• Company limited by guarantee
• Company limited by shares
• Community Interest Company (CIC)
• Scottish Charitable Incorporated Organisation (SCIO)
• Directors’ duties
• Charity trustee duties
• Questions
Legal structures –
what are the options?
• No statutory requirements regarding organisational structure –
options include:
– Company limited by guarantee
– Company limited by shares
– Community Interest Company (CIC)
– Scottish Charitable Incorporated Organisation (SCIO) (depending
upon organisation’s objectives and activities)
• Conventional structure is company limited by guarantee but no “one
size fits all” approach
• Important issue is that legal form should fit your requirements, not
other way round
Company limited by guarantee
• Separate legal entity – distinct from its members and directors
• Limited liability – members undertake to pay specified “guarantee”
amount if company is wound up and assets are insufficient to meet
liabilities – generally £1.00
• No issue of shares or payment of dividends
• Non-profit distributing – profits used to further company’s aims
• CLG may register as a charity
• Model of choice in Scotland to date
Company limited by shares
• Separate legal entity – distinct from its members and directors
• Limited liability – members’ liability limited to amounts unpaid on
their shares
• Company will issue of shares and may pay dividends
• Profit distributing
• CLS cannot register as a charity
• Not commonly used as a model for Town Centre Partnerships
• More suitable for commercial, profit-distributing organisations
Advantages of company
structure
• Familiarity
• Flexibility
• Transparency
• Benefits of limited liability and separate legal personality
• Well regulated
• Ability to attract funding
• Ability to attract members / directors / stakeholders
Community Interest Company (CIC)
• CIC may be a company limited by guarantee or by shares
• Designed for social or community enterprises
• “Half way house” between CLG and CLS
• Key characteristics
– Must benefit a specific, defined “community”
– Satisfy a “community interest test” – both at incorporation and on an ongoing basis
– Asset lock - CIC cannot transfer its assets (including any profits or other surpluses generated by its activities) for less than market value unless transferring them to another CIC or charity (that is either specified in its or articles or consented to by the Regulator) or if the transfer is for the benefit of the community it was set up to serve
– Dividend cap – maximum aggregate dividend of 35% of distributable profits
• Annual community interest report (in addition to standard annual report)
• CIC Regulator
• CIC cannot register as a charity (but may convert)
Charitable status?
• Charitable status – depends on objects of organisation
• Charities must operate for public benefit and one or more defined charitable purposes
• Advantages
– Tax exemptions
– Rates relief
– Additional funding sources available
– Perception
• Disadvantages
– Scope of activities is limited to charitable objects – can be inflexible
– Additional regulatory / administrative burden
– Legal duties
– One way street
Scottish Charitable Incorporated
Organisation (SCIO)
• New legal form available solely to charities registered in Scotland
• OSCR is regulator, not Companies House
• Separate legal entity
• Limited liability for members / charity trustees
• Wholly dependent upon charitable status – ceases to exist if
removed from charity register
• Cannot be restored to register
• Advice should be sought re SCIO model – suitability will depend
upon objects and activities of organisation
Constitutional issues
• Constitution of a company are its memorandum and articles of
association
• Templates available but degree of tailoring will be required
• CLS and CLG articles of association will differ
• CIC articles will require additional tailoring
– Defined community
– Asset lock
• SCIO constitution
Constitutional issues
Key provisions
– Objects
– Powers
– Distribution of surpluses on wind up – standard approach is distribution to organisation with similar objects
– Membership – different categories?
– Procedures for general meetings (meetings of members)
– Procedures for board meetings (meetings of directors / trustees)
– Procedures for appointment / removal of directors / trustees
– Power to make rules and byelaws
– Indemnification of directors / officers
– Insurance
– Changes to constitution
– Dissolution
Governance
• Board of directors
• Composition and powers
• Mix of skills and experience
• Public / private / community sectors – strategic or operational
responsibility?
• Delegation of powers
• Conflicts of interest
• Partnership working
Directors’ duties
Companies Act 2006 (the “Act”)
Duties of company directors:
– duty to act within powers
– duty to promote the success of the company
– duty to exercise independent judgment
– duty to exercise reasonable care, skill and diligence
– duty to avoid conflicts of interest
– duty not to accept benefits from third parties
– duty to declare interest in proposed transaction or arrangement
Charity trustees’ duties
• Directors of charitable companies and charity trustees of a SCIO are
subject to statutory duties
• Charities and Trustee Investment (Scotland) Act 2005
• Act imposes range of duties on charity trustees
• Who are they?
• Charity trustees are “persons having general control and
management of administration of a charity”
– May be formally appointed or elected (or may not)
– “Shadow trustees”
• Charity trustees have a range of statutory duties in terms of the Act
and related regulatory guidance from OSCR
Charity trustees’ duties
• A charity trustee must act in the interests of the charity
• A charity trustee must seek in good faith to ensure that the charity
acts in a manner which is consistent with its purposes
• A charity trustee must act with the care and diligence that it is
reasonable to expect of a person who is managing the affairs of
another
• Charity trustees must ensure that the charity complies with any
direction, requirement, notice or duty imposed on it by virtue of the
2005 Act
• All charity trustees must take such steps as are reasonably
practicable for the purposes of ensuring that:
– any breach of duty is corrected by a trustee and not repeated; and
– any trustee in serious / persistent of duties is removed as a trustee
Questions?
Disclaimer
This presentation is for information purposes only. Nothing in this
presentation constitutes or is intended to constitute legal or taxation
advice. This presentation should not be relied upon or treated as a
substitute for specific legal or other professional advice relevant to
particular circumstances. Harper Macleod LLP does not accept any
responsibility for any loss which may arise from reliance upon
information contained in this presentation.