Our charity is developing a range of trading activities that can’t be justified as furthering our primary purpose – we’re getting involved in room hire, conference organisation, catering, producing display materials etc for other organisations, not all of which are charities.

We’ve been advised to establish a trading subsidiary to take over these activities, to avoid any problems with the Charity Commission or the Tax Office.

Question: what is the best legal structure for a charity’s trading subsidiary? What sort of constitution should we use?

Can a board meeting be held without the company secretary being present or invited to attend?

We are an Infrastructure Organisation, a Company limited by guarantee, and a registered Charity. We have a system of membership to our organisation; - It works by organisations filling out a membership form which is signed by a representative of the organisation. The board approve or reject the application at their next meeting.

The form does not include any guarantee by the applicant that they will contribute in any way to the liabilities of the company if it were to fold up. Every year we have an annual meeting and we allow representatives of those organisations those who we consider to be members to vote at this meeting.

My question is about the legal status of this "membership". Please could you explain the difference between being a "member_of_our__organisation" (for operational purposes) and being a "member_of_the_company" for legal purposes? Which type of member would have the right to vote at the AGM, and if we have got it wrong, how could we arrange things so that member organisations can vote at the AGM?

Empowering Members to Elect their Board

An incorporated charity with members:

a) Each year a third of the board retires, two thirds continue and because there are vacancies, and no one opposes, those who retired are reappointed. The board does not change. This might discourage new trustees.

Is there a better way? Is there a way that would only appoint trustees who were elected by a majority ballot of members and make sure that you always had at least 3 trustees? If so what might the wording be?

b) Article 33(2), below. What might the particulars comprise in “stating the Particulars”

c) Article 38, below. Could this mean that a director (unpopular with the members) could retire at an AGM, avoiding not being elected by the members, only to be reappointed by the board the next day?

===== Extract from Mems and Arts===========

30. At the first annual general meeting all the trustees shall retire from office, and at every subsequent annual general meeting one third of the trustees who are subject to retirement by rotation or, if their number is not a three or a multiple of three, the number nearest to one third shall retire from office: but, if there is only one trustee who is subject to retirement by rotation he shall retire.

31. Subject to the provisions of the Act, the trustees to retire by rotation shall be those who have been longest in office since their last appointment or reappointment, but as between persons who became or were last reappointed trustees on the same day those to retire shall ( unless they otherwise agree among themselves ) be determined by lot.

32. If the Charity at the meeting at which a trustee retires by rotation, does not fill the vacancy the retiring trustee shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the trustee is put to the meeting and lost.

33. No person other than a trustee retiring by rotation shall be appointed or reappointed a trustee at any general meeting unless: (1) he is recommended by the trustees; or (2) not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the Charity of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the Charity’s register of trustees together with a notice executed by that person of his willingness to be appointed or reappointed.

34. No person may be appointed as a trustee (1) unless he has attained the age of 18 years; or (2) in circumstances such that, had he already been a trustee, he would have been disqualified from acting under the provisions of Article 38.

35. Not less than seven or more than twenty-eight clear days before the date appointed for holding a general meeting notice shall be given to all persons who are entitled to receive notice of the meeting of any person ( other than a trustee retiring by rotation at the meeting ) who is recommended by the trustees for appointment or reappointment as a trustee at the meeting or in respect of whom notice has been duly given to the Charity of the intention to propose him at the meeting for appointment or reappointment as a trustee. The notice shall give the particulars of that person which would, if he were so appointed or reappointed, be required to be included in the Charity’s register of trustees.

36. Subject as aforesaid, the Charity may by ordinary resolution appoint a person who is willing to act to be a trustee either to fill a vacancy or as an additional trustee and may also determine the rotation in which any additional trustees are to retire.

37. The trustees may appoint a person who is willing to act to be a trustee either to fill a vacancy or as an additional trustee provided that the appointment does not cause the number of trustees to exceed any number fixed by or in accordance with the Articles as the maximum number of any trustees. A trustee so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the trustees who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof.

38. Subject as aforesaid, a trustee who retires at an annual general meeting may, if willing to act, be reappointed.

I have a problem that is bothering me. A company went into liquidation in 1997; the process was completed in 2003. Another company wishes to purchase land that had belonged to the liquidated company but according to the Land Registry there is a charge still outstanding. The charge was in favour of a gentleman, and related to money lent to the gentleman by the business before liquidation.

According to the liquidators, the liquation was completed in full in 2003 but it seems the land cannot be bought until the outstanding charge is settled. Any thoughts as to why this could occur or what should be the next steps?

I was trying to find out the legal responsibilities and obligations of Housing Associations in general and under the Companies Acts, particularly in regard to tenants and in their wider social responsibilities. I tried looking it up on the web but there is not much in layman’s terms. So I would appreciate any summary and/or signposting to websites that explain this in a non-technical way?

A change up consortium made up of not for profit organisations wishes to set up a new company for charitable purpose, to take over the existing assets of a failing social enterprise and to run the successful business of the consortium on a more formal basis. Should it seek to set up as a company with charitable purposes and limited liability, or as a community interest company or a COI ?

They do not wish to be a charity, as many of the existing consortium members are charities already.

Also, are there standard mem and arts which they can use rather than having to write a new set themselves ?

We are about to make our company dormant.

Can we start a dormant date at anytime within a 12month year? Or do we have to start at 6th April? Are there any particular areas to pay attention to?

Any advise would be most appreciated.

sorry this is so long...

We are a well established community organisation, which operates a regular business planning cycle and has a strong trustee board who are engaged with our activities. Our aim, typically, is to reduce reliance on grants and we are clear that developing our existing social enterprise activity is the most viable way forward.

The existing businesses turnover £25k with scope to grow and we now have the opportunity to buy a 3rd business [we have done this before] that is turning over 60k p.a. This is a ‘primary purpose’ business and we are satisfied it fits well with objects and business plan, that we have very good data on the business and the market and that [suitably skilled] trustees are fully engaged in scrutiny/strategic engagement.

The issues I am less clear about relate to structures and governance.

• Trading entity and VAT: The new business takes us over the vat threshold; if we keep the trading activity within the existing charitable structure how will this affect the way we account for income/expenditure? I understand that the 2 small contracts we currently operate would attract VAT [as services rather than grant-funded activities], if we exceed the threshold.
• Would this be the ideal point at which we ‘spin off’ a trading entity?
• What are the pros and cons of various structures for such an entity? CIC? Company limited by guarantee/shares? (i’ve seen your ‘legal models’ document but no reference to CICs)
• Charity commission guidance seems clear on how a company would ‘gift’ its profits back to the ‘host’ charity thus off-setting corporation tax, but would there need to be a very tightly worded set of mem & articles to ensure there was a ‘lock’ on the new organisation? Is there a down-side to this? Is this what the CIC is for?
• Would we manage the new entity by making existing trustees of the charity into Directors of the new company?
• Are we coming at this from the wrong angle altogether? Should there be more fundamental ‘drivers’ shaping how we move forward?

Existing charitable structure: the charity is not currently a limited entity; it is an unincorporated association, which worked well when it was a small, membership-based entity handling small amounts of cash with few staff. If we go ahead with the trading ‘arm’ (on top of funding campaigns, grants and contracts), is this a point when we should be considering a change of structure for the main charity as well? If I were a trustee, should I not be concerned about personal liability in an unincorporated association? Should we wait for details of the new charitable incorporated organisation?

Hello Charlie We havea document entitled 'Pros and Cons of Incorporation' that we had from you last year. It is dated 2004 so was wondering if there is anything more up-to-date or is this still valid info Thank you