What are the different types of charity structures?
There are four main types of charity structure; charitable incorporated organisation (CIO), charitable company (limited by guarantee), unincorporated association and a trust.
A CIO allows charities to register once with the Charity Commission as an incorporated form of charity which is not a company. CIO’s are simpler and cheaper to run than Charitable Companies and do not need to report to Companies House. Transactions such as employing staff, holding land and entering contracts are done in the name of the CIO rather than the trustees individual names.
A charitable company does not distribute income to shareholders. It has voting members and is controlled by a group of directors, who can be paid or unpaid. Like a CIO all transactions are done in the name of the company rather than the trustees. Unlike a CIO a charitable company has to file at * Companies House and the Charity Commission.
An unincorporated association is the easiest, cheapest and quickest way for a group of volunteers to run a charity. To be a charity it must have charitable aims and be run for the public benefit, it cannot employ staff or own premises in its own name. Any such employment or property holding must be in the names of the individuals.
A charitable trust is a type of charity run by appointed trustees allowing them to manage assets such as money, investments, land or buildings. A charitable trust cannot enter into contracts or own property in its own right as far unincorporated associations any such transactions are in the names of the trustees.
To determine what structure best fits your organisation you need to weigh up a number of factors such as risk, whether you intend to employ people and/or own property.
Having chosen a charity structure what are the next steps?
To set up a charitable trust a trust deed must be made and must indicate that the organisation is legally charitable.
In order to set up a CIO you can a model constitution approved by the Charity Commission.
To set up an unincorporated association, you need to write and agree a constitution within your group.
To establish a company limited by guarantee, you must adopt a governing document called the Articles of Association and submit this to Companies House. It is a legal document which sets out the charity’s matter and information of how the organisation will be run. It would be advisable to get this document checked by a solicitor and this is a service that we provide at Taylor Bracewell.
Do I need to register with the Charity Commission and how long will it take?
Charities can raise funds before they become a registered charity. If the charity is based in England or Wales and has an income above £5,000 per annum it will need to register. CIOs on the other hand, must be registered with and report to the Charity Commission regardless of their income.
Registration with the Charity Commission takes about 40 days but could take longer in some instances, such as where the Charity Commission has questions or concerns about the charity or if the Commission require some redrafting of the charity's constitution.
How many trustees should a charity have?
Your governing document should tell you the minimum and maximum number of trustees that your charity is required to have, however it is advised to have a minimum of three trustees which include a chair, secretary and treasurer.
Can trustees get paid?
Most trustees are unpaid but all trustees can claim expenses. A charity trustee cannot be paid for serving as a trustee but can be paid for providing services to the charity where it is in the interests of the charity and provides a significant and clear advantage over all other options. To do so all legal requirements for paying a trustee must be followed including all restrictions set out in the charities governing documents. To pay a trustee is a complicated matter for which advice should be sought before any payment is made.
Can trustees resign?
Your governing document may also provide any procedures that must be followed in order for a trustee to resign. But yes, trustees can resign and they must do so in writing.
For more information please contact our Charities team on 01302 360 060