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More than just lawyers

Cornwall Community Fair Charity Law and Governance Shivaji Shiva September 2009. More than just lawyers. Recent Developments. Charities Act 2006 Companies Act 2006 Charity Commission policy … a practical perspective. Practical Implications. Adopt a new legal structure?

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More than just lawyers

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  1. Cornwall Community Fair Charity Law and Governance Shivaji Shiva September 2009 More than just lawyers

  2. Recent Developments • Charities Act 2006 • Companies Act 2006 • Charity Commission policy … a practical perspective

  3. Practical Implications • Adopt a new legal structure? • Review the governing document? • Train charity trustees? • Update procedures?

  4. A New Legal Structure? “Fit for Purpose 2. The structure, policies and procedures of an effective charity enable it to achieve its mission and aims and deliver its services efficiently.” CC60 - The Hallmarks of an Effective Charity

  5. Incorporation • Limited liability • Legal personality • Key prompts

  6. Types of Organisation Company Limited by Guarantee • Common and effective • Membership often misunderstood • Companies Act 2006

  7. Types of Organisation Charitable Incorporated Organisation Key features: • Limited liability • Single layer structure (?) • Single regulator • Clarification of role of members • Conversion possible … April 2010?

  8. Types of Organisation Community Interest Company • TalentStar • Aa - Zad • Model constitutions • “more of a hockey than a football” • “a hair shirt”

  9. Types of Organisation Community Interest Company Key features: • “Asset lock” • “Community Interest Test” • Directors may be paid • Not a charity • Limited liability

  10. Types of Organisation CICs - looking ahead • Will tax benefits arrive? • “a tailored straightjacket”? • Community Interest Reports

  11. Review the Governing Document? An effective charity: “Reviews its organisational and trustee structures” … “Regularly reviews its governing document to ensure that it is up to date and that the trustees have the powers they need in order to achieve the charity’s objects and manage its resources;” CC60 – The Hallmarks of an Effective Charity

  12. Fit for Purpose? • Legal Form • Membership structure • foundation/oligarchy • association/democratic • hybrid • Plain English, up to date and relevant • Merger • Trustee Training

  13. Charities Act 2006 • Trustee payment and benefits • Trustee indemnity insurance • Identifying members – s29A • Register of mergers

  14. Companies Act 2006 Opportunities to: • relax rules and streamline admin • e.g. AGMs • clarify the articles and avoid confusion • e.g. proxies • ensure ‘a good fit’

  15. Key changes • Trustee remuneration • Electronic communication • Conflicts of interest • Notice periods • Proxies – notice requirements • Company secretary and AGM optional

  16. Trustee Remuneration • New rules since 27 February 2008 • Trustees may be paid for services, subject to usual safeguards • Trustee must not be involved in the decision. • NOT – employment of trustees, acting a trustee => Remove express prohibition?

  17. Directors’ duties • New statutory duties for directors • Overriding duty to: “act in the way he considers in good faith, would be most likely to achieve the company’s purposes”

  18. Directors’ duties • Act within the powers of the company. • Promote the success of the company. * • Exercise independent judgment. • Exercise reasonable care, skill and diligence. • Avoid conflicts of interest. * • Accept benefits from third parties. * • Declare an interest in a proposed transaction or arrangement. * from October 2008

  19. Directors’ duties Having regard, among other things, to: • The likely consequences of any decision in the long term. • The interests of the company’s employees. • The need to foster the company’s business relationships with suppliers, customers and others. • The impact of the company’s operations on the community and the environment. • The desirability of the company maintaining a reputation for high standards of business conduct. • The need to act fairly as between members of the company.

  20. Conflicts of Interest • Direct financial gain or benefit • Indirect financial gain or benefit • Conflicts of loyalty

  21. Conflicts of Interest • Increased obligations for charitable companies Authorisation by • charity’s governing document • NOTE: Companies Act s181 • Charity Commission • Charities Act 1993 (as amended)

  22. Conflicts of Interest Practical steps: • Policy on conflicts of interest • A register of interests (?) • Identify potential conflicts for new appointees • A standing agenda item? • Induction training

  23. Further Information • www.charitycommission.gov.uk • CC3: The Essential Trustee • CC60: The Hallmarks of an Effective Charity • Care, Diligence and Skill (Scottish Arts Council) • Legal Update: charities@michelmores.com

  24. Shivaji Shiva Head of Charity Law 01392 687542 tss@michelmores.com

  25. More than just lawyers

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