Incorporating your students' union. How we can help

Transcription

1 Incorporating your students' union How we can help

2 Summary This document has been prepared for students' unions which are set up as unincorporated associations, and which are thinking about incorporating. Key reasons for incorporating a charity Legal Risk Limit the personal liability of trustees Convenience Simplify the process of entering into contracts, particularly regarding property Stewardship Allow the charity to hold property and assets in its own name Identity Enable the charity to have its own legal identity Contents Section 1 Incorporating your charity - FAQs Section 2 Service options and fees "The solicitors we deal with at Wrigleys are always on the ball. They are always willing to go above and beyond the normal level of service." Chambers & Partners

3 Section 1 Incorporating your charity - FAQs 1. What does incorporating mean? Usually when people talk about incorporating they mean becoming a charitable company or a charitable incorporated organisation (CIO) by setting up a new charity, registering it with the Charity Commission and transferring the assets across. 2. Why might a charity want to incorporate? To limit the personal liability of trustees and members if something goes wrong. Limited liability can make it easier to recruit and retain trustees. To create a separate legal identity for your charity: incorporated charities can own land, enter into leases and contracts, and employ staff in their own name. 3. What do charities need to prepare for incorporation? Stage 1 - Due Diligence Essentially, "due diligence" is ensuring that incorporating will not cause any "nasty surprises" such as triggering financial liabilities or risking funding streams. Particular areas to focus on are listed below. We recommend planning the due diligence exercise carefully, to ensure that key legal liabilities are not missed. Many clients find it most cost effective to do the majority of the due diligence work themselves, and then ask us to advise once particular issues or problems have been identified. Pensions schemes if you pay into certain types of pension scheme (e.g. defined benefit, final salary, or other hybrid pension scheme), incorporating can trigger an immediate pensions debt. Pensions can also be a particular problem if you are a member of the Students' Union Superannuation Scheme ("SUSS"). Although SUSS is generally closed to new members, the trustees have taken the decision to open a window each year (in 2017, this is from 1 July to 30 September), during which time they will accept new members, and when incorporating should not trigger the crystallisation of the pensions debt. You should speak to the trustees of SUSS at an early stage to confirm what your options are, and inform them of your intention to incorporate by the deadline they set (in 2017, this deadline is 31 March). If you are not sure whether your pensions arrangements are likely to trigger a pensions debt, you should seek professional advice. Wrigleys has a pensions team that advises charities in this area of law. Contracts you should make a list of key contracts and check that they can be transferred to the new incorporated structure. There may be clauses covering assignment/transfer sometimes contracts cannot be transferred or you might need consent to the transfer from the other party/parties, or it might be that you need a novation agreement (this is where the new charity, the trustees of the old charity and the other parties to the contract all formally agree that the new charity should step into the old charity's shoes). For example, contracts for photocopiers often include provisions to say that they cannot be transferred without the consent of the company who leases them to you. Grant funding you need to make sure that any grants can be transferred to the new incorporated structure. Sometimes grant funders include a provision in the terms and conditions of the grant saying that if you merge or incorporate or transfer the charity's activities to another organisation, they can ask

4 for their money back this is known as clawback and can apply even after you have spent the money. Premises do you own or occupy premises? If so, you should make a list of all premises you own or occupy and the basis on which you do so (e.g. do you own the freehold or leasehold, or are you a tenant or licensee?). You should also assemble copies of all relevant documents (e.g. the lease, licence, title deeds, details of any mortgages or legal charges, and/or Land Registry title number). If you are about to enter into a lease or other property arrangement, speak to us first. It may be that we can help you with some wording to make it easier to transfer the property to the new charity once you have incorporated. Assets you should make a list of your key assets, so that you can make sure that they are all transferred. Employees you should prepare a list of all employees who are employed by the students' union (and not, for example, by the university). Normally, we would expect all employees to transfer across on their existing terms of employment under the TUPE Regulations. If you plan to make any changes to the workforce, (for example in terms of numbers or their terms and conditions of employment), then you must take legal advice first, as the rules on changing terms and conditions following a TUPE transfer are quite restrictive. You will also need to go through appropriate consultation processes with your employees. For a small charity (up to 9 employees with no recognised trade union) the TUPE obligations for you regarding information and consultation to be undertaken are relatively light touch and you can deal directly with staff rather than through an employee representative. We can provide you with a checklist of actions to take and a draft letter to provide to staff. Powers do you have the power to incorporate? This stage is important because if you attempt to incorporate without having the necessary power, the transfer could be challenged later on. We can check this for you. If you do not currently have the necessary power to incorporate, you may need to amend your current governing document. We can assist you with this. Permanent endowment if you have any assets which are permanent endowment (a form of legal restriction meaning that you can spend the income but not the capital), we can advise you on how to deal with them. If you are not sure whether you have permanent endowment, we can help to advise you on this. It is probably unlikely for a students' union. Legacies have you received legacies in the past or do you expect to receive them in the future? If so, we can help you to take the necessary steps to make sure that the new charity can receive those legacies following incorporation. Consents students' unions will need the approval of the University to the new constitution

5 Stage 2 Resolve that you would like to incorporate Wrigleys can provide you with a template in principle resolution for your charity. Stage 3 Decide which incorporation option is best for you Your main options are the charitable company or the charitable incorporated organisation. You will also need to decide who your company law members are. You may choose to restrict this to the trustees (a "closed" membership) or alternatively have all students as the company law members (an "open" membership). Company law members enjoy certain legal rights and duties, such as the right to appoint and remove trustees and the right to receive annual accounts. This is likely to affect your decision about who your members are. The National Union of Students has model constitutions for charitable companies and charitable incorporated organisations, with both open and closed memberships. Stage 4 Set up the new charity A charitable company needs to be registered with both Companies House and the Charity Commission. A CIO needs to be registered with the Charity Commission. We can draft your governing document and the Charity Commission application form for you, or we can review a draft prepared by you and provide comments. We can register a company for you with Companies House, using online software. We also have lots of experience of making applications to the Charity Commission, so we have a good idea of what the Charity Commission is looking for and what might cause them concern. Stage 5 Inform and consult with your employees If the charity has employees, it will be necessary to go through appropriate processes to inform them of the incorporation and potentially consult with them. Legal advice is strongly recommended in respect of your employees' rights and the charity's obligations to them. Stage 6 Transfer the assets, activities, contracts, premises and employees to the new charitable company or CIO We can prepare a transfer agreement for you so that you have peace of mind that all assets, contracts and activities have been properly transferred. We would normally include indemnities to offer additional protection and peace of mind to the trustees of the old charity, in the event that anyone makes a claim once the transfer has taken place. We can advise you on whether you need consent from the Charity Commission, and on making sure that you have the correct authorities in place to sign the transfer agreement. If you have premises to transfer or contracts to novate, we would be happy to assist you with this as well. We would need to see the Land Registry entry/lease/relevant contracts to be able to provide a bespoke estimate for this

6 Stage 7 Resolve what to do regarding the old charity Decide whether to wind up the old unincorporated charity or retain it as a shell. We can advise you on this. It is sometimes important to keep the old charity if people might leave gifts in their will to it. Stage 8 Notify contacts Notify your beneficiaries, suppliers and other contacts that you have incorporated. Update your letterhead, website, social media, promotional materials etc. We can provide you with a guidance note which includes a form of wording for your footers, letterhead, etc, and a sample letter to send to beneficiaries and suppliers to let them know about the change. You will receive a new registered charity number when you incorporate, so you may wish to hold off bulk ordering letterhead, compliments slips, etc until the new charity is registered with the Charity Commission. If you have other registrations (e.g. data protection or Gift Aid), you will need to apply for these for the new charity as well. Stage 9 - Prepare company books or CIO registers We can prepare the initial company books or CIO registers to get you started, which you can then keep updated yourself, as changes occur to the charity. 4. How long does it take to incorporate? Charitable companies: once the articles of association (i.e. the governing document) have been agreed, setting up a company is quite quick. It can be done within a day or two. CIOs: there is no need to register with Companies House. The CIO only comes into existence when registered with the Charity Commission. The most time-consuming aspects of the process tend to be getting all the trustees to agree the new governing document and sign the necessary paperwork, and registering with the Charity Commission. Registering with the Charity Commission typically takes 3 to 6 months from the time they receive the application, depending in part on how long it takes you to provide them with any additional information they ask for. Using the NUS model constitution should make the process quicker, as this has already been approved by the Charity Commission. 5. How can Wrigleys help? In our experience, different charities have different approaches that work for them: Option 1: Standard Service Option 2: Overview Service

7 Section 2 Service options and fees Option 1 - Standard Service The Standard Service package covers the stages that are relevant to all charities. Clients instruct us to do as much of the incorporation as possible in order to give themselves peace of mind and to keep the time of their staff and trustees free to focus on their day jobs. Option 2 - Overview Service This is a breakdown of the Standard Service (Option 1) with each element priced separately. We find typically that charities choose the Overview Service over the Standard Service when: the charity has trustees, staff or volunteers who have the experience and time to do certain elements of the work included in the Standard Service. the charity does not have the budget to instruct a solicitor to undertake everything, but would like the peace of mind of having an experienced solicitor look over and advise on the key aspects of the process. An example of this would be to instruct solicitors to ensure that the necessary indemnities are in the transfer agreement to protect the individual trustees. Additional Legal Services Option 1 and Option 2 list the elements applicable to all charity incorporations. This list of Additional Legal Services covers areas of advice that may be applicable to your charity (though they will not be applicable to all charities). Option 1 - Standard Service 4,950 plus VAT and disbursements The Standard Service includes: An initial meeting or telephone call where we explore your incorporation options. Providing you with the wording for an in principle resolution to incorporate. Checking that you have the power to incorporate. Preparing the constitution (CIO) or memorandum and articles of association (charitable company), based on an NUS model constitution.* Applying to Companies House to set up the charitable company (if required). Preparing and submitting the application to the Charity Commission to register the new charity.* Preparing the transfer agreement to transfer assets, contracts and activities from the old charity to the new charity, including indemnities to protect the trustees of the old charity. Assessing whether you need Charity Commission consent to the transfer. Applying to the Charity Commission for consent to the transfer (if required). Preparing the resolutions to authorise the necessary people to sign the transfer agreement. Providing you with our guidance note for CIOs or charitable companies (including a suggested form of wording for your footers, letterhead, etc). Providing a sample letter to send to beneficiaries and suppliers to let them know about the change. Preparing the initial company books or CIO registers (showing the position on the date you registered with the Charity Commission) to get you started. Providing an initial letter of advice in relation to preserving legacies (if required). * Assuming that we prepare an initial draft for you to comment on and then a further draft incorporating your amendments (if required)

8 Option 2 - Overview Service Service Price Notes Governing document 1a 1b OPTION 1: we prepare the governing document for you, having discussed your requirements in advance OPTION 2: you prepare the governing document, based on an NUS model constitution, and we review it and provide comments 1,250 plus VAT This assumes you will use an NUS model document. 500 plus VAT 2 Incorporating the company (if relevant) online at Companies House 150 plus VAT You will also need to pay Companies House registration fees, which are currently 13 for standard service or 30 for same day service. Charity Commission registration 3a 3b OPTION 1: we apply for Charity Commission registration on your behalf OPTION 2: you apply for Charity Commission registration, and we review the draft application form before you submit it 2,500 plus VAT We would draft the Charity Commission application form, work with you to finalise this, submit it to the Charity Commission and deal with any queries they have before registration. 500 plus VAT We would do one review of the application form and provide you with our comments on it, in writing and/or over the telephone. If the Charity Commission raise queries on the application and you require our help, we would give you a separate fee estimate at that stage. Transferring assets to the new charity 4 Preparing the transfer agreement 5 Preparing the resolutions to transfer assets and liabilities to the new charity 6 Prepare the initial company books or CIO registers (showing the position on the date you registered with the Charity Commission) to get you started 7 Providing you with our guidance note for CIOs or charitable companies 1,500 plus VAT We would also advise on whether you need Charity Commission consent and apply for this on your behalf, if necessary. 250 plus VAT 150 plus VAT 150 plus VAT This note includes suggested wording for your footers, letterhead, etc

9 Additional Legal Services Service Price Notes 1 Advising on whether incorporating your charity is likely to trigger a section 75 pensions debt 2 Checking that grant funding can be transferred 3 Checking that contracts can be assigned 4 Advising on whether you have permanent endowment 5 Small charity TUPE (up to 9 employees assuming that there is no recognised trade union) providing a checklist of actions to take and a draft letter to provide to staff 6 Larger charity TUPE (10 employees or more) and charities with a recognised trade union To be agreed separately 200 plus VAT per contract (up to 10 pages) 350 plus VAT per contract (up to 20 pages) 200 plus VAT per contract (up to 10 pages) 350 plus VAT per contract (up to 20 pages) To be agreed separately 300 plus VAT (assuming that you do not intend to change employees' terms and conditions posttransfer) To be agreed separately 7 Property transfer agreement To be agreed separately, once we know a bit more about your current property arrangements 8 Novation agreement To be agreed separately (if required), once we have seen the contract which is to be novated 9 Applying to register with HMRC for Gift Aid 500 plus VAT 10 Due diligence To be agreed separately

10 About the Wrigleys Charities & Social Economy Team Wrigleys is a specialist law firm with a dedicated Charities and Social Economy Team that has advised many hundreds of charities and organisations in the voluntary, community and social enterprise sectors. The specialist team numbers over 20 lawyers including 6 partners working full time in this sector. The team has lots of experience of registering charities, incorporating charities and helping them to navigate their way through the ever-increasing regulatory burden. Many of our lawyers are themselves trustees, volunteers and/or governors of charities giving them first hand practical experience of many issues that they might be advising on. The Legal 500 guide considers Wrigleys a top tier leading charity law firm and the Chambers & Partners Guide to the Legal Profession has given the firm a national ranking. "I think the main reason we enjoy working with them is because we feel that they sympathise with our cause and understand why we are driving for what we want." Chambers & Partners