Town Centre Partnerships Models and Governance. Legal considerations and incorporation options

Transcription

1 Town Centre Partnerships Models and Governance Legal considerations and incorporation options

2 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

3 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

4 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

5 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

6 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

7 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)

8 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

9 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

10 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

11 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

12 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

13 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

14 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

15 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

16 Questions?

17 Contact details James McMorrow Partner t: +44 (0) e:

18 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.