Remembering Mark Hallam
We are deeply saddened to share the news that Mark Hallam, a longstanding charity mentor from 2016 to 2024, passed away in August 2024 after a courageous battle with cancer. Mark is fondly remembered by his colleagues at Charity Mentors for his unwavering dedication, kindness, and insightful guidance. His positive energy and generous spirit left a lasting impact on everyone who had the privilege of working with him. Mark’s passion for helping others, coupled with his wisdom and warmth, made him an invaluable mentor and a cherished friend. His legacy of compassion and leadership continues to inspire all of us who knew him.
If you were mentored by Mark and would like to share a memory with his family, please contact our Executive Director, Kelly Jennings-Robinson, at kelly@charitymentors.co.uk, and she will ensure your memories are shared with them.
A Summary Guide to Voluntary & Community Legal Status
If you are considering setting up a voluntary or community group or are already an established group looking to review their status, this summary guide aims to give you some outline considerations for the different structures which may suit both the status of how your organisation could operate within.
If you are looking to set up a group, with the aim of carrying out a specific task or purpose, it’s important to undertake some research within the area of which you intend to operate. There might already be an organisation which operates locally, regional, or nationally and it’s important to be able to demonstrate any evidence of need.
From a legal perspective, an organisation is either:
A collection of individuals working together, such as an unincorporated organisation or charitable trust (Types of unincorporated organisations include: Association, Charitable Association, Charitable Trust and Friendly Societies) or
An incorporated organisation which exists as a separate legal entity from the individuals belonging to it. Types of incorporated organisations: Company Limited by Guarantee, Community Benefit Societies, Community Interest Companies and Charitable Incorporated Organisation.
Unincorporated Associations
This structure is ideal for small groups with a membership, short-term goals, low incomes, and which do not intend to employ staff or acquire property. These are easy & inexpensive to set up and usually no other agencies need be involved.
Such associations have no separate legal existence, and any property or contracts are held by individual members and, therefore, may be personally liable in the event of legal proceedings.
Such associations still need to have a structure & practices to follow by agreeing to rules & writing these down so that everyone involved is clear about the aims of how it should be run & managed – this usually means a written constitution, by which all members are accountable.
If there’s a need to lease/buy buildings, employ staff or enter into significant contracts, it may be that there is a more appropriate structure.
Such unincorporated associations can take different forms and include, Charitable Trusts, Friendly Societies, Registered Charities (which are not a registered company) as well as unregistered voluntary & community organisations.
Registered Charities
A charity is an entity that has been set up for purposes which are exclusively charitable and for the public benefit. These must be demonstrable.
It’s a requirement that applies to each of an organisation’s aims, so a charity cannot have some aims that are for the public benefit and some that are not. An organisation that is established for charitable purposes in England and Wales must register with the Charity Commission if it has income over £5,000 a year.
There are also four sub-sectors to consider:
· An unincorporated association – small & local groups governed by its own written constitution, usually run by a membership in the form of a management committee.
· A trust – again, unincorporated and usually used by grant making organisations – governance is by a trust deed or a will.
· A limited company – if formed before 2009, governance is via a memorandum & articles of association. Post 2009, just articles of association. Trustees or Directors are afforded legal protection against contractual liabilities. Charitable companies must register with Companies House and usually the Charity Commission.
· Charitable Incorporated Organisation (CIO) this is a new legal form for a charity. It provides limited liability but only requires registration with the Charity Commission and is governed by a constitution.
Details on registering with the Charity Commission can be found on the Commission’s website
Charitable Trusts
A charitable trust is a special sort of unincorporated association, set up to administer money or property (or both) and is registered with the Charity Commission. Its set up is in the form of a Trust Deed (the Charity Commission provide a free model).
The trust usually consists of a small group of trustees who manage property &/or money in accordance with the Trust Deed. There is no membership, and the trustees could face personal liability for its actions and, also, if it runs into dept. It’s always best to consider legal advice prior to setting up a Trust Deed.
Friendly Societies
Such societies are now less popular as their function was to offer insurance benefits to their members. To become a Friendly Society, you must have a ‘benevolent’ purpose and have a minimum of 7 members.
Groups set up in this way are regulated by the Registrar of Friendly Societies and you must comply with the Friendly Societies Act 1974. Members/trustees may also be liable for any debts of the organisation.
Incorporated Organisations
If your organisation becomes a corporate body, it can enter into contracts, hold property and take part in lawsuits in its own right. It is also covered by limited liability – should its debts not be payable, it can be wound up and the liability on members are usually limited to their shareholdings.
They are more complex to set up and more closely legally controlled. There are 4 kinds of incorporated structures that are suitable for the voluntary sector:
· Company Limited by Guarantee
· Community Interest Company (CIC)
· Charitable Incorporated Company
· Community Benefit Society (previously known as the Industrial & Provident Society)
Company Limited by Guarantee
This structure does not have shareholders and cannot distribute profits. Instead, it has members who pay a subscription and are each liable for a limited sum (the guarantee) if it is wound up. Members elect a board or committee (or directors) whom can be removed but the board has day to day control.
The framework is set out in a legal document called the ‘memorandum & articles of association’. This should be drafted, taking legal advice, as it must be very specific as to what the company can do. The Charity Commission have a model which is available for free.
The Companies Act lay down rules, covering such things at AGMs (Annual General Meetings), account and audit procedures. There is a fair amount of paperwork involved and it can be quite expensive. Therefore, this may only suit larger organisations.
Community Interest Companies
CICs are limited companies. They exist to provide a benefit to a community or a specific section of the community. Similar in structure to a company, they can access a range of financing options - so may suit those working for a social purpose.
The key feature of a CIC is an ‘asset lock’ and a ‘community interest statement’. To register as a CIC, you must also register as either a company limited buy shares, or a company limited by guarantee. CICs are also bound by dual regulation by both the CIC regular and Companies House.
CICs are not charities, nor do they hold charitable status. However, a charity can own a CIC.
Charitable Incorporated Organisations (CIO)
This is a relatively new form of incorporated body for charities, created in 2012 and the legal framework was set out in the Charities Act 2011. They are registered and administered solely by the Charity Commission and all information & documentation required and exchanged must be done electronically.
This structure usually suits small & medium sized organisations who employ staff and/or enter into contracts.
Community Benefit Societies
With this structure, all members have an equal say in the running of the society. The society has a corporate status which may have a share & loan capital but must pay only moderate interest on any loan capital.
Such a society cannot register with the Charity Commission, but with the Financial Services Authority (FSA). However, they may apply to the Inland Revenue Charities Division to be classed as charitable, for tax purposes.
The FSA, to whom the society is accountable, can provide information about registration and promoting societies, together with model rules.
Constitutions
Whichever legal status you adopt for your group/business. It is important to have a written constitution which is both agreed upon and adopted from the outset. This should be drafted in plain English for clarity and avoidance of being vague to follow and apply.
Being a set of rules, buy which your organisation will be governed, such aspects may include:
• What the aims (“objects”) of the organisation are
• The powers of the organisation in achieving its objects
• Show how the organisation governs itself, e.g. through an elected management committee/board of directors
• What the powers of the management body are
• Who can be a member and on what terms
• How meetings are convened and conducted
• How the constitution can be amended
• How the organisation is wound up
• How surplus income is used e.g. Reserves policy, reinvested in the organisation
• Other principles which you want to apply to your organisation
As part of considering your constitution, it is vital to think about whether the organisation may, in the future, need to register with the Charity Commission. Should this be likely, it is advisable to follow one of the model constitutions which has been approved by them &, therefore, easing any future registration with them.
It may also be worth the investment of £45 to obtain membership of the Charity Law Association who can provide model governing documents for a Charitable Company, a Charitable Trust and an Unincorporated Association.
Details can be found at here on the website for the Charity Law Association
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The above is a summary of a wider document which also explores the pros and cons for each structure which should be considered carefully, in addition to taking the appropriate legal advice.
We can signpost you on to organisations for support and more information – please do contact us for help.