Museum Collections & Alienability

1. Museum Collections& Alienability Adrian Babbidge 3 November 2011 Coventry Transport Museum

2. Unincorporated associations trusts Incorporated public bodies companies no legal personality trustees are individually and collectively responsible for any liabilities legal personality the liability of trustees is limited Some Terms

3. Some Terms • ownership - the state or fact of exclusive rights and control over property of whatever type, can be individual of shared • title- the rights and benefits associated with ownership • personal property (chattels) - any property that can be moved from one location or another, as distinct to real property which is immovable, such as land and buildings.

4. Museums Association Definition Museums enable people to explore collections for inspiration, learning and enjoyment. They are institutions that collect, safeguard and make accessible artefacts and specimens, which they hold in trust for society.

5. What Does ‘Hold In Trust’ Mean? • property held by one party for the benefit of another • used in the museum sector in a general sense to state an intention based on ethical standards, and does not imply legally enforceable (similarly ‘museum trusts’ is an imprecise term) • if intended to be legally-enforceable it must fulfil certain characteristics

6. Who Holds The Property? • a trustee may be • a natural person • an corporate personality eg a public body or company • the trustee is the legal owner of the property • may be single sole trustee or multiple trustees • may be a single or multiple beneficiaries • maximum possible duration 125 years unless a charity (previously lives in being + 21 years)

7. Who are the Beneficiaries ? • the person settling the property • named individuals • a group of individuals • a body corporate

8. What Constitutes A Trust ? • certainty of intention – clear intention to create a trust • certainty of subject matter – extent of the property must be clearly specified • certainty of objects – the purpose and beneficiaries must be identified

9. Charitable Trusts A trust is charitable if: • its purpose is wholly and exclusively charitable • it provides a public benefit • it falls under one of thirteen heads of charity which include: • ‘the advancement of arts, heritage or science’ • ‘the advancement of education’ • ‘the promotion of the efficiency of the armed forces or police fire and rescue and ambulance services’ • ‘other purposes beneficial to the community’

10. Differences of Charitable Trusts • perpetual – no time limits • cy près – if trust wound up for any reason funds must be applied to similar purpose to the trust’s original intention • trustees bound to meet the requirements of charities legislation and comply specific regulatory rules

11. Are Museum Collections held on Legal Trusts? • YES in the case of most unincorporated associations – as they cannot hold property in their own name, the property is held by trustees (who may or may not be the managing committee/governing body) in their own name • NO in the case of most incorporated bodies • collections are normally corporate property alongside all their other chattels Current practice based on ethical standards not the law

12. Property • corporate property • available for the entity’s general purposes and for the owner(s) to with as they will (provided it is lawful) • no obligation to maintain its value • appears on the accounts as an unrestricted fund • available to meet liabilities to creditors • trust property • has to be used for the purposes of the trust • has to be kept in good order • transparency as restricted fund • not available to meet obligations to creditor

13. Trust Property • has to be used for the purposes of the trust • has to be kept in good order • transparency as restricted fund • not available to meet obligations to creditor

14. Trusts and Incorporated Bodies • a legal trust is always unincorporated • some unincorporated entities may have an incorporated entity (eg a local authority) as sole trustee • the assets of the trust and the corporate property of the incorporated body must not be confused and need separate accounting

15. Forms of Trust • functional permanent endowment - tangible assets/income to be used for a specific purpose or purposes of the charity • special trusts - funds or property held and administered on its own separate trusts by or on behalf of a main charity for any special purposes of that charity • needs appropriate documentation (Collections Trust Transfer of Title form) may constitute special trust

16. How Are Trusts Created? • by Deed • by Will • by the Museums Act 1845 and Public Libraries & Museums Act 1850 for local authority museums founded before 1892 • some Local Acts of Parliament

17. Accounting Issues • need to account for endowments and special trusts as restricted funds • local authorities and other incorporated bodies required to account for heritage assets under mandatory FRS 30 – important that these are not treated as corporate property • FRS 30 compatible with Charities SORP 2005 which is a legal requirement

18. FRS 30 Heritage Assets assets kept principally for their contribution to knowledge and culture (mainly historic buildings and collections) requirement from 2010 to report heritage assets in annual accounts primary aim is to provide information about an entity’s total holding of heritage assets and its stewardship of those assets includes donations

19. FRS 30 Heritage Assets primary objective is disclosure but if cost/ valuation available this needs to be accounted for on face of Balance Sheet FRS 15 applies – cost or valuation (where practicable) impairment must be accounted for failure to comply risks qualified audit report

20. FRS 30 Disclosures in all situations nature and scale of heritage assets held accounting policies acquisition, preservation, management & disposal policies if reported on balance sheet significance and nature of heritage assets carrying amount and movement valuation date and method (external or internal) any limitations if not reported on balance sheet summary of transactions

21. The ‘Two Trusts’ Model • promoted by the Museums & Galleries Commission following Chatterley Whitfield insolvency • separate charitable body to hold collections to operating charity • could never work properly as: • collections charity had no income, nor the wherewithal to deal with the collection if the operation company collapsed • potential risk of conflict between the two sets of trustees • merely holding collections is not charitable