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Join Anthony Collins Solicitors in Birmingham for a workshop on community managed libraries and new legal structures for community enterprises. Explore options, governance, funding, and more.
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Community managed libraries • Legal workshop • 10th November 2017
Who’s he? • Anthony Collins Solicitors – based in Birmingham, working all over the country • Leaders in the “space” between the public, private and third sectors • Leading charities practice, focus on community enterprise • Specialising in social enterprise • New models for public services • Community asset transfer • Wide range of social businesses
Programme • Who’s in the room? • Setting up a community enterprise • Dealing with governance • Break • Arrangements with the local authority • Libraries and income generation • Q and A • Lunch
Community managed libraries • Setting up a community enterprise • 10th November 2017
Where are we going today? • Looking at when you should set up a new legal structure • The options available • Looking at some models in practice • Answering questions as we go along
Legal structure • Does it matter? • Yes it does, because it affects: • What a group can do • Liability • How the group can hold money or assets • Who will fund and how
Where do you want to go? • Key issues – do you want to: • employ staff? • enter into contracts? • take a lease or own property? • provide or procure services ... independently, without risking personal liability to people involved • If so, then you will probably need a separate vehicle
Where do you want to go? • Are you thinking about: • Running a centre with a library in it • Taking over a library building • Running a library service • Arts and culture generally • … or something else? • Consider your aims in principle before you start thinking about a structure
What happens when you create a new structure? • You can decide: • What sort of “thing” it is • What its aims should be • Who should own it • How it is accountable to the community • Who should make the decisions
What happens when you create a new structure? • The new entity: • Can own its own money • Can enter into contracts (not the board or committee members) including employing people • Will have a written constitution • Will be registered with a regulator • Will have to do accounts and send them off
Choosing the right vehicle • Where do you want to go? • What are your options? • How should you decide?
What are the options? Profit distributing structures: • Companies limited by shares • Including PLCs • Limited Liability Partnerships • Co-operative Societies • Community interest company (CIC) ltd by shares
What are the options? Non profit distributing structures: • Companies limited by guarantee • Community Benefit Societies • Community interest company (CIC) limited by guarantee • Charitable Incorporated Organisation (CIO)
But what are we at the moment? If a group isn’t any of those, then in law its probably: • an “unincorporated association”, an association of two or more people “for common purposes” (but not business); or • a “sole trader”; or • a “partnership” (if its about business)
“Social Enterprise” “Community Development Trust” “Community Enterprise” … don’t worry too much! Basic options the same Don’t worry about labels
Company Limited by Guarantee • Common vehicle for non-profit making organisations • No shares; Members give £1 “guarantee” • Constitution called “the Articles of Association” • Can be a charity or a CIC
Community Interest Companies • Introduced as legal form for social enterprise • CIC registration: CIC regulator • “Community benefit” • Annual Community Interest Report • Standard/required provisions in M&A • Asset lock • No tax breaks
Co-operative Societies • For the benefit of those who join as a member • Democratic structure – one member, one vote • Members hold a share in the Co-op • Regulated by Financial Conduct Authority • International co-operative principles
Community Benefit Societies • Set up to benefit the wider community, not just members • Democratic structure • Members own a share • Can have asset lock, similar to CIC asset lock • Can be charitable • Generally higher set up costs than companies • NB community investment – some useful key features
Charitable Incorporated Organisations • A legal structure especially for charities • Created by the Charities Act 2006 • Only has to register with the Charity Commission • Comes into existence when registered
Charitable Status • In order to be charitable, an organisation must be “established for charitable purposes” • “Charitable purposes” means purposes which are “exclusively charitable according to the law of England and Wales” • 13 listed in the Act but a wide range in practice • Charities Act 2011
Charitable Status • Some social enterprises are charities • Some helpful charitable purposes: • Promotion of education • Promotion of arts and culture • Relieving unemployment • Health warning – Charity Commission guidance! • But what about activities?
Charitable Status • Tax treatment different to normal companies • Exempt from most forms of Corporation Tax • Other tax advantages • Access to sources of funding • Restrictions on trading • Regulation by Charity Commission • “Burning the bridge”
Pause for breath … • With me so far?
Some examples New Horizons Community Enterprise: • A charity which is a company ltd by guarantee • Formed for the regeneration of the area • Locally elected residents lead the board • With a trading company, New Horizons Enterprises Ltd • Has a library in its building
Some pointers • Charitable aims: • Promotion of education including literacy • Promotion of arts, culture • Tax advantages of charitable status • Business rates • Limiting liability….
How do you make the choice? • Assess what you want the organisation to do • Do you want to give out profits to members or investors, or is it not for profit? • Is it likely to have only charitable aims? • Is it likely to carry out only charitable activities? • Trading? • Are the tax advantages going to be important? • Is it likely to need to borrow?
How do you make the choice? • How certain are you – do you need to retain flexibility? • How are you going to raise funds?
Community managed libraries • Dealing with governance • 10th November 2017
Charity Commission Report: Tackling Abuse and mismanagement 2015-16 “Charities play a vital role in our society. When they are well run, with strong governance and leadership, they can have great impact and do a lot to support their beneficiaries.” William Shawcross, Chairman, Charity Commission
Charity Commission Report: Tackling Abuse and mismanagement 2015-16 “We have continued to strengthen our work to prevent and stop abuse and mismanagement in charities this year, both in terms of the regulatory action we have taken and in our work with charities to be more proactive and take preventative measures.”
Charity Commission Report: Tackling Abuse and mismanagement 2015-16 7 key risks/themes: Fraud, financial crime and financial abuse Safeguarding issues Abuse of charities for terrorist related purposes Governance issues – unmanaged conflicts of interest, private benefit and poor decision-making Charities in financial distress Fundraising Registration compliance
So what is the secret……… COMMON SENSE!
Back to basics Do your charity trustees know: that they are trustees their duties their liabilities! the legal structure of the charity the charitable purposes of the charity the charity’s governing document how to run a good meeting?
Beware the illnesses! Founder syndrome Dysfunctional politeness Head in the sand
Who does what? The key to a well run charity is being clear who is responsible for what: the buck stops with the trustees but unless the charity is small they cannot run it on a day to day basis the “haggling over £20 and nodding through £2m” syndrome sub-committees CEO/employees
Managing Risk Charities must manage their risks: identify the major risks that apply to their charity make decisions about how to respond to the risks they face make an appropriate statement regarding risk management in their annual report
Managing Risk Risks charities face: Governance Operational Financial External Compliance with law and regulation
Finance Duty – “Great Aunt Maud” Policy Practise Investments
Trading Charitable purposes - activities Primary purpose trading Ancillary trading Non-trading e.g. “simple” rental income Statutory exemption: the total turnover from all trading activities must not exceed the annual turnover limit; and profits must be used solely for the purposes of the charity. The annual turnover limit is £5,000 or if greater than £5,000, 25% of the charity’s gross income subject to an overall limit of £50,000. Trading companies
Conflicts of Interest Personal/non-personal Direct/indirect Private benefit STOP - declare it LOOK - check governing document & conflicts policy LISTEN - leave meeting? THINK - can they vote
Community managed libraries • Arrangements with local authorities • 10th November 2017
Where are we going today? • Legal models for working with local authorities • Looking at tools • The statutory duty of local authorities
Models of working with Councils • Legal models for working with local authorities • Independent community library • Asset owning – owns its own premised, entirely independent • Non asset owning – independently run but not owning premises • Co-produced library • Community managed – community led and delivered • Community supported – support from volunteers • Commissioned community – funded by Council but delivered by third sector body under contract
Models of working with Councils • Tools for working with local authorities • Community asset transfer • Short term lease / licence • Management agreement • Commissioned contract
Property issues –what’s on offer? Land issues? What kind of interest? What are you getting? Condition of property, plans for development On what terms? Who repairs? Is there any rent? Linked to service provision? Why? How? Restrictions on usage? What documents are needed?
LA commissioning Who is commissioning what? Grant agreement or contract Contract for services? One library, or lots? Social outcomes…
Issues for local authorities • Meeting the statutory duty • Public Libraries and Museums Act 1964, section 7: • “It shall be the duty of every library authority to provide a comprehensive and efficient library service for all persons desiring to make use thereof” • People who live, work or study in the area • Bearing in mind the need to: • Have sufficient stock • Encourage adults and children to use the service • Co-operate with other local authorities
Community managed libraries • Libraries and income generation • 10th November 2017
