Friday, 25 February 2011

Charitable definition under the Charities Act (NI) 2008 Part 1

Under the 2008 Act a "Charity" is an institution which is established for charitable purposes only. But what constitutes a "charitable purpose"? For the answer to that question we must examine section 2 of the Act.

Under section 2 the purpose must fall within one of the descriptions listed in Section 2(2) AND be for the public benefit.

The descriptions listed in s2(2) are as follows:

(a)the prevention or relief of poverty;.

(b)the advancement of education;.

(c)the advancement of religion;.

(d)the advancement of health or the saving of lives;.

(e)the advancement of citizenship or community development;.

(f)the advancement of the arts, culture, heritage or science;.

(g)the advancement of amateur sport;.

(h)the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;.

(i)the advancement of environmental protection or improvement;.

(j)the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;.

(k)the advancement of animal welfare;.

(l)any other purposes within subsection (4)

Subsection 4 goes on to include:

(a)any purposes not within paragraphs (a) to (k) of subsection (2) but recognised as charitable purposes under existing charity law or by virtue of section 1 of the Recreational Charities Act (Northern Ireland) 1958 (c. 16);.

(b)any purposes that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of those paragraphs or paragraph (a) above; and.

(c)any purposes that may reasonably be regarded as analogous to, or within the spirit of, any purposes which have been recognised under charity law as falling within paragraph (b) above or this paragraph..

In effect, the Act introduces for the first time a statutory definition of a charity. Any organistion contemplating the adoption of charitable status must satisfy one of the aforementioned descriptions. The organistion must only exist to advance or or more of these purposes.

Sunday, 23 January 2011

The Pension Debate & Social Enterprises

The Department of Health in England has been quick to point that that the transfer of NHS pensions to a 'Health-care providing Social Enterprise' does not set a new precedent for a uniform transfer of NHS pensions.

Over 1,000 employees have moved from the NHS to Anglican Community Enterprise and importantly, their NHS pensions have moved too. Many NHS employees have in the past been very reluctant to make the switch due to the fear that they would lose their pensions if they took up employment with such Government backed social enterprise initiatives.

The Government however finds itself in an awkward position. Giving a blanket assurance that all pensions will be protected would certainly give re-newed impetus to its "Right to Request" policy but would be an expensive measure. The approach at present appears to advocate pension transfer if certain criteria are met. Whilst the Anglican Community Enterprise was successful there is no guarantee that future NHS spin-out social enterprises would enjoy a similar result.

Whilst such uncertainty remains, considerable opposition will continue to be voiced, and social enterprise involvement in health and social care provision will be curtailed. Many NHS employees have yet to buy into the social enterprise concept in its present form. The onus is now on the Government to allay those fears.

Monday, 13 September 2010

Charity Act (NI) 2008

The implementation of the Charity Act (NI) 2008 may now be delayed due to a technical issue with the legislation itself in the spotlight and the definition of a "charitable purpose" in particular coming under scrutiny.

When the legislation was originally drafted it incorporated existing legislation from both England & Wales and Scotland. However the law regarding the 'charitable purpose' differs between England and Scotland and so the the NI version in effect contradicts itself.

It now appears that the Act may have to be amended which will result in the new registration process for charities being delayed.

Sunday, 12 September 2010

Can Charity Trustees be Paid?

The short answer to this question is generally, no.

However, there are limited circumstances where a trustee can be paid by the charity for services provided to or on behalf of a trustee which go above and beyond the normal duties of that person in his or her trustee role.

A number of conditions must be met before any payment can be made:

-The charities governing documents must give an express power to remunerate the trustee.

-There must also be a written agreement between the charity and the trustee to be paid which should set out the minimum and maximum that the trustee can be paid. To avoid any conflict of interest the trustee should not sit partake in the decision made by the board to enter into the agreement.

-The payment must also be reasonable and must be in the best interests of the charity.

-The total number of trustees who are receiving payment must be in the minority.

-There is an onus on the board to adhere to the "duty of care" as laid out in the Trustee Act (NI) 2001 (2000 Trustee Act in England & Wales)

Trustees can of course recover reasonable out of pocket expenses.

Wednesday, 25 August 2010

Community Benefit Societies & The Asset Lock

In recent years Community Benefit Societies (BenComm's) in England & Wales and Northern Ireland have had the option of introducing an 'asset lock' within their legal framework which ensures, that upon dissolution or amalgamation, the assets will be retained permanently for the benefit of the community. This also prevents the possibility of the assets being redistributed to members upon a conversion from a Society to a Company.

Monday, 23 August 2010

Protecting the Social Mission through your legal structure

The social mission is the common strand which runs through every social enterprise yet it can quickly become subservient to commercial pressures as organisations become increasingly fixated on the financial bottom line. This may occur despite the best intentions of those who run such enterprises, but to avoid such potential dilemmas it is perhaps prudent to build in safeguards which will protect the social theme.

One way of acheiving this is to articulate the social mission in the enterprise's Memorandum and Articles of Association (the governing documents/constitution). Through clearly stipulating the social objectives of the enterprise such documents can help focus those in charge and maintain standards. The governing documents can also be drafted in such a way as to ensure that profits are retained to fund the social mission. Assets can also be 'locked in' to the enterprise so that their benefit will be retained for the community in the event of a sale/dissolution of the company.

Such safeguards are useful but have their limitations in a traditional company structure as it is possible for the board to remove such clauses from the constitution if a majority agree.

As such it may be beneficial for a social enterprise to employ the Community Interest Company structure as a security blanket with which to enfold the normal company arrangement. The Community Interest Company structure contains an asset lock which is legally enshrined and cannot be removed. There are also caps on the ways in which profits may be distributed and any social enterprise that wishes to adopt this structure must pass a community interest test which ensures that the company will carry out activities which benefit the community.This reporting obligation is on-going and must be prepared at the end of each financial year, thus ensuring that the enterprise does not take its 'eyes of the ball' regarding the social mission.

Another way in which the social mission can be protected is by ensuring democratic control of the enterprise. To this end a co-operative type structure (Community Benefit Society)may be employed which encompasses the concept of "one member, one vote". By allowing each member an equal vote regardless of their share capital it would be hoped that vested interests could not reduce the 'social scope'. The Community Benefit Society structure also prevents the distribution of profits to the members; they must be retained for the benefit of the community. Upon dissolution or winding up of such a society only the amount invested by members may be re-claimed. Any other assets must pass for the benefit of the community.

The social mission can be protected in different ways through the effective implemenation of varying legal structures. Which one suits your enterprise best will often depend on the your particular circumstances and goals.

Wednesday, 18 August 2010