With many organisations having gone through restructuring, partnering arrangements and in some cases mergers, attention is now turning to consolidation and compliance.  In this issue we will be focussing on Director’s Duties and whether trustees can be paid for providing goods and services. 

Our next issue will be out in the summer so there if there is a particular article you would like to see or jargon you would like ‘busted’ then please email us at thirdsector@jstlaw.co.uk.

PAYING TRUSTEES

We are regularly approached by charities asking whether their trustees can be paid for being trustees and for providing goods or services.  For example a charity recently asked us whether an accountant, who was on their board, could quote for their annual accounts and payroll work.

As a general rule trustees cannot be paid for actually being trustees, that is they cannot be paid for the role they play in being a trustee.  Any such arrangement requires the express authority of the Charity Commission and the situation is rare.  However, whether a trustee, such as an accountant, can bid to provide services will depend entirely upon your Memorandum and Articles* or other governing document.

If your governing document does allow for such an arrangement then it will be subject to the Charities Acts.  There are various conditions that need to be met in order to comply, for example:

• there is a written agreement between the charity and the trustee (or their company);
• the agreement sets out the exact or maximum amount to be paid;
• the trustee concerned may not take part in the decision about the making of the agreement or about the acceptability of the service provided;
• the payment is reasonable in relation to the service provided;
• the trustees are satisfied that the payment is in the best interests of the charity;
• the total number of trustees who are receiving payment or who are connected to someone receiving payment are in a minority.

Trustees must also have regard to all of the Charity Commission’s guidance and show that they have taken the guidance into account.

If the charity is also a company then the trustee will also have to take into account their director’s duties in respect of avoiding conflicts of interest and will also have a company law duty to declare an interest in the proposed transaction or arrangement with the company.

Charities should also assess their ability to maintain an arms length relationship with trustees who do provide goods and services to the charity.

(* Recently constituted limited companies will have all of their rules contained within their Articles)

DIRECTORS DUTIES

There is a common misconception that when a member organisation nominates a director, that the director is elected to represent that organisation.  This is becoming increasingly common with partnership arrangements and directors sitting on multiple boards.  It is therefore crucial that a director understands that their duty is to the company on whose board they are sitting. 

Whether you are an executive or non-executive director you are still subject to the same legal duties.  Many of these duties were known in the past as common law duties but the Companies Act 2006 ‘codified’ many of these and they are set out in the act. 

Duty to Act within Powers

This essentially means that a director can only act in accordance with the company’s constitution.  It is therefore crucial that a director is familiar with their Memorandum and Articles*, the company’s objects and the powers that the company has.

Duty to Exercise Independent Judgment

A director must not blindly follow the judgment of those who nominated them but must act independently and follow their own judgement on a decision. 

Duty to Avoid Conflicts of Interest

A director must avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.  In particular this relates to the exploitation of any property, information or opportunity that a director may become privy too.

Duty to Exercise reasonable care, skill and diligence

Arguably one of the most important duties of a director.  A director must exercise the care, skill and diligence that would be exercised by a “reasonably diligent person”.  The duty takes into account both the general knowledge, skill and experience that may be reasonably expected and also the general knowledge, skill and experience that the director actually has.

Other duties contained in the act, along with common law duties, include the Duty to promote the success of the company; Duty not to accept benefits from third parties; Duty of confidentiality; and the Duty to declare an interest in existing or proposed transactions or arrangements.

(* Recently constituted limited companies will have all of their rules contained within their Articles).

JARGON BUSTER – What is a CIO?

With so many acronyms these days, clients are often confused about what different terms mean.  In this issue we are giving the quick once over to CIO’s.

Currently many charities are company’s limited by guarantee and registered charities.  This gives the trustees the benefits of being a company, such as limited liability, but also comes with the dual compliance requirements of both the Companies Act and the Charities Act.

The Charitable Incorporated Organisation (CIO) is a new legal structure that has been created in response to charities requesting a legal form that gives the benefit of a company without these dual regulations. Essentially a CIO will be approved and regulated by the Charity Commission alone.

The Charity Commission has now published the two models that will be available for use (subject to change).  These are the Foundation Model where trustees and members are one and the same and the Association Model where the membership is wider than just the trustees.

There is still no definitive timetable for the implementation of CIO’s as final regulations still require parliamentary time.

BREAKFAST BRIEFING

JST are running a FREE breakfast seminar on Trustee’s Roles & Responsibilities on Thursday 10^th May 2012 at their offices in Liverpool.  Please visit our website or email events@jstlaw.co.uk to book a place.

KEY CONTACTS:

Heather Summers

Managing Partner

E: hsummers@jstlaw.co.uk

DDI:  +44(0)151 282 2835

Mob:  +44780 3002640

Iona Horsburgh

E:  ihorsburgh@jstlaw.co.uk

DDI:  +44(0)151 282 2869

As a general rule trustees cannot be paid for actually being trustees, that is they cannot be paid for the role they play in being a trustee.  Any such arrangement requires the express authority of the Charity Commission and the situation is rare.  However, whether a trustee, such as an accountant, can bid to provide services will depend entirely upon your Memorandum and Articles* or other governing document.

If your governing document does allow for such an arrangement then it will be subject to the Charities Acts.  There are various conditions that need to be met in order to comply, for example:

•  there is a written agreement between the charity and the trustee (or their company);
• the agreement sets out the exact or maximum amount to be paid;
• the trustee concerned may not take part in the decision about the making of the agreement or about the acceptability of the service provided;
• the payment is reasonable in relation to the service provided;
• the trustees are satisfied that the payment is in the best interests of the charity;
• the total number of trustees who are receiving payment or who are connected to someone receiving payment are in a minority.

Trustees must also have regard to all of the Charity Commission’s guidance and show that they have taken the guidance into account.

If the charity is also a company then the trustee will also have to take into account their director’s duties in respect of avoiding conflicts of interest and will also have a company law duty to declare an interest in the proposed transaction or arrangement with the company.

Charities should also assess their ability to maintain an arms length relationship with trustees who do provide goods and services to the charity.

(* Recently constituted limited companies will have all of their rules contained within their Articles)

For further information on this topic contact Iona Horsburgh

Whether you are an executive or non-executive director you are still subject to the same legal duties.  Many of these duties were known in the past as common law duties but the Companies Act 2006 ‘codified’ many of these and they are set out in the act. 

Duty to Act within Powers

This essentially means that a director can only act in accordance with the company’s constitution.  It is therefore crucial that a director is familiar with their Memorandum and Articles*, the company’s objects and the powers that the company has.

Duty to Exercise Independent Judgment

A director must not blindly follow the judgment of those who nominated them but must act independently and follow their own judgement on a decision. 

Duty to Avoid Conflicts of Interest

A director must avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.  In particular this relates to the exploitation of any property, information or opportunity that a director may become privy too.

Duty to Exercise reasonable care, skill and diligence

Arguably one of the most important duties of a director.  A director must exercise the care, skill and diligence that would be exercised by a “reasonably diligent person”.  The duty takes into account both the general knowledge, skill and experience that may be reasonably expected and also the general knowledge, skill and experience that the director actually has.

Other duties contained in the act, along with common law duties, include the Duty to promote the success of the company; Duty not to accept benefits from third parties; Duty of confidentiality; and the Duty to declare an interest in existing or proposed transactions or arrangements.

(* Recently constituted limited companies will have all of their rules contained within their Articles).

For further information and to sign up for our Third Sector newsletter, please contact Iona Horsburgh

Currently many charities are company’s limited by guarantee and registered charities.  This gives the trustees the benefits of being a company, such as limited liability, but also comes with the dual compliance requirements of both the Companies Act and the Charities Act.

The Charitable Incorporated Organisation (CIO) is a new legal structure that has been created in response to charities requesting a legal form that gives the benefit of a company without these dual regulations. Essentially a CIO will be approved and regulated by the Charity Commission alone.

The Charity Commission has now published the two models that will be available for use (subject to change).  These are the Foundation Model where trustees and members are one and the same and the Association Model where the membership is wider than just the trustees.

There is still no definitive timetable for the implementation of CIO’s as final regulations still require parliamentary time.

For further information on Third Sector Law and to sign up to our newsletter contact Iona Horsburgh

Iona joined JST Lawyers in 2009 having worked in the charity sector for over 15 years. She now specialises in assisting charities and social enterprises with legal advice. On her award win, Iona commented; ‘Receiving the award is a fantastic achievement and one I’m very proud of. This kind of recognition from The Law Society makes all the hard work worthwhile.’

Heather Summers, Managing Partner of JST Lawyers added; ‘Iona has already made a big impact at the firm so we’re all very proud of her. She does an amazing job by supporting many clients and she regularly provides free advice via a quarterly newsletter and regular seminars.’

Iona’s next free seminar – titled Understanding Your Memorandum & Articles – is taking place on Thursday 10th February, 2012 and is open to charity staff and trustees. Places at the event can be booked free of charge at www.jstlaw.co.uk/events/

So, how does this social medium work? First, you create an identity by opening an account. Then you start “following” other people. These may be a mixture of people you know, business colleagues and others you admire in your metier. Some of these will then follow you back. At the same time post your own comments. Some people get stuck here; they don’t know what to say in the allotted 140 characters. You’ll soon get the idea. The discipline of getting your point over in a few words is a good one for all communicators. You will soon find your ideas , by observing other people’s tweets, and deciding what works best for how to want to project yourself. Some businesses get their PR companies to “manage” their twitter account. While this is better than nothing, the posts tend to be bland and self-promoting. Restaurant owners who do their own are able to project their personality and promote themselves much more effectively. Russell Norman@PolpoSoho does it brilliantly, and Stevie Parle maintains a gentle repartee at his Dock Kitchen.

If you’re famous, you will naturally attract followers. Otherwise, you need to draw a bit of attention to yourself. Twitter helps you along with this, by picking up the content you tweet about and suggesting you as a follower to others. Another way is to join in conversations. When you press the reply button, you will address the other person, and if they reply back to you, all their followers will see your twitter name. If all this sounds convoluted, the best way to proceed is just to get started.

As you do this, you will come across baffling symbols like # and #FF. A # (hash tag) creates or follows a trend; the words that follow it must have no spaces. So for example #nopainnogain on your tweet would probably be gathered into the fitness arena, and you may find yourself being followed by personal trainers looking for new clients! #FF is a tradition among the twitterati to encourage their followers to follow new people they like, or simply to publicly endorse their friends. It stands for Follow Friday which is the day it all happens. And then there is the mysterious group of letters and numbers preceded by bit.ly/,  yfrog/ or ow.ly/. Click on any of these links and it takes you to the internet. This is the key to publicising a post/blog on your website. If you were to copy the link in full directly on to Twitter, you’d soon use up your 140 characters, so these agencies shorten it for you, simply and efficiently.

Why do some people get competitive about the followers they have? Having a large number of followers can give you as much credibility as a large income before the credit crunch, rather like being popular at school. But on a more practical level, the bigger the audience the more effective the message. You will notice by looking at some people’s profiles they might be following 2000 people, simply to get more followers. How can they be engaging effectively with that number? The answer is they don’t, and to me half the fun is getting to know people, and perhaps meeting up with them in real life. So, a proper social networking tool. I’d say around 200 is the optimum number of  people to follow. Another important thing is to enjoy it. I follow @sixthformpoet .

If you are working in the Food  Culture and Media sector , Twitter is almost a must if you want to keep up with all the new openings and trends, especially in London. It also has huge benefits for the latest breed of Art Private Views ( the day before the opening and just turn up ! Best with most interesting people and most to drink are @WhiteCube , @AlisonJacquesgallery and anything East End , also pop-ups, street food and mobile operators .

I hope this has whetted your appetite enough to have a go.

The premises were unable to open for business as usual due the extent of the damage sustained. The Owner did not have buildings insurance and was not in a position to pay for the repairs required. Therefore, we were instructed to provide further guidance. 

We have vast experience in representing innocent victims of road traffic accidents and have successfully recovered millions of pounds in compensation. This particular matter was pursued on a ‘no win, no fee’ basis, resulting in no legal costs being paid by the Owner.

It was essential that we acted quickly throughout as the premises had only recently opened and a loss of trade was being incurred. There were also a number of employees who were unable to work whilst the premises remained closed. Our Employment Department was able to offer additional advice regarding the employees.

The damage to the property was immediately documented to the car driver’s insurers who initially refused to consider the loss. The insurers alleged that the driver had provided false details when the insurance was taken out and that they were attempting to cancel the policy. We continued with the matter and were confident that the insurers would have to provide compensation.

All motor insurers are required to be members of the Motor Insurers Bureau (MIB) and are therefore bound by their Articles of Association. One such Article, known as Article 75, details circumstances in which motor insurers must compensate individuals, despite having cancelled insurance.

After comprehensive legal argument based on Article 75, the insurers, and their solicitors, each agreed they were required to offer compensation. A significant amount was received to carry out the repairs to the premises, with a further sum recovered for the loss of trade experienced whilst the premises had to remain closed. It was an excellent result and the Owner was extremely grateful for the assistance provided.

We are able to offer a professional and personal service on a range of issues that may arise following an accident that was not your fault. We have particular expertise in representing individuals following accidents on the road, at work and in public places. Many of the instructions received can be pursued on a ‘no win, no fee’ basis, with no deductions being made from the compensation recovered.

In addition, if you refer a friend or family member to us with a claim for personal injury, you will receive a cheque for £350 once liability is admitted[1]. If you would like any further information, or are unsure whether you are able to make a claim, please contact us on 0151 282 2828 or personalinjurydept@jstlaw.co.uk.

A CIC is a Community Interest Company and is a new type of legal structure that was introduced in 2005 to assist organisations that wanted to be identified as social enterprises.  Generally it is used by organisations that are driven by public or community benefit rather than by profit although that is not to say they are not profitable!

A CIC is set up in a similar way to a normal limited company and can be either Limited (Ltd) by shares or by guarantee.

CIC’s, unlike charities, can pay their board members and can also be useful structures to attract investment.  However there are also special restrictions for CIC’s such as an asset lock which restricts what you can do with assets of the organisation, a limit on distribution of dividends and a requirement to pass a community interest test which requires approval by the CIC regulator.

If you would like more information or advice on becoming a CIC please please contact Heather Summers or Iona Horsburgh of our Charity & Third Sector team.