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Legal Structures including Ltd Company
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Legal
Structures
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A legal structure
is the means of organising activities or a project formally that
is recognised in law.
Some arts organisations
operate within a Local Authority's structure, or within another
organisation such as a University or school, but most arts organisations
are independent and need to have their own recognisable legal structure.
The main reasons
for establishing a structure are to ensure stability and certainty.
The structure determines who is legally and financially responsible
for the organisation and how major decisions, such as to close the
organisation, have to be made.
You need to
know
- what legal
structure(s) the organisation has
- how the
legal structure operates
- what the
constitution is
- what role
you have in its operation
- who are
legally and financially responsible for the organisation
- what actions
you need to take or ensure others take
- what knowledge
you need of legal duties, powers and liabilities
- where to
go for specialist advice if needed.
The following
legal structures are all used by arts organisations:
Sole Trader
Partnership
Unincorporated Association
Trust
Limited Company with Shares
Company Limited by Guarantee
Industrial and Provident Society
The most common
structure in use in the arts is the Company Limited by Guarantee.
Incorporation
and Limited Liability
One important aspect of a legal structure is whether or not it provides
incorporation and limited liability. Incorporation
means that the organisation has its own identity in law, distinct
from that of its individual members. The organisation is a "legal
person", and can enter into contracts etc. Limited liability
means that the personal assets of individuals in the organisation
are protected, provided that at all times the organisation has operated
legally. Any financial claims made during its normal operation,
or if the company collapses and owes money, will be made against
the company.
Legal Structures
Compared
The following table shows the vocabulary used to describe the various
legal structures’ governing bodies and constitutions, and shows
whether they provide incorporation and limited liability, are acceptable
for charitable status and which sector they usually operate within.
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Co Ltd
by Guarantee |
Co Ltd
by Shares |
Trust |
Unincorp.
Assoc. |
Partnership |
IPS |
Governing
Body
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Directors |
Directors |
Trustees |
Committee/
Officers |
Partners |
Council |
Does
it have a Membership?
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Yes |
Yes |
No |
Yes |
No |
Yes |
Name of
the Constitution
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Memorandum
& Articles of Association |
Memorandum
& Articles of Association |
Trust Deed
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Constitution
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Partnership
Deed |
Rules |
Name of
any specific Legislation
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Companies
Acts |
Companies
Acts |
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Industrial
&
Provident Soc. Acts |
Does it
have Incorporatn and Limited Liability?
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Yes |
Yes |
No |
No |
No |
Yes |
Is Charitable
Status possible?
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Yes |
No |
Yes |
Yes |
No |
No (some
Exceptions) |
| Which Sector(s)
does it usually belong in? |
Non-profit/
charitable |
commercial |
Non-profit/
charitable |
Non-profit/
charitable |
commercial |
Non-profit |
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The Constitution
The constitution provides the framework within which the organisation
must operate. If you are involved in the running of the legal structure,
you will need to read and understand the constitution, and be aware
of the following (where relevant):
- how the
governing body / directors / trustees are appointed
- who are
the members
- how meetings
are called (membership and governing body)
- what minutes
and other records must be kept
- how votes
are taken (membership and governing body)
- what annual
report and accounts are required
- when and
how the AGM must be held
- how to alter
the constitution.
Company Secretary
If you are the Company Secretary of a Limited Company, in addition
to the above list, you will be responsible for ensuring that the
following are done:
- calling
and minuting meetings
- submitting
the necessary forms to Companies House
- completing
the registers of directors, secretaries and members
- submitting
annual accounts and report to Companies House.
The
Company Secretary could be liable with the Directors for fines
for any failure in the administrative management of the company.
A Limited Company
is required to have a registered office, at which it can be contacted,
and the registers must be kept there available for inspection. The
company must have certain information on its letterhead, including
its full name as registered at Companies House, and its number and
registered office address. Its full name must also appear on cheques.
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Key Resources on Legal Structures
Voluntary
but not Amateur: A Guide to the Law for voluntary organisations
and community groups
by Jacki Reason, Ruth Hayes and Duncan Forbes
Pub: LVSC 6th edition 2000 £22.95 ISBN 1 872582 71 0
The companion volume to Just About Managing. A clear, concise
guide to the major legal aspects of running a smaller voluntary
organisation. Very valuable reference which provides endless answers
on running your organisation's legal structure, employing people,
finances, health and safety, insurance, premises. Highly recommended.
Voluntary
Sector Legal Handbook (2nd
Edition)
by Sandy Adirondack and James Sinclair Taylor
Pub:
DSC 2001 ISBN 1-900360-72-1 £42 for Voluntary Organisations, £60
for others [£50.50 inc. p&p for Vol Orgs]
The second edition of this essential reference work on all things
legal. Review
The
Company Right or Wrong? - The Pros and Cons of Incorporation
for Charities and Other Voluntary Organisations (Trustee
Briefing No. 3)
by NCVO
Pub: NCVO 2nd edition 1997 £4.00 ISBN 0 7199 5126 0 If the
company limited by guarantee is being considered as your legal
structure, there is excellent information on what protections
it offers, the liabilities of those involved, the extra administration
and costs, and the loss of privacy. This booklet enables you to
make an informed choice. It outlines the choices of legal structure
available to the non-profit / charitable organisation, and explains
incorporation and limited liability.
Sinclair
Taylor & Martin Company Handbook and Registers for Voluntary
Sector Companies Limited by Guarantee
By Sinclair
Taylor & Sandy Adirondack
Ring-binder, 196 pages, 1st edition 1999 £35.00
This comprehensive and easy-to-use publication is suitable for
all voluntary sector companies limited by guarantee without a
share capital, whether charitable or non-charitable. With regular
updates available it provides combined company registers, a handbook
covering the requirements of company law, specimen copies of company
forms, storage space for annual returns, copies of company forms
and other company records.
Available from Sandy Adirondack (not SAM's Books) 39 Gabriel
House, 10 Odessa Street, London SE16 7HQ
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