Voluntary (parent-let) groups
Just because your group is not registered as a charity or incorporated does not mean you are nothing. In contrary: The Charities Act 2011 defines a charity as an institution which is established for charitable purposes such as the advancement of education.
This means that by definition your unregistered and unincorporated group is in fact a charity and falls under charity law. Please also note that unincorporated groups with an income of at least £5,000 per year are required to register with the Charity Commission (or as an alternative to incorporate as a private business or Community Interest Company).
Please further note that as long as your group is not incorporated, you and others who lead the group are liable if things go wrong. You can partly mitigate this by getting public liability insurance for your unincorporated group.
Registration and incorporation
These are not the same.
If your group/school is only a charity (see above), it falls under Charity law and is required to register with the Charity Commission once your annual income exceeds £5,000. You can continue to run your group on this basis. However note that your group is not a legal body and the members of the management committee are personally liable with their private wealth for debts and damages, and are employers of the teachers.
We therefore recommend incorporating your group quite early on, in particular when you work with children in the absence of their carers, take fees, rent rooms or employ teachers. Incorporation means that your group or school becomes a legal body independent of the management committee (who turn into trustees or directors) and liability stays with the group/school.
You can incorporate as a private business (Limited Company), a Community Interest Company, a Charity with Limited Company, or – since 2013 – as a Charitable Incorporated Organisation.
The usual situation is that you are a small, but growing group with limited annual income of a few thousand pounds. You are trading, i.e. taking payments for providing educational services. And normally you have teachers or group leaders working for you and pay them either expenses, a fee or a salary. (Please see Slang buster on the question whether your teachers are employees or volunteers. But it is not really important in this context whether or not your teachers are your employees.)
The most important things to consider are:
- Who controls the organisation (i.e. individuals or the community, are the trustees/directors elected)?
- (Who is liable if things go wrong?)
- Administrative load
- What individuals can be paid for doing the administrative work?
- (Can the incorporated group apply for charitable funding?)
As a basic principle: it is easier to go from the left to the right in this diagram, i.e. from a business to a more ‘charitable’ framework, than the other way round. So, you could start as a small business and then take your time to develop everything you need for a CIC, CIO or charity before converting.
If you manage the group on your own, make all decisions and have no particular interest in involving the community, the easiest option is setting up a Limited Company. This involves the least associated administrative work, gives you sole control and you are free to pay yourself from any profits you make.
When you wind up your business, you can keep all assets after payment of any debts.
Though companies cannot apply for charitable funding, they can accept donations and you can always run it as a social enterprise.
Community Interest Company (CIC)
Community Interest Companies are managed by one or more directors and have special rules to make sure they serve a defined ‘community interest’. In your case, this would be something like ‘to provide education to children bilingual in XX language’. Also, all assets belong to the CIC, NOT the directors. This means that if you wind up the CIC, anything that belongs to the CIC (the ‘assets’, such as computers, books, stationary, money) need to be given to another, previously nominated CIC or charity.
You have some choice over the level of involvement of, and control by, the community.
The administrative load is relatively low and CICs can apply for some/most charitable funding.
Charitable Incorporated Organisation (CIO)
Charitable Incorporated Organisations are charities and therefore run by trustee(s). These trustees cannot (easily) be paid for doing the administrative work, i.e. an individual would need to decide whether they want to control the school as a trustee or get paid for doing the administrative work.
Trustees are either elected by the CIO’s membership (association model) or by themselves (foundation model).
The administrative load is a bit higher than for a CIC, but as a charity the group/school can apply for charitable funding.
Charity with Limited Company
This is the classic English and Welsh model which is complicated and very heavy on administrative load.
Why is this?
For hundreds of years before 2013, the only organisations that could incorporate were companies. With the rise of charities, the Charity Commission was founded to hold up certain standards, and charities were required to register with the Charity Commission and report to them to prove compliance.
However, since a charity cannot trade, till 2013 they had to set up Limited Companies that donate all profits to the charity. Therefore, these charities have to fulfil all requirements as set by the Charity Commission and report to them, as well as report to Companies House and do a tax return with HRMC.
We do not usually recommend this framework to supplementary schools and groups.
We are happy to discuss your needs and suitable organisational frameworks with you. Please get in contact.