Articles of association/Constitution
These are written rules about running the company or charity which are set up at foundation. They need to be filed with Company House/the Charity Commission. There are model policies for all frameworks available and they can be changed later on.
Association model (CIO)
In this model, the members of the CIO elect the trustees and the trustees have terms of service.
Regulatory body and register for companies, i.e. sole traders, companies and CICs.
Regulatory body and register for charities, i.e. unregistered charities, CIOs and registered charities.
There is no overarching definition of an employee. For example, the same person can count as an employee for insurance purposes, but not for tax purposes. Please note that you cannot decide whether or not someone is an employee. For example, if you give your teachers a contract that states they are self-employed does not make them self-employed.
A volunteer is a person who by their own choice gives their time unpaid. They can be reimbursed for reasonable expenses such as costs for travel or – against receipt – purchases made for your group or school.
Foundation model (CIO)
In this model, trustees elect themselves and they can stay on for an indefinite period of service.
Income and profit
Please make sure that you note the difference between income and profit. Income is all your groups’/school’s takings, i.e. fees, donations, charitable funding and payments for sales. Profit is what is left of your income after all payments have been made, i.e. costs related to teachers, administrators and volunteers, rent of rooms, purchases, insurance…
Income/revenue and costs/expenses are normally counted monthly or termly and over a financial year.
Limited by guarantee
Except in cases of gross negligence, trustees or directors are only liable to the guaranteed nominal amount, normally £10. Surplus income (profit) is used to further the non-profit aims of the business or charity, rather than being used as a source of personal income.
Limited by shares
Except in cases of gross negligence, trustees or directors are only liable to the nominal value of their shares. This is a good choice if you want to run a company with the intention of taking some or all of the profit as personal income.
Memorandum of association
This is a legal statement signed by all initial founders agreeing to form the company or charity. It needs to be filed with Company House/the Charity Commission. There are models available for all frameworks.
Please see below for the trustees’ 6 main duties as set out by the government. This is work trustees have to give voluntarily, i.e. unpaid. You will see that it is sometimes difficult to differentiate it from administrative work. This is one of several reasons why it is difficult to pay trustees for managing a charity.
- Ensure the charity is carrying out its purposes for the public benefit, i.e. trustees must make sure that the charity is carrying out the purposes for which it is set up, and no other purpose.
- Comply with your charity’s governing document and the law, i.e. trustees should take reasonable steps to find out about legal requirements, keep the charity’s details on the register up to date and ensure the right financial and other information is sent to the commission in their annual return or annual update.
- Act in the charity’s best interests, i.e. trustees must not put themselves in a position where their duty to the charity conflicts with their personal interests or loyalty to any other person or body. Trustees must not receive any benefit from the charity unless it is properly authorised and is clearly in the charity’s interests; this also includes anyone who is financially connected to you, such as partners or children.
- Manage the charity’s resources responsibly, responsibly, reasonably and honestly, i.e. trustees must make sure the charity’s assets are only used to support or carry out its purposes. Trustees should put appropriate procedures and safeguards in place and take reasonable steps to ensure that these are followed.
- Act with reasonable care and skill; i.e. trustees should give enough time, thought and energy to the role, for example by preparing for, attending and actively participating in all trustees’ meetings.
- Ensure the charity is accountable, i.e. trustees must comply with statutory accounting and reporting requirements.