What is the legal meaning of a structure for a community group, voluntary organisation or similar “Third Sector” body?
One of the biggest misunderstandings I come across is that “being a charity” is, in itself, a form of legal structure. In fact being “charitable” is more a description of a special combination of particular features that an organisation may have – regardless of its actual legal form or structure.
There are currently four basic types of legal structure now commonly used by “Third sector” organisations working for some wider community or public benefit, with a fifth on its way and a sixth that is falling into disuse.
(i)A Club, Society or Association is a gathering together of individuals to do things together according to a mutually agreed set of rules, often called its “constitution”. This type of has some degree of open access to membership, and it is only the membership acting democratically together who can change the constitution or rules.
(ii) A Trust is usually brought into existence by a special type of legal act, known as a “deed”, which sets it up, although trusts can also be set up in other ways, such as by a will. Although a trust can choose its initial rules, once set up they can be very difficult to change. Usually the existing Trustees have the sole power to appoint any new ones. Trusts are also treated in law as being a collection of the individual trustees.
(iii)Many voluntary organisations, particularly those which employ staff, own or lease property or need to sign contracts, find it better to operate through an organisation which has its own separate legal identity. The usual form for this is a Company Limited by Guarantee. This has to operate within the requirements of Company Law. In practice such a company will require at least two members and two directors in order to operate within the voluntary sector.
(iv)For Third sector organisations whose activities are mainly dependent on trading or similar business-type activity, but which are set up with the additional purpose of providing a wider community benefit, there is now another type of company structure available called a Community Interest Company.
(v) A new type of structure called a Charitable Incorporated Organisation will soon be available, but only for organisations which have all the necessary characteristics of being charitable. This will be like a company and have its own separate identity in law. The precise requirements and characteristics are currently being decided upon, after consultation with the voluntary sector.
(vi)The last common type of structure is what is sometimes called a “bencom”. This is a type of Industrial and Provident Society set up for the benefit of the wider community rather than just for its own members, as would be the case with an ordinary cooperative. This “bencom” structure is only rarely used nowadays for new organisations.
Community Groups Legal Advice Worker, Avon and Bristol Law Centre
Tel: 0117 924 8662 Email: firstname.lastname@example.org
This article was originally published in March/April 2009 Thrive Magazine