Governance and Charity Law
Good governance and understanding charity law is important.
Board members and trustees should be aware of their responsibilities and good practice in relation to governance of a voluntary sector group, organisation or charity. It can be daunting if you are new to this and practice does change of time, so it is worthwhile keeping yourself up to date. This might be around how you identify and manage risk, how you conduct the business of board or committee meetings, what policies you have and so on…
Our governance training sessions are a good place to start for anyone new to a committee or board of a voluntary sector group, organisation or charity. They act as a good refresher too for those that have been doing this a while! Our Better Governance and Accountability session covers Roles & Responsibilities; Effective Board Meetings; Policies etc and its a great opportunity to ask questions and learn from others.
One to One Support - Governance Surgeries
Board members play a key role; providing leadership and direction, ensuring compliance and generally being the advocates for their organisation or group. Sometimes they need a little support, eg with understanding their role or reviewing governing documents and policies. A surgery appointment with our Sector Development Officer and governance expert, Phil Broadley can point you in the right direction. These are one to one discussions to identify actions to move forward and take place as 45 minute bookable appointments over Zoom or telephone. Start-ups new to all of this also welcome and Phil is also happy to answer email queries, please email email@example.com
Managing Risk: Unincorporated Organisations
Managing Risks: Unincorporated Organisations
- Is your group or organisation an unincorporated association?
- Do you rent or lease property, employ staff, or enter into contracts?
- Do you know that having charitable status may not be enough to protect you when things go wrong?
As an unincorporated association, a group or organisation has no separate legal identity from its trustees and so is not able to enter legal arrangements such as leases or contracts. Instead, the trustees must enter into arrangements in their own name and therefore become personally liable for any debts that are incurred. Many may think that having charitable status means that liability lies with the organisation, but this is not the case. Having only charitable status does not offer the same “limited Liability” protection of other corporate structures. This means that if an unincorporated business runs out of funds, the people responsible for running it will have to pay any remaining outstanding debts from their personal assets. For this reason, we would only advise groups to consider being unincorporated if they do not plan to rent or lease property, employ staff, or enter into contracts. Under such circumstances we highly recommend that groups consider converting to one of many other options available.
GCVS Sector Development Officer, Phil Broadley, can advise on incorporating your organisation. For further information email the Sector Development team at firstname.lastname@example.org
Background Additional Information
The terms “Incorporated” and “Unincorporated” both stem from the Latin word “corpus”, meaning “body”
That being the case therefore, incorporated organisations are independent legal entities (or bodies) entirely separate from those running them, whilst unincorporated organisations are simply extensions of the people who run the organisation, i.e. they are not a separate legal entity/body.
One of the chief implications of this legal distinction is that people running unincorporated organisations (in voluntary organisations this would normally be the Management Committee) are generally personally liable for the organisation’s financial liabilities, whilst the people running an incorporated organisation are generally not liable for the business’s debts.
This means that if an unincorporated business runs out of funds, the people responsible for running it will have to pay any remaining outstanding debts. On the other hand, if an incorporated organisation runs out of money, its owners are generally not legally required to pay any of its outstanding debts, as they are deemed to have what is called “limited liability” *
*NB: It is important to note some important points with regard to the concept of “limited liability” as it applies to those running organisations in the voluntary sector:
Although the concept of “limited liability” limits personal financial liability, if an incorporated organisation runs into financial difficulty, it should be borne in mind that this limit on liability does not apply if the cause of the situation was as a direct result of any of the following:
- recklessness, or
- any other form of mismanagement on the part of the people running the organisation.
The Scottish Governance Code lays out five principles for all boards and committees. Principle Five relating to Control is particularly relevant here.
Good Governance Guides
There are a number of useful guides that demonstrate good practice for governance and supporting sustainability. If you are looking for ideas or to check your organisation is working along the right lines, these can be helpful with checklists and examples:
- The Good Governance Code – Scotland’s Third Sector Good Governance Forum produced a code based on 5 core principles – Organisational Purpose, Leadership, Board Behaviour, Control, Effectiveness
- The lasting Difference – In it’s fifth edition it provides straight forward suggestions around Involvement, Income Generation, Innovation, Improvement and Impact Measurement
- Lasting Leadership – Bringing together the leadership in your organisation and sustainability with topics Succession Planning, Lateral Leadership, Self-care & Next Generation and Leadership as an Equalities Issue
Our general Capacity Building Resource Page complied with partners from Glasgow Makes Connections also has a wide range of information.
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