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Charity law training on companies, SCIOs and conversions 11 November 2013. Summary of today’s format. 2.00pm – 2.15pm Introductions 2.15pm – 2.45pm Presentation on incorporation 2.45pm – 3.30pm Case Study 3.30pm - 4.00pm Questions and answers/discussion.
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finance…generally taking on risk, then it may make sense to use an
incorporated vehicle – this is because – in most cases –
incorporation and limited liability will provide some degree
of protection if things go wrong.
Codified in Companies Act 2006
Summary – act fairly, honestly and in the interests of the
tried and tested
funders comfortable with this kind of vehicle
need to comply with Companies Act 2006 and other legislation
dual registration and regulation for charitable companies
publicity (e.g. accounts are public documents)
directors’ dutiesPros and cons of being a company
members enjoy limited liability
does not need to be (indeed cannot be) recognised as a charity and is therefore subject to less regulation
can act more commercially than charities (but remember grant criteria…?)
not the same tax benefits as a charity
regulation by CIC regulator
allows community benefit/ private gain
allows equity investment but caps on returns (for CICs with shares)
directors can all be paid
its assets are subject to a ‘asset lock’ which means that all surplus assets must be retained for use for the company’s social or community purpose, and if transferred out of a CIC, the transfer must either (a) be made for full consideration; (b) generally be made to another asset locked body (a CIC or charity); or (c) be otherwise made for the benefit of the community
it cannot be a charity
it does not benefit from as favourable tax treatment as that applied to charitiesPros and cons of being a CIC
“A new legal form which will allow Scottish charities to incorporate without having to become a company.”
Regulations impose additional requirements on contents of constitution:-
Check existing constitution to confirm that organisation has the power to convert to another legal form.
Conduct "due diligence" on existing organisation (e.g. identifying contracts, employees and assets and whether any third parties such as lenders will need to consent to the change).
Have members approve the "conversion" [subject to OSCR's consent]. This is usually done at a meeting of the members, so bear in mind notice periods.
Assuming members approve the conversion, seek OSCR consent to changes ("Stage 1 consent"). Amend and finalise legal documentation accordingly.
Assuming OSCR issues "Stage 1" consent, submit "Stage 2" consent request to OSCR.
Assuming OSCR issues "Stage 2" consent, execute Transfer Agreement etc.
Notify OSCR that conversion has taken place. Deal with practical matters such as changing bank accounts, notifying suppliers and parents etc.