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COMPANIES LIMITED BY GUARANTEE, INFORMATION ON GUARANTEE COMPANIES REGISTRATION. BENEFICIARIES WHO BECOME TRUSTEES

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Our fee for registering a company limited by guarantee is ONLY £42.00. This type of company is normally incorporated for non-profit making functions. The company has no share capital. Common uses of guarantee companies include clubs, membership organisations, sports associations and charities. When first setting-up a business there are many issues to consider. You need to decide whether or not to incorporate your business, and to choose a structure for your business. There are several types of legal business entities which you can choose to operate as. For more information on these choices, follow the links below. We advise that professional legal and financial advice is obtained before a final choice of business entity is made. Sole Trader (Self-Employed) Limited Company Public Company Company Limited by Guarantee Limited Liability Partnership Branch or Place of Business Coddan is a leading service provider in the field of English, Scottish and Irish company formation and company registration. We can help you in starting a business in England, Wales Scotland & Northern Ireland. Over 95% of our companies are incorporated within 4-8 hours. The electronic submission of information enables a fast company start-up satisfying all of the required legal formalities: a director, a secretary, a registered office and shareholders. Our electronic filing software has been approved by Companies House.

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EFFECTIVE MANAGEMENT

Meaning Of Words & Expressions Used:

Trustees: Means charity trustees. Charity trustees are the people who are responsible for the general control and management of the administration of the charity. In the charity's governing document they may be called trustees, managing trustees, committee members, governors, or directors, or they may be referred to by some other title.

Relative: Should be considered in the widest sense of anyone closely connected to a user who would be considered to have a clear and direct interest in how the charity is run. This might include blood relations, relatives by marriage, a partner of the same or different sex, step children or children outside of marriage.

Users: In this section includes anyone who uses or benefits from a charity's services or facilities, whether provided by the charity on a voluntary basis or as a contractual service, perhaps on behalf of a body like a local authority. "User" will mean different things to different charities, and a number of people around the person directly receiving a service will also often benefit from the service. For instance in a charity that undertakes research into a particular medical condition, the "user" could be the person with that condition, his or her carers, medical and educational professionals offering advice on the condition and so on. Even if support is not provided direct to relatives, guardians or carers, they might have a clear and direct interest in how the charity is run because of their relationship and responsibility, sometimes financial or legal, for the actual users.

Effective management. The inclusion of users as trustees is a decision that each charity should consider based on its own circumstances and needs. User trusteeship will be appropriate for some charities but not for others. First and foremost, each charity should consider whether user trusteeship would enhance the effective management of the charity and have a positive impact on the delivery of its services.

Users can contribute their direct experience to the development of services and help other trustees develop a greater knowledge of the user perspective. Taking on trusteeship can restore a sense of ownership and empowerment to users. It can help reduce inequality and discrimination. It can increase support for a charity among other users, and lead to more cohesive communities. It can broaden a charity's contacts and influence and, sometimes, open up avenues of funding that were previously closed.

RESPONSIBILITIES OF TRUSTEES

All trustees, whether they are users or not, have responsibilities in law (for more information: UK Trustee Delegation Act, 1999. To summarise, trustees have full responsibility for their charity and must:

Act together with the other trustees and in person and not delegate control of the charity to others. Act strictly in accordance with the charity's governing document. Act in the charity's interests only and without regard to their own private interests. Manage the charity's affairs prudently and take a long-term as well as a short-term view. Not derive any personal benefit or gain from the charity without express legal authority.

It is important that anyone appointed as a trustee is made fully aware of his or her responsibilities and liabilities. It is unfair to impose on someone a range of duties that that person cannot properly understand and cannot, or does not want to, carry out. User trustees may sometimes feel that they are appointed solely to advise on issues of service delivery, or to speak on behalf of the users. This is not the case. They have equal standing with all other trustees and should see their role not just in terms of contributing to improvements in services. Effective trustees are those who contribute to maintaining high standards of governance and management as well as to improving service provision. There is no such thing as a single interest trustee.

As with any other trustee, induction for user trustees at the start of trusteeship and continuing training and support thereafter are very important. Effective training for all trustees will help to consolidate a person's strengths, to minimise weaknesses and to make up for any lack of knowledge and experience. It is important for charities to ensure that all meeting arrangements are fully accessible to all trustees in terms of physical access and timing and that support systems are in place for any trustee who needs them.

CONFLICTS OF INTEREST

As mentioned above, all trustees must act only in the best interests of the charity and not for their own private interests or gain. There may be situations where a trustee's own interest and the interests of the charity arise simultaneously or appear to clash. For example, in a charity providing grants for educational purposes, a child of one of the trustees might apply for support. Or a user trustee in a charity that helps people with cerebral palsy might apply for assistance from an independent living scheme run by that charity. Obviously these trustees would be in a position where they might gain from the award of a grant or direct assistance. The issue is not the integrity of the trustee concerned, but the management of any potential to profit from a person's position as a trustee.

Charity transactions that are affected by a conflict of interest are valid unless and until they are challenged by us or by someone interested in the charity. Obviously, no transaction that is in the charity's interest to sustain is going to be challenged, even though it is affected by a conflict of interest. But if a conflict of interest transaction is challenged, it is at risk of being invalid unless it is authorised. This may have legal consequences (for example, a grant will, if invalidly made, have to be repaid to the charity). It is in the interests of the trustees themselves and the public image of the charity, that clear methods of demonstrating that any potential conflict has been avoided are used.

As a general principle, trustees cannot receive any benefit (which includes services, facilities, funds or other benefits of measurable value) from their charity unless they have express legal authority to do so. This legal authority will come either: from a clause in the charity's governing document; or where there is no adequate clause in the governing document, from us or the Court.

This does not include the repayment of reasonable out of pocket expenses for trustees. Any costs that are necessary to allow a trustee to carry out his or her duties as a trustee can be classed as expenses and recovered by the trustee or met directly by the charity. This may include travel costs and the cost of providing care for a dependent whilst attending a trustee meeting, or when undertaking trustee business. It may also include the cost of providing documents in Braille or on audio tape for a trustee who is blind, or providing special transport, equipment or facilities for any trustee with a disability.

The principle that a trustee cannot receive any benefit works on the basis that if trustees are not allowed to receive any benefits from their charity, they will not have any conflict of interests when they come to allocate charity resources. It is part of a wider rule that trustees should not put themselves into a position where their duties as trustees might conflict with their personal interests. Trustees who are also users of the charity's services are potentially in a position of conflicting interests because of their dual involvement, and should be mindful of the need to identify any conflicts.

All trustees, whether users or not, need to be alert to possible conflicts of interest and to minimise their effects. A key aspect of minimising the effect of conflicts of interest is to be open and transparent about such situations wherever they arise. We recommend that all trustees advise their charity of any actual or potential conflict of interests of which they are aware. However, even if a trustee advises their charity of a potential conflict, if there is no actual authority to allow the trustee to benefit, this will not necessarily eliminate the risk that a transaction that directly affects his or her own interests will be invalid. But if a trustee is open about the fact that he or she has a personal interest in a particular transaction of the charity, it is less likely that the transaction will be thought not to be in the charity's interests, and, therefore, less likely that it will be challenged.

If conflicts of interest are ignored they might eventually damage the charity. Transactions, including the provision of services to users, might be challenged if they are found to have been affected by a conflict of interest. Beyond this, conflicts of interest can result in resources being misused, funders' and donors' expectations going unmet, other users being discriminated against and, ultimately, a charity being run for self-interest against all the principles of charity.

Where we find a charity to be run for self- interest, we will use our powers to correct the situation, ensuring that the activities of the organisation remain wholly charitable. A trustee who knowingly receives a benefit from the charity without proper authorisation will be in breach of trust and may be required to pay back to the charity any gain he or she has made.

Charities might wish to establish a register of interests for their trustees. Individuals are able to record any actual or potential conflicts openly. We recommend that such a list be updated regularly.

Charities might also consider establishing a policy on how they deal with any conflicts that are likely to arise as a result of the work they undertake. This can include guidance on when a trustee needs to withdraw from certain decisions. Even if a trustee does withdraw from a decision that directly affects his or her own interests, this will not necessarily eliminate the risk that a transaction that results from the decision will be invalid. For that, there must be an explicit authority to allow the trustee to benefit, if he or she withdraws from the decision. But if a trustee does withdraw from such a decision, it is less likely that the transaction that results from it will be thought not to be in the charity's interests, and, therefore, less likely that the transaction will be challenged.

APPOINTMENT OF USER TRUSTEES

Charity's governing document may lay down rules as to who can be its trustees. We can always give a charity advice on whether or not it has adequate legal authority to appoint user trustees. We will, if necessary, provide that authority for the charity. This authority would be subject to the condition that user trustees are excluded from making decisions directly affecting their or their relatives', interests. There will then be no legal risk to any transaction that results from such a decision, so long, of course, as the trustee(s) comply with the condition.

If the charity has a power to amend or change its governing document, it may be possible to use this power to remove a bar on the appointment of user trustees but we recommend that trustees obtain our advice before doing so. A decision to use a power of amendment in this way might itself be open to challenge on the basis that its effect is to confer a benefit on trustees.

With a new charity, a bar on user trustee appointments will, of course, only be included in the governing document if that is thought appropriate by those who are setting the charity up. If the charity is expected to have user trustees, we advise that it be made a condition that user trustees are excluded from taking any part in decisions directly affecting their or their relatives' personal interests. If this is done, there will be no legal risk to any transaction that results from such a decision, so long, of course, as the trustee(s) comply with the condition.

Some funders make it a condition of their grant to, or contract with, a charity that the charity must have user trustees. The charity can, of course, only agree to this condition if its governing document does not prohibit the appointment of user trustees, and it does, in fact, have the required number of user trustees.

TRUSTEE BODIES

The most effective trustee bodies will include a variety of people with a range of skills, interests, views, and perspectives. It is important that no single interest group dominates a trustee body or exercises undue influence. Subject to anything in the governing document of a charity, there is no legal bar to every trustee being a user. Some charities might find that by having all user trustees they will provide a much better service to their other users and ensure the effective management of the charity. However, as with any trustee body, what is important to guard against is having a group of trustees with a single agenda.

Some charities might find that having any users on the trustee body would be unworkable. For example, charities where the users are transient, or seek only one off or confidential advice and support. However, as a guide, we would suggest that where the proportion of user trustees makes up a third or less of the trustee body, there are unlikely to be any problems with any one group of trustees with a single interest or motivation being accused of taking control of the direction of the charity. As we have already explained, it is up to each charity to decide the most appropriate and effective proportion of user trustees.

LEGAL REQUIREMENTS ON ELIGIBILITY FOR TRUSTEESHIP

Anyone, whether or not a user, who is thinking of becoming a trustee should check beforehand that there is no legal bar to his or her appointment as a trustee. If a person does find that they are not qualified to act as a trustee, they can still make a positive contribution to the charity by becoming involved in more general ways, such as belonging to advisory groups. The three main areas of eligibility to consider are:

Age: A person under the age of 18 cannot be a trustee of a charitable trust or of a charitable unincorporated association. An attempt to appoint someone under 18 as a trustee is not legally valid. By contrast there is no minimum age limit for directors of companies (including charitable ones). Nevertheless a person appointed as a company director has to be old enough to understand the duties of a director.

People Who Cannot Manage Their Own Affairs: A decision that a person does not have the capacity for trusteeship will usually flow from a more general conclusion, that a person lacks the capacity or comprehension to manage his or her own affairs and could not, therefore, manage the affairs of the charity.

Disqualification: There are a number of specific grounds that disqualify - in effect, prohibit - a person from being a charity trustee. They include bankruptcy (undischarged) and having a conviction (unspent) for an offence involving deception or dishonesty.