I spent a few hours reading about how to set up a registered charity. It is a long and complicated process. The step-by-step guidance on the gov website makes it look like seven easy steps, but actually even getting a charity set up takes a lot of work, and maintaining the administrative side is even more work. This type of legal structure wouldn’t work for future.charity. Being this type of charity wouldn’t give it the agility and flexibility it’ll need to be cause-agnostic, iterate on purpose, experiment, and develop a workable model for a charity of the 21st century that inspires a paradigm shift across the sector in decades to come.
Luckily, there are other types of legal structures charities can use that carry less governance, administration, and operating effort.
There are four main types of charity structure to choose from:
- charitable incorporated organisation (CIO)
- charitable company (limited by guarantee)
- unincorporated association
The deciding differences between these four types are ‘wider membership’ and ‘corporate body’.
A charitable incorporated organisation has a corporate body, meaning the charity exists as a legal entity that can enter into contracts with individuals and organisations, and has wider membership, meaning more people have voting rights than just the trustees. It has to be registered with and report to the Charity Commission, have a constitution, and maintain a register of members. It seems the closest to the traditional charity legal structure, offers legal protection to its trustees and would mean that a wider group of people would be involved, which I think would be really good for encouraging diversity of thought.
A charitable company (limited by guarantee) has a corporate body but doesn’t have a wider membership. It is administered in a similar way to a commercial company (it has to provide financial returns to Companies House as well as reporting to the Charity Commission) but its assets can only be used to achieve its charitable purposes and it doesn’t have shareholders to distribute profits to. If future.charity intended to sell services as the primary means of achieving its charitable purpose than perhaps this would be the best structure.
A unincorporated association has no corporate body but has a wider membership. Having no corporate body means that the organisation can’t enter into contracts and so individual trustees would have to do that and be legally responsible. Requiring a wider membership requires particular governance of the organisation, but I think there are some interesting governance models other than the usual ‘one member, one vote’ model that usually gets low engagement.
A trust has no corporate body and no wider membership. It is made of a group of people, usually selected by the founder of the trust, and usually to perform quite a specific charitable role, such as giving grants.
So, which is the right type for future.charity? I feel like that needs to be a decision all of the trustees make together (so I’d better get on and recruit them).