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Spotlight
After much anticipation, the Charity Commission has published
the first part of its guidance on the Charitable Incorporated
Organisation (“CIO”) and, with it, two model constitutions.
However, the guidance has been released in somewhat of a
vacuum, due to the Regulations (which will contain the fine
detail about CIOs) not yet being finalised.
We understand that the Regulations will go before Parliament
prior to summer recess. The documents which have been
released may be subject to change once Parliament has agreed
the Regulations, although it is expected that any changes would
be minor.
We anticipate further publications from the Office for Civil
Society and the Commission when further information is
available.
Why are CIOs seen as necessary?By way of reminder, charities can be either unincorporated or
incorporated.
u Unincorporated charities mainly take the form of a trust or
an unincorporated association. The main problem with an
unincorporated charity is that its trustees could potentially
face personal liability in the event that something goes wrong.
u Incorporated charities are usually established as companies
limited by guarantee. Such charities benefit from a “corporate
veil” which means that, except in very limited circumstances
(e.g. criminal behaviour), the trustees (who are directors under
company law) do not face personal liability. However, there are
also certain drawbacks, the main of which are:
- dual regulation (with both the Commission and Companies
House);
- two-tier member and trustee/director structure, which is
not always relevant and/or clear and can lead to confusion
regarding who duties are owed to (whether to beneficiaries
or to members).
The CIO was conceived to offer the benefits of incorporation
but without some of the drawbacks currently associated with
companies limited by guarantee; importantly, CIOs are required
only to report to the Commission (not to Companies House).
Who might consider a CIO and what is the process?
The Charities Act 2006 made clear that CIOs would be available
to both new charities and also to existing charities wishing to
change their existing form.
A CIO only comes into existence upon registration with
the Commission and so planning will need to take the
Commission’s turnaround time into account. There is no
minimum income requirement for registration of a CIO and
CIOs are not available to exempt charities.
u New charities: Applications are made to the Commission (who
may refuse an application on certain grounds).
CIOs: nearly here…?Working with the Not-for-Profit Sector Spring 2011
CONTENTS1-2 CIOs: nearly here…?
3 What’s in a Name? - It Could be Your Reputation and Your Business
4 Pension Credits - Just Desserts for Religious Communities?
4 Client Focus
5 Stone King Digest Conference Dates
s
Stone King LLP13 Queen Square Bath BA1 2HJ Tel. 01225 337599 Fax. 01225 335437
16 St John’s Lane London EC1M 4BS Tel. 020 7796 1007 Fax. 020 7796 1017
Wellington House East Road Cambridge CB1 1BH Tel. 01223 451070 Fax. 01223 451100
New Hall Market Place Melksham Wiltshire SN12 6EX Tel. 01225 337599 Fax. 01225 335437
www.stoneking.co.uk email: charity@stoneking.co.uk © Stone King LLP 2011
u Existing incorporated charitable companies may, subject to the
Commission’s right of refusal on certain grounds and to certain
constitutional requirements for the proposed CIO, “convert”
into CIOs. The legal entity will remain the same and so will
be unlikely to trigger a legal “transfer”. It is not currently clear
how this will work for existing Industrial & Provident Societies
(nor, although not charitable, for existing Community Interest
Companies).
u Existing unincorporated charities may “transfer” their assets
into a new CIO; this will be a new legal entity and so will trigger
a legal “transfer”, including a transfer of staff, if relevant. A few
further details regarding the transfer from unincorporated
charities are discussed below.
What more does the new guidance tell us?
The guidance summarises some information which we already
knew, including what CIOs are, the rules that CIOs will be
subject to (although note that these are the Regulations which
are yet to be finalised) and a summary of how registration and
reporting will work.
The guidance also provides some new information. In particular,
the guidance states there is now no provision for a CIO or the
Commission to keep a register of charges over the CIO’s property.
This may reduce the desirability of the CIO for larger charities,
particularly those with property interests who may find funders
reluctant to lend, owing to the perceived loss of protection.
In light of this, the Commission considers that the CIO will be
most suitable for small to medium-sized organisations and in
particular those which employ staff or enter into contracts.
The guidance also confirms that CIOs will produce accounts
under charity law and so CIOs with a gross annual income of
£250,000 or less may prepare receipts and payments accounts,
but CIOs whose income is greater than £250,000 must prepare
accruals accounts.
The guidance states that statutory provisions will assist the
transfer process from an existing unincorporated charity
which has property which is permanently endowed (i.e. subject
to certain restrictions preventing it being spent as income).
There will be an ability for trustees of such charities to make
a vesting declaration which will: (i) transfer all property not
subject to such restrictions to the CIO, (ii) vest the legal title
in any permanently endowed property into the CIO, subject to
existing trusts, (iii) appoint the CIO as trustee of such property,
and (iv) treat the CIO and the underlying trust as one charity for
registration and accounting purposes (like a uniting direction).
What about the constitutions?
The Commission has published two model constitutions:
u the foundation model for charities whose only voting members
will be the charity trustees; and
u the association model for charities that will have a wider
membership, including voting members other than the
trustees.
The Commission has indicated that a CIO must base its
constitution on one of the models but CIOs may, subject to
obtaining the relevant consent of members, change from one
model to the other once established.
How will CIOs be brought in?
The guidance confirms that implementation will be staggered.
We understand that implementation will be carried out as
follows:
u new CIO applications;
u transfers from existing unincorporated charities, probably
phased by income;
u conversions of incorporated charities.
It is expected that the Commission will accept new CIO
applications shortly, but existing charities are unlikely to be able
to transfer to CIOs for another year.
We will publish updates on our website as and when we know
more.
Hannah Kubie
s
CIOs: nearly here…? - continued
What’s in a Name? - It could be your reputation and businessThe reputation of a charity (whether built up by providing
services to the homeless or running a school), or the reputation
of its trading company and any associated brands, is hard won
and easily tarnished. A name can come to be a guarantee of
quality and it is sensible to protect it from harmful use by other
persons, though it may be appropriate to allow others to use
it as long as they do so properly and are restrained from doing
things which have an adverse effect.
Unlike original works, in respect of which copyright arises
automatically, and confidential information, which is largely
protected by contractual arrangements, protection in respect
of a name (and any accompanying logo) is achieved by
registering a trade mark with the Intellectual Property Office.
Although a trade mark may arise in the UK as a matter of fact
without registration, the ability to assert rights, and not find
competing rights overriding them, is very much stronger once
registration has been obtained.
Distinctiveness and not being too similar to another trade
mark or other protected right lie at the heart of registrability,
so KODAK would have had no problem when they originally
registered. On the other hand merely descriptive marks, such
as TREAT, cannot be registered. Place names are capable of
registration as trademarks but that is counterbalanced by
the principle that free designation of geographical origin is
commercially important. So, MARS is allowed for a chocolate
bar, which has no other association with that planet, whereas
Hotel Monaco was rejected (in the USA) for hotels not situated
in that principality and having no connection with it.
Registration will be in respect of classes (each dealing with
a different category of activity, for example Class 25 covers
clothing, footwear and headgear). When making an application
you will need to decide which classes are appropriate to cover
your activities in order to obtain appropriate protection. In the
UK consideration will be given to the extent of the association
between the place and the name of the entity and the degree
of familiarity attributed by the relevant persons. A good
example of what can be registered is DUCHY OF CORNWALL,
as done in connection with a wide range of products. Basically,
there has to be distinctiveness through use and an application
may well not be granted if the name has been changed in
recent years. If a logo is added the likelihood of an application
being successful is much higher but protection will only extend
to what has been registered as the trade mark.
If you would like more information on this topic, or to discuss
the registration of the name of your charity, trading subsidiary,
or other entity, and/or any logo, as a trade mark, please contact
Roy Butler (rab@stoneking.co.uk) or Caroline Leviss (crl@
stoneking.co.uk).
Roy Butler
“… protection in respect of a name (and any accompanying logo) is achieved by registering a trade mark with the Intellectual Property Office.”
Pension Credits - Just Desserts for Religious Communities?
Unlocking the arts for all young people
The Prince’s Foundation for Children & the Arts reaches
out to the many children who, through social or economic
disadvantages, are denied access to cultural venues and to
high-quality arts activity.
Take Tregolls School in Cornwall as an example. These
primary school children come from the Tregolls Estate,
an area that suffers from significant deprivation: typically
children from the estate have low self-esteem, low
confidence and start school with low attainment levels. By
enabling them to regularly visit The Royal Cornwall Museum,
Children & the Arts has introduced them to a world beyond
school and home. Although not far away, it has given these
children a completely new perspective, allowed them to
shine in areas where they used to lack confidence, and
taught them that cultural venues are welcoming, exciting
and accessible places to visit.
Since being established by
HRH The Prince of Wales
in 2006, Children & the
Arts has introduced over
100,000 disadvantaged
children to theatre, music,
art and dance. This year the charity is working in partnership
with over 40 arts organisations across the country and is
transforming the lives of children from over 250 schools.
We need to raise £1million each year to continue our work.
With no government funding, we rely on the generosity of
individuals, companies, trusts and foundations to fund our
programmes through grants, donations and bequests. To
find out more, visit www.childrenandarts.org.uk or join us
on twitter (@childrenandarts) and facebook (www.facebook.
com/childrenandarts).
Client Focus – The Prince’s Foundation for Children & the Arts
Is an elderly nun who has worked tirelessly all her life entitled to
a pension credit? The answer from three of the country’s most
senior judges in the Court of Appeal is “perhaps”.
The sister manages a nursing home and a playgroup owned by
her religious order but she does not receive a salary. Her basic
needs – housing and food – are met by her own community. As
she became increasingly frail, she made a claim for pension credit.
The Department of Work & Pensions refused to pay the pension
credit, relying on a regulation that excludes “members of
religious orders who are fully maintained by their order”. The
same regulation excludes prisoners.
Emma Haley, a solicitor with Stone King, brought a legal
challenge on behalf of the sister in the Court of Appeal. We
argued that the DWP were wrong to say the she was “fully
maintained” by her community because she generated the
funds for her own maintenance through her work in the nursing
home and playgroup. Thus, she was caught in a Catch 22
situation: elderly and increasingly frail, but unable to stop work.
The judges ruled that to allow the appeal would cause confusion
and uncertainty. However, Lord Justice Rimer felt that, should
the sister decide to stop work and the trustees of her order,
as a result, found themselves unable to maintain her, then a
new claim for pension credit might well succeed. The legal
challenge and judgment has been described as introducing a
more nuanced approach to interpretation of the regulation.
The rationale for the State declining to offer members of
religious orders pension credit seems to be that the religious
community would generally have sufficient funds, funded from
the salaries of their members and supplemented by the tax
reliefs available to charities or (in the case of non-charitable
contemplative communities) supplemented by concessionary
reliefs. Patently, if the religious order has run out of money to
look after its elderly and retired members, the latter should be
able to apply to the State for help.
We end this article with another imponderable question – does
an elderly nun ever really retire?
Emma Haley and Michael King
Rii Schroer
Stone King has recently enlarged its team in order to deal with
increasing calls on services throughout the public and voluntary
sectors.
In particular the firm has continued to see significant growth
in its services for the Education Sector especially in relation to
academies, and for charities of all sorts as they respond to the
economic downturn and new compliance issues such as the
Equality Act and the Bribery Act.
In addition to the recent arrival of Graham Burns (ex TPP Law) as
a Partner, new solicitors who have recently joined Stone King’s
Charity & Education team include:
Reema Mathur as a solicitor in the Charity team. After training
at City firm Clifford Chance and a period at Withers doing
banking law, Reema has opted for the Charity sector and joins
our charity team.
Kate Grimley Evans trained with Eversheds and on qualification
worked for Eversheds and Mills & Reeve in Cambridge. She
specialises in Education law and Education property work.
Rishi Mital as a solicitor in the Education team. Rishi qualified
as a solicitor with niche education firm Match solicitors 3 years
ago and has worked with them since, specialising in operational
issues for education clients.
Nicola Berry as a solicitor in the Education team. Nicola trained
at TPP Law and has acted as principal assistant to Graham Burns
who recently joined the firm.
Lydia Brookes as a solicitor in the Education team. Lydia trained
at Clifford Chance and qualified as a solicitor 4 years ago.
Stone King DigestCharity & Education Team Growth Continues
Conference DatesStone King has a full programme of seminars/workshops for 2011 which will include Charity, Education and Employment
Law Update Workshops. We are also often involved in joint events with third-party charity professionals from time to time.
Please contact Annette (01225 324413; e-mail ak@stoneking.co.uk) or Charlotte (01225 326746; e-mail cmef@stoneking.co.uk)
for further information or check Events on our website at: www.stoneking.co.uk
2011 18 May Catholic Charity Conference Church House Conference Centre, London
14 June Joint Seminar: “Charities Guide to The Holburne Museum, Sydney Place, Bath Maximising Your Assets”
Left to right: Reema Mathur, Kate Grimley Evans, Rishi Mital, Nicola Berry and Lydia Brookes.
Your Contacts
The Spotlight deals with some current legal topics. It should not be used as an alternative to specific legal advice on the individual circumstances of a particular problem. Stone King LLP - registered limited liability partnership no OC315280, registered office 13 Queen Square, Bath BA1 2HJ
Charity:Michael King PartnerJonathan Burchfield PartnerRobert Meakin PartnerAnn Phillips PartnerStephen Ravenscroft PartnerAlexandra Whittaker AssociateVicki Bowles Barrister at LawSarah Clune SolicitorHannah Kubie SolicitorTom Murdoch SolicitorDarren Hooker SolicitorReema Mathur SolicitorSophie Pughe ParalegalMyles Taaffe ParalegalCharity Legacy Team:Jonathan Burchfield PartnerRobert Meakin PartnerPaul Sutton PartnerMatthew Braithwaite AssociateChild Protection:Steven Greenwood Partner
Commercial Property:Hugh Pearce PartnerStephanie Howarth PartnerHugo Greer-Walker PartnerCatherine Sanderson Senior AssociateSally McFadden AssociateAndrew Small AssociateJoanna Burton AssociateTamsin Simmonds SolicitorSarah Lawson ParalegalKathryn Williams TraineeCorporate & Commercial:Roy Butler PartnerCaroline Leviss AssociateDispute Resolution:Paul Sutton PartnerAlice Wood SolicitorAntony Pidgeon Solicitor
Education:Roger Inman PartnerGraham Burns PartnerRichard Gold ConsultantMichael Brotherton Senior AssociateKate Grimley Evans SolicitorRishi Mital SolicitorNicola Berry SolicitorLydia Brookes SolicitorEmployment:Nick Watson PartnerPeter Woodhouse PartnerJean Boyle AssociateTamsin Wilkinson SolicitorVictoria Blake HR AdvisorAmy Gordon TraineeHousing:Geraldine Winkler Legal ExecutiveTrust and Taxation:Andrew Mortimer PartnerAlison Allen PartnerDavid Ainslie PartnerCharles Hayward Partner
Stone King LLP13 Queen Square Bath BA1 2HJ Tel. 01225 337599 Fax. 01225 335437
16 St John’s Lane London EC1M 4BS Tel. 020 7796 1007 Fax. 020 7796 1017
Wellington House East Road Cambridge CB1 1BH Tel. 01223 451070 Fax. 01223 451100
New Hall Market Place Melksham Wiltshire SN12 6EX Tel. 01225 337599 Fax. 01225 335437
www.stoneking.co.uk email: charity@stoneking.co.uk © Stone King LLP 2011
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