Setting up a Voluntary Organisation

So, you have decided to start a community project. You have a clear idea of what you want to do, how you are going to do it and who is going to benefit.

What happens next?

This resource sheet describes some of the structures you might use to support and run your project and the different circumstances you might use them in. The flow chart at the end offers a simple visual guide to deciding what kind of organisational structure you might want and the table summarises the key factors for each.

If it’s a simple project, which doesn’t involve spending or receiving money or put you in a position of responsibility or care over other people, you could just do it.

The residents of Some Street want to clean up their local park. They decide to organise a monthly Sunday clean up. They ask residents to come, bringing binbags and gloves. They tell the Council who help out with hi vis vests and an extra collection of the bin bags at the end of each session.

As the sessions become more popular, they set up a Whatsapp group to coordinate dates and times and start to call themselves Some Street Saviours.

But they have no formal organisation so no bank account and no assets of their own.

If the project becomes a bit more complex, you could consider linking up with an existing organisation, becoming a project within their organisation. They can hold any funds and take care of legal issues. You might want to have a written agreement with them about your relationship.

Some Street Saviours decide they want to go further than simply cleaning up the park. Now they want to enhance their environment with a tree planting project.

But to do that, they need to buy trees and spades. They think it would be sensible to have public liability insurance in case the spade slips and hurts someone.

The delighted council offer a small grant to cover these expenses. But they have to meet the council’s grant requirements including a bank account with two signatories.

So the Saviours approach Our Town Community Association who are a registered charity running the park pavilion. They agree to hold the grant in a restricted fund and establish that the Saviours will be covered by their insurance.

If the project becomes more complex – for example you raise more funds to be spent over a longer period of time; you run several projects; or you take on staff, you might feel you need to set up your own organisation. This will allow you, for example, to have a bank account and control your own finances. But it will also mean that the people in charge will now be responsible. At this stage, you will need to start thinking about what kind of organisation you need.

The Saviours decide they want to run some fun days in their park. They plan to sell cakes on the litter picking days to raise money for the fun days. Since the money will come in bit by bit, they think it will be easier if they have their own bank account. There are now 30 regular saviours and they think its important the members continue to feel very involved.

They set up an unincorporated voluntary organisation. They have a simple constitution which sets out their aims and provides for a committee of five elected annually from the membership. The constitution gives them the power to raise funds and spend it on projects associated with improving the park.

If the organisation starts taking on responsibilities – for example employing staff or taking on contracts with other organisations – the leadership may want some legal protection so if things go wrong, they are not personally liable. This reduces the risk that, for example, creditors might pursue them individually for any debts.

Some Street Saviours moved on from planting trees to also cultivating flowers in their park. The displays were so wonderful that the council put them in touch with a local college who asked them to run a therapeutic horticultural course in the park.

Now the Saviours have a contract with the college. They have employed a course leader and some course assistants. They buy in seeds and compost on a regular basis. They are responsible for the welfare of some very vulnerable people.

The management committee decided they needed more protection. They had heard, for example, about groups who had faced employment disputes with their staff which had led to serious financial problems.

So they set up a company limited by guarantee. The management committee are still elected by the membership but now the committee are directors of the company and all transactions take place in the name of the company. The company does not make a profit; any surplus is reinvested in its activities but if it makes a trading profit, it now has to pay tax. It has to submit accounts to company’s house; if it is late, there is a fine.

The council have more confidence in the Saviours and give them a contract to run fun days in all the city’s parks.

You may need to think about whether you want to become a charity. If you set up a charity, you will have to comply with the requirements of the Charity Commission. This means having at least three trustees who run the charity, submitting approved accounts in a fuller form than is required from a company each year and ensuring that the way the charity is run meets the charity commission’s standards of “governance”. It must have objectives which are “charitable” and benefit people who do not run the charity. A charity can be a company and a charity which means it has to meet the requirements of company’s house and the charity commission or it can become a charitable incorporated organisation with the limited liability benefits of a company but only answerable to the charity commission. Charitable Incorporated Organisations may or may not have a membership.

Local people are so impressed by the work of the Saviours that they start asking if they can raise money for them. And the Saviours themselves now want to start forest school activities for local children who never get to go into the countryside. They have found a source of funding for this, but the funder requires them to be a charity.

After much thought, the Saviours apply to the Charity commission to become a Charitable Incorporated Organisation. Their turnover is now well over the minimum amount required and they are clearly undertaking activities which fall under one of the legal “heads of charity”.

A group can have more than one legal structure if it has different activities which have different needs. It is quite common, for example, for an organisation to be a charity and to have a separate “trading company” whose activities are not charitable, but which makes a surplus which can be donated to the charity.

Given their success with running fun days across the city parks, the Saviours decide to start an events business, hiring our bouncy castles on a commercial basis and running private children’s birthday parties.

They set up a new company limited by guarantee – Some Street Saviours Parties ltd. It is very successful and it covenants its profits to Some Street Saviours charity as a charitable donation each year.

A former member of the Saviours retires the country; when they die, they leave their country estate to the Saviours with the express requirement that it is used to provide holidays for people living in the city who are elderly or disabled and unable to have a holiday.

The Saviours decide to set up a new CIO – but this time a Foundation CIO which does not have a membership – to manage this legacy. It is a long way from Some Street and they found the members felt it was simply important that it was well run. Some Street South is born.

To celebrate their 20^th anniversary, the Saviours run a big fundraising campaign to raise an endowment fund to provide scholarships for people who had been on their therapeutic horticulture course to attend a horticulture degree course.

They set up a separate charitable trust with the specific objective of managing the endowment and making the scholarships. It has five trustees. New trustees are appointed by the remainder of the board when one retires. The board pays the main charity for the services of their secretary one day a week. This is Some Street Scholarships

Glossary

Term	definition
Trustee	Someone appointed to be a member of the board of a registered charity. The terms of their appointment will be governed by the constitution but their primary responsibility is to ensure that the charity carries out the objectives set out in its constitution for the public benefit and does so in the best possible way. Their responsibilities are supervised by the charity commission Even if the charity employs staff including very senior staff, trustees remain responsible for the charity
Director	Someone appointed to be a member of the board of a registered company. Their role is to ensure that the company is run in the best possible way. Their responsibilities re supervised by Companies House
unincorporated	An organisation which holds assets eg land or things or money in the name of the directors/trustees who are fully responsible for those things and for any debts or liabilities
incorporated	An organisation which has an existence in its own right separately from the people (trustees/directors) currently running it. Any assets are held in the name of the organisation and the organisation is solely responsible for debts etc (unless the people running it have acted illegally)
Limited liability	The legal protection given to directors of a company including a charitable company provided they comply with the law. This prevents them from being individually pursued for debts etc incurred by the company.
Membership	People who have signed up to belong to an organisation including some companies and some charities. The members are not responsible for the organisation, but they can hold the board to account including by electing the members of the board, scrutinising the accounts and passing resolutions about the organisation’s activities or governance.
Heads of charity	There are 12 types of activity which are charitable. Any organisation applying to become a charity has to show that it undertakes activities which fit with one or more of these categories.
Public benefit	All charities must satisfy this test. They must deliver activities which are beneficial ie make things better and they must do that for the public or a reasonable section of it.
Company limited by guarantee	A registered company which cannot distribute profits (as a company limited by shares can). The guarantee comes from the members who usually guarantee to cover nay losses up to a maximum of something like £10
Charitable Trust	A registered charity run by trustees, but which has no members and is not protected in the same way as a company. A form usually used primarily by grant making trusts who do not incur liabilities.
Charitable incorporated organisation	An organisation which is charitable and enjoys the protection of a limited company but does not have to report to both the Charity Commission and Companies House. Alternatively, a charity can be a company which is regulated by Companies House and which is then registered as a charity. This tends to be an organisational form of older charities, but it is difficult for the charity commission to close down such an organisation. CIOs have a membership.
CIO foundation model	As above but without members.
Governance	The process of effectively running a charity. Governance is the responsibility of the board not the staff although the staff may advise and support.