Building the Powerhouse ...... Corporate Structures Part 2 - The Options

Nicola Hodson

At the end of Part 1, I put forward three options that i personally consider are the most viable ones for PHB:

“Fundamentally there are three options which protect the trustees/ directors from liability to a greater or lesser extent , which one is best suited depends on a number of factors.
So who/what is left in this contest

1. CIO
2. CIC
3. CLG and registered Charity “

The government website Charity types: how to choose a structure (CC22a)  gives advice on the options.

Within the CIO structure there is also the Association/Foundation issue. This depends on whether the organisation has a ‘wider membership’ , arguably PHB will fall into that category in that the wider membership (or at least those who have ‘contractual capacity’) could be involved in the management of PHB. the government advice (ibid) says the following about charities and wider memberships

“if you set up a charity with a wider membership, it mustn’t be set up only for the benefit of your members unless:

• a sufficient section of the public can access those benefits by becoming members – for example, anyone can join
• the membership structure is a suitable way of carrying out your charity’s purposes for the public benefit – for example, members of an amateur sport club”

Depending on how exactly we see the ‘purpose’ of PHB one or both of these could apply:

• ‘anyone could join’ - arguably anyone can join as a supporter , but do we necessarily offer voting rights to this class of member ?
• ‘suitable way of carrying out your charities purpose’ - if one of the charitable purposes of PHB is to offer education and training to those interested in ballet /dance - then that is quite possibly a ‘suitable way of delivering the purpose’ to have a wider membership that consists of those interested in taking class, and directly contributing to our performances. 

This means that PHB could very possibly be an ‘association’ type CIO and it’s (adult) members have a significant say in the running of the organisation.

As a CIC or CLG +registered Charity, the management of the organisation would be in the hands of the directors of the company as registered with Companies House and mostly overlapping Trustees registered with the Charity Commissioners.

CIC

Pros

• One registration (companies house) 
• Can seek funds from members 
• As a company can have secured lending facilities
• Relatively unrestricted on employment of those involved in the oversight of management 

Cons

• No tax relief 
• May be ineligible for funding reserved for Charities 
• May be seen as commercial 

CIO

Pros 

• One registration (Charity Commissioners)
• Taxed as Charity
• Will have a Charity no. from day 1 

Cons

• Can only raise funds from members as gift/donations or subscriptions/payment for activities.
• May not be able to access secured business lending 
• Have to answer to Charity Commissioners over charitable purpose (may eventually have to have a CIC or CLG as subsidiary, may even end up with another Ltd CO for ‘incompatible trading’- (see Community Southwark and The Big Give - What is the final word on the benefits of a CIO?).

CLG + Charity 

Pros

• Established and known structure 
• Has tax benefits of a charity 
• CLG can borrow as any company 

Cons

• Double paperwork (Charity Commissioners and Companies House)
• Srructure can be misunderstood 
• May still have limitations on employment of trustees 

We shall doubtless consider these in due course.