SocialEconomyIssue no. 97September - November 2009

A quarterly bulletin of information for charities,voluntary organisations and social enterprises

To view SocialEconomy online visit: www.unity.co.uk/socialeconomynewsletter or www.wrigleys.co.uk

SocialEconomy­is­published­by­Wrigleys­Solicitors­in­association­with­Unity­Trust­Bank

The­first­assessmentsCharities...

The outcomes

Of the five schools assessed, twowere held not to meet the publicbenefit requirements. Of the threecare homes, one ‘failed’ the test andanother was doing something sodifferent from its objects that theCommission felt it could not assessthe public benefit at all. The religiouscharities all ‘passed’ the test.

What happens next?

The trustees of the charities whichdid not meet the test must confirmwithin three months that they haveconsidered the Commission's reportand will put in place a plan toenable the charity to meet thepublic benefit requirement andsubmit the plan within a furthernine months.

Some learning points

The main issue for the two schoolsand the care home which failed theassessments (St Anselm's SchoolTrust Limited, Highfield PriorySchool Limited and Penylan HouseJewish Retirement and NursingHome) was the perceived lack ofsufficient opportunity to benefitthose who are unable to afford theirfees. The trustees of PenylanHouse, for example, were toldfirstly, to ensure their policy onassistance with fees is clear, openand transparent; and secondly toestablish a funding strategy (e.g.through the setting of fees, use of reserves, fundraising or acombination of all or some of these)

so that the charity can demonstratethat it has a planned and monitoredsystem for ensuring that its benefitsare more widely accessible to thosewho cannot afford i ts fees,including those in poverty.

Even for those which passed thetest, the Commission has asked forfurther action to be taken, and theCommission has said that it willreview the trustees’ progress onthese points within 18 months ofthe report. For example ManorHouse School Trust Limited, whichdid meet the public benefitrequirement, has been told thatdetails of means tested awards, theextent of discount available andtypes of assistance available shouldbe publicised more clearly; they

should review the scope forextending the impact of the bursary programme by increasingthe relative number of higherpercentage awards and they shouldkeep under review the extent towhich the opportunities to benefitare taken up by people who are unable to afford the feesincluding people in poverty.

Points for all fee-charging charitiesto note are therefore:

• Consider the level of meanstested awards, the extent ofdiscounts available and types ofassistance available, and ensurethat there is sufficient opportunityto benefit those who are unable toafford fees or entry charges.

• Make sure that details of anymeans tested awards, the extentof discounts available and typesof assistance available arepublicised as clearly as possible.

• Review the scope for extending theimpact of bursary programmes.

• Keep under review the extent to which the opportunities tobenefit are taken up by peoplewho are unable to afford the fees, including people in poverty.

Further information

The Commission has published a report on its findings: “PublicBenefit Assessments: Emergingfindings for charity trustees from the Charity Commission’s publicbenefit work: 2008-09”, which isworth reading if your charity is a fee-charging charity or otherwise at risk in the event of a publicbenefit assessment. It can befound at:

www.charitycommission.gov.uk/Library/publicbenefit/pdfs/assessemerge.pdf. (Sylvie Nunn, Wrigleys.)

The Charity Commission published the results of initial public benefitassessments of 12 charities on the 14 July 2009 with a view to ‘helping’other similar charities to understand what factors are taken intoaccount. The charities which were assessed were fee-charging schools,fee-charging care homes or charities for the advancement of religion.

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It can often prove very difficult to get charity members, boards oftrustees or members ofcommittees to reach decisions.New Economics Foundation andthe de Borda Institute have donesome research into consensusvoting by collaborating in a two-year pilot project funded by theJoseph Rowntree Charitable Trust.

Consensus voting presents adecision-maker with a range ofoptions, which they are asked torank in order of preference. Eachoption is given points according tohow highly it is ranked. Forexample, where there are fouroptions, the preferred optionwould get four points, the secondpreference would receive threepoints and so on. The total pointseach option receives from thevoters would be counted and thewinning option would be the onethat received the most pointsoverall. The outcome depends on

the preferences of all the decision-makers, rather than simply amajority vote.

The pilot project has been tested inseven organisations, one of whichwas London’s Holy CrossCommunity Trust. Perry Walker ofthe New Economics Foundation, inan article for Third Sector, describedhow many of the service users havemental health, drug or alcoholproblems but, with support, wereable to understand the concept ofconsensus voting. The voting wasused to determine how £500should be spent. Ten options weregenerated by the service users,which were then voted on.

To aid those using consensusvoting, the de Borda Institute has developed a free softwarepackage called Decision Maker,which is to be launched later this year at: www.deborda.org.(Helen Wray, Wrigleys.)

Charities…­(continued)

A repor t published by NewPhilanthropy Capital, the think tankfor charities, has concluded thatmost boards are “not up to scratch”.Whilst in good times this canlargely pass unnoticed, boards canbe sorely tested in tougher timesand the report highlights a numberof improvements that may help tostrengthen boards including:

• Better recruitment, to find a mixedboard with all the necessary skillsto drive the charity forward.

• Better support once a board is established. There should be more thorough inductions for new trustees, both in terms of understanding thelegislative framework and alsounderstanding the governancestructure of their own charity.

• There should be a stronger focus onboards evaluating their ownperformance, particularly for largeorganisations. Regular appraisalsand evaluations are key.

The repor t has produced a very useful 10-question trusteeevaluation questionnaire which is intended to prompt discussionand can be found at:www.philanthropycapital.org.

The repor t advocates raisingawareness of the option ofbecoming a trustee, given that it appears that 95% of people in the UK are unaware that they can support a charity in this way. It can be found at:www.philanthropycapital.org.

How­effective­is­your­board?

Those who have been following

the legislative changes to charity

law in recent times draft bill will

be published by the end of the

summer to consolidate the

Charities Acts 1992, 1993 and

2006 and the Recreational

Charities Act 1958. The purpose

is not to change the legislation,

but simply to make it easier to

read by having it all in one Act

of Parliament.

Charities­Act­–Consolidation­bill

Mergers can bring togetherorganisations with similar missionsand help charities improve existingservices, create new benefits andsave money. However they are alsorisky and, if they are not done well,they can be ‘destructive’. A reportby New Philanthropy Capital, “WhatPlace for Mergers betweenCharities?” provides an analysis andconcludes that:

• The evidence is that mergersbetween charities are not verycommon, particularly amongst larger organisations. Theysuggest that “merger” is a “dirty”word in the charitable sector.

• Mergers often seem to result froma crisis rather than an explicitdesire to fur ther charitablepurposes. The general structure,interests and personal passionsinvested in charities by thoseinvolved with them tend to favourmaintaining the status quo.

• There is a lack of coherentinformation available to charitiesin this sector, which makes ithard for them to spotopportunities for collaboration.

• It should be part of a trustee’s roleto consider whether a merger is away to fulfil its charitablepurposes more effectively, even ifthis means the eventual windingdown of the charity. Sometimeswhat is best for the community inneed is not necessarily what is‘best’ for the charity.

The report can be found at:www.philanthropycapital.org.

“Good Governance: A Code for theVoluntary and Community Sector”was published in 2005 and promotedby the National Charity Governanceclub, with the Charity Commission’ssupport. The code was developed by asteering group representing NCVO,ACEVO, charity trustee networks andInstitute of Chartered Secretariesand Administrators, with support

and advice from the Commission.The same steering group is nowconsulting on draft “re-fashionedprinciples” and views are beinginvited on this.

The consultation draft can be foundat: www.charitycommission.gov.uk/enhancingcharities/goodgovernance.asp.

The­sector’s­GovernanceCode­–­have­your­say!

Consensus­VotingTo­merge­or­not­to­merge?

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R (on the application of E) vGoverning Body of the Jewish FreeSchool; R (on the application of E) v Office of The Schools Adjudicator.

These proceedings concerned twoapplications for judicial review ofdecisions concerning the proprietyand legality of the criteria governingadmission to a Jewish School.

It was held that an undersubscribedfaith school could not use religiouscriteria to allocate places but anoversubscribed school could restrictplaces to children whose parentsshared the schools faith. No school,however, was permitted todiscriminate in its admissions onracial grounds. Refusal of admissionwas plainly less favourable treatmentwithin the meaning of s.1(1)(a) but

the question was whether that wasdone on racial or religious grounds.

It was held that the refusal to admitM because he was not regarded asmatrilineally Jewish constituted adiscrimination on racial grounds.Jews constituted a racial groupdefined principally by ethnic originand, additionally, by conversion. Todiscriminate against someone onthe grounds that he or someoneelse was or was not Jewish wasdiscrimination on racial grounds.The theological motive for thediscrimination made it no less andno more unlawful. A Jewish faithschool could give preference toJewish children but that eligibilityhad to depend on faith and notethnicity. It is understood thisJudgement may be appealed.

What this will involve in practice willof course depend on the particularemployment circumstances.

As a bare minimum, all employersshould properly identify and assessthe risks to their employees andtake steps to reduce them, forexample by introducing handsanitisers in communal areas andensuring that the surfaces andequipment that employees use arekept clean. Many employers areintroducing new policy documents,dealing specifically with themanagement of pandemics, andsetting out the details of whatbehaviour is expected of employeesin compliance with the policies.Additional training for managersand supervisors may be in order.

As well as introducing new policies,employers should consider the

possible impact of the flu pandemicon existing policies and procedures.For example, a sickness absencepolicy that requires employees toprovide a doctor's note after aninitial seven day period of self-certification would need to berelaxed if Department of Healthproposals to temporarily extend thepermitted period of self-certificationto 14 days were implemented.Employers should also considerrelaxing restrictions on leave to care for dependants, andextending flexible working or homeworking arrangements.

Although in most cases, employeesexperiencing the symptoms ofswine flu will readily agree to stayaway from work, there may becircumstances in which employeesare reluctant to take time off. Even

where their presence at work may put other employees at risk ofcontamination, employers cannotforce them to take sick leave unless their contract of employmentspecifically authorises them to do so.

Employers should consider varyingemployees’ contracts to permit their exclusion from work incircumstances where they pose athreat to the health and safety oftheir colleagues.

If there are a large number ofabsentees, staff may be asked to

cover the work of their absentcolleagues. This may involveworking beyond their normalcontractual hours. In thesecircumstances, employers mustensure that staff don’t miss out ontheir statutory rest periods, andshould check employees’ contractsto see what additional entitlementsthey will have if they work beyondtheir usual hours. In some cases itmay be necessary to ask staff tocontract out of the 48 hourmaximum working week imposedby the Working Time Regulations1998. This must be individual,voluntary and in writing, and staffcannot be sacked or unfairly treatedfor refusing to opt-out.

Finally, if a pandemic does takehold, employers may encountersituations in which employees arereluctant to come to work forpreventative reasons. While fearsare per fectly understandable,employers are enti t led toimplement their discipl inaryprocedures when employees take unauthorised absences. (Joanna Sanderson, Wrigleys.)

Employment...Swine­Flu­and­other­pandemics­–­what­should­employers­do?

The Health and Safety at Work Act 1974 imposes a duty on everyemployer to provide a safe working environment and secure the healthand safety of employees in the workplace. Health and safety in theworkplace is about preventing both injury and disease, and providing anenvironment that promotes staff wellbeing. In the context of the currentflu pandemic, it will include taking reasonable steps to prevent thespread of germs and facilitate employees’ swift recuperation.

Faith­and­race­in­school­admissions­

Charities…­(continued)

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Social­Enterprise…

The Development TrustsAssociation (DTA) is leading aproject under the Advancing Assetsfor Communities programmefunded by the Department for Communities and LocalGovernment to create a standardlease for empty shop buildings.

The purpose of the lease is to permit community groups touse empty shop buildings fortemporary arts or education

projects until a commercial usebecomes available. An informalconsultation on the draft lease is being undertaken with inputfrom the Association of TownCentre Managers. The advantagefor a landlord in thesecircumstances is that, if thebuilding is otherwise unoccupied,the landlord is still obliged to payempty property business rates.www.dta.org.uk. (Regeneration& Renewal 03.08.2009.)

The British Federation of FilmSocieties has recently published a community cinema sourcebook to encourage and inform groups who wish to establishcommunity cinemas.

If you wish to or are running acommunity cinema then you willneed to know about encouraging anaudience in order to maintain

viability, programming and legalaspects of operation. A screeninglicence will be required as well as a premises licence for the venue.You may also wish to considerwhether charitable status would be sensible. There are lots ofpractical tips within the sourcebook.www.bffs.org.uk. (Regeneration &Renewal 17.08.2009.)

Leasing­empty­shops

Co-operative­and­Community­BenefitSociety­Reform

The Bill is very short with only sixsections. The main changes itmakes are firstly, to re-name thelaw relating to industrial andprovident societies as the lawrelating to co-operative andcommunity benefit societies, andsecondly, 23 years after theintroduction of the CompanyDirectors Disqualification Act1986 it is intended that the Act will apply to co-operative andcommunity benefit societies.

Finally, it gives power to theTreasury to introduce into co-operative and communitybenefit society law, by statutoryinstrument, regulations equivalentto five out of the 47 parts of theCompanies Act 2006. This is amissed oppor tunity by HM

Treasury to modernise co-operativeand community benefit societylaw. HM Treasury believes it isimportant that Companies Actprovisions relating to companynames, investigations of societiesand dissolution and restoration to the register should be amended.It should also have looked at Part 10 relating to directors and

corporate governance, Part 13relating to resolutions and meetings,Part 15 relating to accounts andreports at least. The credit unionamendments in the Bill will enableregulations, which apply tobuilding societies, to be extendedto credit unions. It is understood that it is intended that this Bill will take effect in 2009. (MalcolmLynch, Wrigleys.)

Some of the overdue reform of industrial and provident societies togetherwith reform of credit unions, has emerged and now takes the form of aCo-operative and Community Benefit Societies and Credit Unions Billwhich is currently working its way through Parliament; and a statutoryinstrument which is likely to be introduced in 2010 known as TheLegislative Reform (Industrial and Provident Societies and Credit Unions)Order 2010. We will report on the Statutory Instrument in the next issue.

At­a­screen­near­you

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Environment...British­Waterways­–­A­Charity­Consultation

Developing­a­low­carbon­economy

The Government’s approach couldlargely be considered as one of acarrot approach. The system ofcarrots is starting to change withthe renewable energy subsidiesknown as the RenewablesObligation Certificate changing fromthe 1 April 2009 to take account ofthe fact that certain technologiesare more commercially viable thanothers. Technologies have nowbeen banded so that those whichare needing more support foreffective market deployment receiveit. For farmers, anaerobic digestionand dedicated energy crops fall intoBand 2 with a higher purchasesubsidy for energy generated.

From the 1 April 2010 a newfinancial incentive system for

generation of electricity comes intoeffect known as a feed-in tariffpool. These proposed tariffs arebiased towards a higher tariff forsmaller energy systems across a range of technologies. Forexample, it is proposed thatanaerobic digestion producingelectricity only would have a tariff

of 9p a kilowatt hour whilst a retrofitted photo voltaic roof of less than4 kilowatts would have a tariff of 36.5p.

These carrots should be veryhelpful in enabling a much fasterdevelopment of installation ofrenewable energy technologies.This same system has worked verywell in Germany and Denmark formany years. Renewable energy forthe farmer, for community use andfor domestic use starts to becomefeasible from April 2010.

Some of the plans the Governmenthas in this area are set out in i ts strategy document Low Carbon Industrial Strategywhich can be found at: www.lowcarboneconomy.com.(Regeneration and Renewal20.08.2009.)

It is difficult to fault the Government on the number of consultationdocuments and Government White Papers concerning climate changeand actions to prevent it. It is the absence of a consistent approachwhich will lead to implementation of that strategy which has been aproblem. In the last six months there is an impression that theGovernment is “getting real” about what needs to be done.

British Waterways is currently anarm of Government which wouldlike to escape from thatconstraint. Fortunately, the optionof privatisation has been rejectedby Governments over the last 20years and British Waterways isnow thinking of becoming a thirdsector body. It has the choice of becoming a charity, a mutualbody rather like Welsh Water orperhaps some kind of communityinterest company or communitybenefit society.

The National Trust is perhaps abetter example for Brit ishWaterways than Welsh Water sincethe National Trust is democratic,whilst involvement in Welsh Water by its customers is verylimited. This is a consultationwhich anyone interested in BritishWaterways should respond to at:www.britishwaterways.co.uk.

­Reversing­Beeching

Passenger numbers in 2008 were30% higher than in 1963 and it isanticipated that there will be furthergrowth of 22% by 2014. Therehave been some new trackopenings since 1995 with 68stations opened and 199 trackmiles brought back into full use.

For all new lines built since 1995,demand has exceeded forecast.

Connecting Communities is a newstudy by the Association of TrainOperating Companies into newtrack openings to meet thepopulation growth projected for the

next 25 years. 35 lines areconsidered with a further 16 alsoidentified. The study does not seemto look at lightweight transportwhich might potentially reducecosts of reinstatement further. Thewait for the train arriving atPlatform 1 on the closedstation may still be a fewyears away. www.atoc.org.(Regeneration & Renewal22.06.2009.)

In 1948, at the formation of British Railways, the rail network extendedto 19,598 route miles and 6,685 stations. The Beeching Report of 1963started a period of significant reduction in network capacity, so that in2009 the network is 9,828 miles with 2,517 stations.

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Contributors are Malcolm Lynch, Sylvie Nunn, Joanna Sanderson, Sue Greaves and Helen Wray.

Could we help with your banking needs? Contact Unity Trust Bank, Nine Brindleyplace, Birmingham, B1 2HB, tel: 0845 140 1000 or visit www.unity.co.uk

If you require legal advice on charity and social economy lawPlease contact Malcolm Lynch at Wrigleys Solicitors, 19 Cookridge Street, Leeds, LS2 3AG, tel: 0113 204 5724 or visit www.wrigleys.co.uk

Local­Government…Limited­Powers­of­Wellbeing

The judgment against the localauthorities involved in establishinga mutual insurer known as LondonAuthorities Mutual Limited islikely to make local governmentlawyers more cautious inpermitting local authorities to actin the best interests of their areaunder the power of wellbeing.

Section 2 of the Local GovernmentAct 2000 introduced what wasconsidered a power to do anything,unless prohibited. The court decidedotherwise taking the view that whilstsetting up a company might comewithin the wellbeing power,par ticipation in an insurancecompany with a view to seeking

cheaper insurance premiums, whichinvolved giving guarantees to thecompany and assuming what couldbe substantial liabilities, did not.

It seems that indirect wellbeing isunlikely to be sufficient and thatthere has to be a clear link to theeconomic, social or environmentalwellbeing of the local authority area.

The power of wellbeing is a valuabletool in the local authority's armouryto engage in economic, social andenvironmental activity but it will beimportant to ensure that thejustification for its use is clearlydemonstrated. (Local GovernmentLawyer, Summer 2009.)

Companies­Act­2006­–­the­final­changes­

Companies incorporating after 1October 2009 will be the first to betechnically incorporated pursuant tothe 2006 Act. They will have to adopt a memorandum ofassociation in statutory form – thisis very short and is simply astatement that the subscribers wishto form a company and becomemembers of it. There are also newsets of model articles of association,which can be adopted in full or inpart, or ignored entirely in favour ofbespoke articles.

The objects and powers of the 2006Act companies are unrestricted,unless expressly narrowed by aprovision in the articles. The newmodel articles are, unlike the variousTables A-F, readable, useable andrelatively simple, and they place no

restrictions on objects or powers. Itmay be that many new small,private, commercial companiesadopt the model articles and takeadvantage of the flexibility affordedby unrestricted objects, but of coursethis will not be appropriate for mostnot-for-profit companies, and willcertainly not be appropriate forcharitable companies.

In addition to the new memorandumand articles, almost all of thefamiliar Companies House formswill alter with effect from October.Incorporation forms are to be different(form IN01 rather than 10 and 12),and all other forms will at least berenamed, if not altered substantively.Companies House have issuedspecimens of the new forms.

The other key changes to beintroduced in this, the final round ofCompanies Act 2006 alterations,are as follows:

• Directors and secretaries will bepermitted to use a “serviceaddress” rather than their homeaddress, for the purposes of thepublic record.

• There will no longer be a need tolist additional directorships ondirectors’ appointment forms.

• The notion of authorised sharecapital will not apply to CompaniesAct 2006 companies which meansthat there will usually be no limitset out in the memorandum orarticles on the number of sharesdirectors can issue.

• Similarly, directors of companieswith only one class of shares willnot generally need to be expresslyauthorised to issue new shares.

• There are some simplifications toand relaxations on the proceduresallowing private companies tobuy-back their own shares.

• New companies may “entrench”certain provisions in their articlesso that they can only be changedif specif ied condit ions orprocedures that are morerestrictive than a change byspecial resolution are fulfilled.

• New companies will be able toinclude in their ar ticles ofassociat ion procedures forchanging their name other than by special resolution. (Sue Greaves, Wrigleys.)

1 October 2009 is the final implementation date for the Companies Act2006. Most of the substantive changes have already taken effect, but 1 October will see some big administrative changes at Companies House.

Companies…

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