Brett Barton
Brett's recent articles
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18th December - A New Dawn for the Company Voluntary Arrangement (CVA)
13th November - Tougher Measures For Directors
20th August
Is there a future for charities?
17th September 2008 10:01
Over the past 2 years I’ve seen an increase in the number of charities, sporting & social clubs and other similar types of organisations that have been wound up. This is a great shame and I fear that the backbone of our social networks is slowly eroding away. But why is this happening?
Well in part, people have less disposable income and they are cutting back and the knock on effect is that both charities and clubs do not receive enough financial support. However, I believe the main reason is finding people who are willing to help out for no remuneration, who have the right skills needed to do so – such as financial and legal skills. Potential volunteers are put off by the fact that trustees can be made personally liable for the losses of a charity in certain circumstances.
Strictly, this is because charities formed as unincorporated associations or trusts have no legal identity that is distinct from their trustees. One possible solution is to change the charities structure, turning it into a limited company. The main advantage of this is that a company is a legal entity in its own right and can contract in its own name, which means the potential liability of the directors (the trustees) can be limited, providing they are neither negligent nor act in breach of their duties.
The Charities Act 2006 created a new sort of company, specifically for charities, called the Charitable Incorporated Organisation (CIO), which is shortly to be made available. The Act also provides a method which will make it easier for smaller charities wishing to cease operations to transfer their funds to other charities and wind themselves up.
The trend suggests that the next 18 months will not be easy for charities as the availability of funding reduces and compliance costs increase. If you require further information on this topic or know of a charity in difficulty then please email me at brett.barton@cranfieldbusinessrecovery.co.uk
