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

Issue no. 97 September - November 2009


The­first­assessments The Charity Commission published the results of initial public benefit assessments of 12 charities on the 14 July 2009 with a view to ‘helping’ other similar charities to understand what factors are taken into account. The charities which were assessed were fee-charging schools, fee-charging care homes or charities for the advancement of religion. The outcomes Of the five schools assessed, two were held not to meet the public benefit requirements. Of the three care homes, one ‘failed’ the test and another was doing something so different from its objects that the Commission felt it could not assess the public benefit at all. The religious charities all ‘passed’ the test. What happens next? The trustees of the charities which did not meet the test must confirm within three months that they have considered the Commission's report and will put in place a plan to enable the charity to meet the public benefit requirement and submit the plan within a further nine months.

so that the charity can demonstrate that it has a planned and monitored system for ensuring that its benefits are more widely accessible to those who cannot afford its fees, including those in poverty. Even for those which passed the test, the Commission has asked for further action to be taken, and the Commission has said that it will review the trustees’ progress on these points within 18 months of the report. For example Manor House School Trust Limited, which did meet the public benefit requirement, has been told that details of means tested awards, the extent of discount available and types of assistance available should be publicised more clearly; they

should review the scope for extending the impact of the bursary programme by increasing the relative number of higher percentage awards and they should keep under review the extent to which the opportunities to benefit are taken up by people who are unable to afford the fees including people in poverty. Points for all fee-charging charities to note are therefore: • Consider the level of means tested awards, the extent of discounts available and types of assistance available, and ensure that there is sufficient opportunity to benefit those who are unable to afford fees or entry charges. • Make sure that details of any means tested awards, the extent of discounts available and types of assistance available are publicised as clearly as possible.

• Review the scope for extending the impact of bursary programmes. • Keep under review the extent to which the opportunities to benefit are taken up by people who are unable to afford the fees, including people in poverty. Further information The Commission has published a report on its findings: “Public Benefit Assessments: Emerging findings for charity trustees from the Charity Commission’s public benefit work: 2008-09”, which is worth reading if your charity is a fee-charging charity or otherwise at risk in the event of a public benefit assessment. It can be found at: Library/publicbenefit/pdfs/ assessemerge.pdf. (Sylvie Nunn, Wrigleys.)

Some learning points The main issue for the two schools and the care home which failed the assessments (St Anselm's School Trust Limited, Highfield Priory School Limited and Penylan House Jewish Retirement and Nursing Home) was the perceived lack of sufficient opportunity to benefit those who are unable to afford their fees. The trustees of Penylan House, for example, were told firstly, to ensure their policy on assistance with fees is clear, open and transparent; and secondly to establish a funding strategy (e.g. through the setting of fees, use of reserves, fundraising or a combination of all or some of these)


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To­merge­or­not­to­merge? Consensus­Voting Mergers can bring together organisations with similar missions and help charities improve existing services, create new benefits and save money. However they are also risky and, if they are not done well, they can be ‘destructive’. A report by New Philanthropy Capital, “What Place for Mergers between Charities?” provides an analysis and concludes that: • The evidence is that mergers between charities are not very common, particularly amongst larger organisations. They suggest that “merger” is a “dirty” word in the charitable sector. • Mergers often seem to result from a crisis rather than an explicit desire to fur ther charitable purposes. The general structure, interests and personal passions invested in charities by those involved with them tend to favour maintaining the status quo.

It can often prove very difficult to get charity members, boards of trustees or members of committees to reach decisions. New Economics Foundation and the de Borda Institute have done some research into consensus voting by collaborating in a twoyear pilot project funded by the Joseph Rowntree Charitable Trust. • There is a lack of coherent information available to charities in this sector, which makes it hard for them to spot opportunities for collaboration. • It should be part of a trustee’s role to consider whether a merger is a way to fulfil its charitable purposes more effectively, even if this means the eventual winding down of the charity. Sometimes what is best for the community in need is not necessarily what is ‘best’ for the charity. The report can be found at:

Consensus voting presents a decision-maker with a range of options, which they are asked to rank in order of preference. Each option is given points according to how highly it is ranked. For example, where there are four options, the preferred option would get four points, the second preference would receive three points and so on. The total points each option receives from the voters would be counted and the winning option would be the one that received the most points overall. The outcome depends on

the preferences of all the decisionmakers, rather than simply a majority vote. The pilot project has been tested in seven organisations, one of which was London’s Holy Cross Community Trust. Perry Walker of the New Economics Foundation, in an article for Third Sector, described how many of the service users have mental health, drug or alcohol problems but, with support, were able to understand the concept of consensus voting. The voting was used to determine how £500 should be spent. Ten options were generated by the service users, which were then voted on. To aid those using consensus voting, the de Borda Institute has developed a free software package called Decision Maker, which is to be launched later this year at: (Helen Wray, Wrigleys.)

How­effective­is­your­board? A repor t published by New Philanthropy Capital, the think tank for charities, has concluded that most boards are “not up to scratch”. Whilst in good times this can largely pass unnoticed, boards can be sorely tested in tougher times and the report highlights a number of improvements that may help to strengthen boards including: • Better recruitment, to find a mixed board with all the necessary skills to drive the charity forward.

Charities­Act­– Consolidation­bill Those who have been following

is not to change the legislation,

the legislative changes to charity

but simply to make it easier to

law in recent times draft bill will

read by having it all in one Act

be published by the end of the

of Parliament.

summer to consolidate the Charities Acts 1992, 1993 and 2006 and the Recreational Charities Act 1958. The purpose

• Better support once a board is established. There should be more thorough inductions for new trustees, both in terms of understanding the legislative framework and also understanding the governance structure of their own charity. • There should be a stronger focus on boards evaluating their own performance, particularly for large organisations. Regular appraisals and evaluations are key.

The repor t has produced a very useful 10-question trustee evaluation questionnaire which is intended to prompt discussion and can be found at: The repor t advocates raising awareness of the option of becoming 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:

The­sector’s­Governance Code­–­have­your­say! “Good Governance: A Code for the Voluntary and Community Sector” was published in 2005 and promoted by the National Charity Governance club, with the Charity Commission’s support. The code was developed by a steering group representing NCVO, ACEVO, charity trustee networks and Institute of Chartered Secretaries and Administrators, with support

and advice from the Commission. The same steering group is now consulting on draft “re-fashioned principles” and views are being invited on this. The consultation draft can be found at: www.charitycommission. /goodgovernance.asp.

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Faith­and­race­in­ school­admissions­ R (on the application of E) v Governing Body of the Jewish Free School; R (on the application of E) v Office of The Schools Adjudicator. These proceedings concerned two applications for judicial review of decisions concerning the propriety and legality of the criteria governing admission to a Jewish School. It was held that an undersubscribed faith school could not use religious criteria to allocate places but an oversubscribed school could restrict places to children whose parents shared the schools faith. No school, however, was permitted to discriminate in its admissions on racial grounds. Refusal of admission was plainly less favourable treatment within the meaning of s.1(1)(a) but

the question was whether that was done on racial or religious grounds. It was held that the refusal to admit M because he was not regarded as matrilineally Jewish constituted a discrimination on racial grounds. Jews constituted a racial group defined principally by ethnic origin and, additionally, by conversion. To discriminate against someone on the grounds that he or someone else was or was not Jewish was discrimination on racial grounds. The theological motive for the discrimination made it no less and no more unlawful. A Jewish faith school could give preference to Jewish children but that eligibility had to depend on faith and not ethnicity. It is understood this Judgement may be appealed.

Employment... Swine­Flu­and­other­pandemics­–­ what­should­employers­do? The Health and Safety at Work Act 1974 imposes a duty on every employer to provide a safe working environment and secure the health and safety of employees in the workplace. Health and safety in the workplace is about preventing both injury and disease, and providing an environment that promotes staff wellbeing. In the context of the current flu pandemic, it will include taking reasonable steps to prevent the spread of germs and facilitate employees’ swift recuperation. What this will involve in practice will of course depend on the particular employment circumstances. As a bare minimum, all employers should properly identify and assess the risks to their employees and take steps to reduce them, for example by introducing hand sanitisers in communal areas and ensuring that the surfaces and equipment that employees use are kept clean. Many employers are introducing new policy documents, dealing specifically with the management of pandemics, and setting out the details of what behaviour is expected of employees in compliance with the policies. Additional training for managers and supervisors may be in order. As well as introducing new policies, employers should consider the

possible impact of the flu pandemic on existing policies and procedures. For example, a sickness absence policy that requires employees to provide a doctor's note after an initial seven day period of selfcertification would need to be relaxed if Department of Health proposals to temporarily extend the permitted period of self-certification to 14 days were implemented. Employers should also consider relaxing restrictions on leave to care for dependants, and extending flexible working or home working arrangements. Although in most cases, employees experiencing the symptoms of swine flu will readily agree to stay away from work, there may be circumstances in which employees are reluctant to take time off. Even

where their presence at work may put other employees at risk of contamination, employers cannot force them to take sick leave unless their contract of employment specifically authorises them to do so.

Employers should consider varying employees’ contracts to permit their exclusion from work in circumstances where they pose a threat to the health and safety of their colleagues. If there are a large number of absentees, staff may be asked to

cover the work of their absent colleagues. This may involve working beyond their normal contractual hours. In these circumstances, employers must ensure that staff don’t miss out on their statutory rest periods, and should check employees’ contracts to see what additional entitlements they will have if they work beyond their usual hours. In some cases it may be necessary to ask staff to contract out of the 48 hour maximum working week imposed by the Working Time Regulations 1998. This must be individual, voluntary and in writing, and staff cannot be sacked or unfairly treated for refusing to opt-out. Finally, if a pandemic does take hold, employers may encounter situations in which employees are reluctant to come to work for preventative reasons. While fears are per fectly understandable, employers are entitled to implement their disciplinar y procedures when employees take unauthorised absences. (Joanna Sanderson, Wrigleys.)

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Social­Enterprise… At­a­screen­near­you The British Federation of Film Societies has recently published a community cinema sourcebook to encourage and inform groups who wish to establish community cinemas. If you wish to or are running a community cinema then you will need to know about encouraging an audience in order to maintain

viability, programming and legal aspects of operation. A screening licence will be required as well as a premises licence for the venue. You may also wish to consider whether charitable status would be sensible. There are lots of practical tips within the sourcebook. (Regeneration & Renewal 17.08.2009.)

Leasing­empty­shops The Development Trusts Association (DTA) is leading a project under the Advancing Assets for Communities programme funded by the Department for Communities and Local Government to create a standard lease for empty shop buildings. The purpose of the lease is to permit community groups to use empty shop buildings for temporary arts or education

Co-operative­and­Community­Benefit Society­Reform Some of the overdue reform of industrial and provident societies together with reform of credit unions, has emerged and now takes the form of a Co-operative and Community Benefit Societies and Credit Unions Bill which is currently working its way through Parliament; and a statutory instrument which is likely to be introduced in 2010 known as The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2010. We will report on the Statutory Instrument in the next issue. The Bill is very short with only six sections. The main changes it makes are firstly, to re-name the law relating to industrial and provident societies as the law relating to co-operative and community benefit societies, and secondly, 23 years after the introduction of the Company Directors Disqualification Act 1986 it is intended that the Act will apply to co-operative and community benefit societies. Finally, it gives power to the Treasur y to introduce into co-operative and community benefit society law, by statutory instrument, regulations equivalent to five out of the 47 parts of the Companies Act 2006. This is a missed oppor tunity by HM

Treasury to modernise co-operative and community benefit society law. HM Treasury believes it is important that Companies Act provisions relating to company names, investigations of societies and dissolution and restoration to the register should be amended. It should also have looked at Part 10 relating to directors and

corporate governance, Part 13 relating to resolutions and meetings, Part 15 relating to accounts and reports at least. The credit union amendments in the Bill will enable regulations, which apply to building societies, to be extended to credit unions. It is understood that it is intended that this Bill will take effect in 2009. (Malcolm Lynch, Wrigleys.)

projects until a commercial use becomes available. An informal consultation on the draft lease is being undertaken with input from the Association of Town Centre Managers. The advantage for a landlord in these circumstances is that, if the building is otherwise unoccupied, the landlord is still obliged to pay empty property business rates. (Regeneration & Renewal 03.08.2009.)

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Environment... British­Waterways­–­A­Charity­Consultation British Waterways is currently an arm of Government which would like to escape from that constraint. Fortunately, the option of privatisation has been rejected by Governments over the last 20 years and British Waterways is now thinking of becoming a third sector body. It has the choice of becoming a charity, a mutual body rather like Welsh Water or perhaps some kind of community interest company or community benefit society.

The National Trust is perhaps a better example for British Waterways than Welsh Water since the National Trust is democratic, whilst involvement in Welsh Water by its customers is very limited. This is a consultation which anyone interested in British Waterways should respond to at:

Developing­a­low­carbon­economy It is difficult to fault the Government on the number of consultation documents and Government White Papers concerning climate change and actions to prevent it. It is the absence of a consistent approach which will lead to implementation of that strategy which has been a problem. In the last six months there is an impression that the Government is “getting real” about what needs to be done. The Government’s approach could largely be considered as one of a carrot approach. The system of carrots is starting to change with the renewable energy subsidies known as the Renewables Obligation Certificate changing from the 1 April 2009 to take account of the fact that certain technologies are more commercially viable than others. Technologies have now been banded so that those which are needing more support for effective market deployment receive it. For farmers, anaerobic digestion and dedicated energy crops fall into Band 2 with a higher purchase subsidy for energy generated.

From the 1 April 2010 a new financial incentive system for

generation of electricity comes into effect known as a feed-in tariff pool. These proposed tariffs are biased towards a higher tariff for smaller energy systems across a range of technologies. For example, it is proposed that anaerobic digestion producing electricity only would have a tariff

These carrots should be very helpful in enabling a much faster development of installation of renewable energy technologies. This same system has worked very well in Germany and Denmark for many years. Renewable energy for the farmer, for community use and for domestic use starts to become feasible from April 2010. Some of the plans the Government has in this area are set out in its strategy document Low Carbon Industrial Strategy which can be found at: (Regeneration and Renewal 20.08.2009.)

­Reversing­Beeching In 1948, at the formation of British Railways, the rail network extended to 19,598 route miles and 6,685 stations. The Beeching Report of 1963 started a period of significant reduction in network capacity, so that in 2009 the network is 9,828 miles with 2,517 stations. Passenger numbers in 2008 were 30% higher than in 1963 and it is anticipated that there will be further growth of 22% by 2014. There have been some new track openings since 1995 with 68 stations opened and 199 track miles brought back into full use.

of 9p a kilowatt hour whilst a retro fitted photo voltaic roof of less than 4 kilowatts would have a tariff of 36.5p.

For all new lines built since 1995, demand has exceeded forecast. Connecting Communities is a new study by the Association of Train Operating Companies into new track openings to meet the population growth projected for the

next 25 years. 35 lines are considered with a further 16 also identified. The study does not seem to look at lightweight transport which might potentially reduce costs of reinstatement further. The wait for the train arriving at Platform 1 on the closed station may still be a few years away. (Regeneration & Renewal 22.06.2009.)

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Companies… Companies­Act­2006­–­the­final­changes­ 1 October 2009 is the final implementation date for the Companies Act 2006. Most of the substantive changes have already taken effect, but 1 October will see some big administrative changes at Companies House. Companies incorporating after 1 October 2009 will be the first to be technically incorporated pursuant to the 2006 Act. They will have to adopt a memorandum of association in statutory form – this is very short and is simply a statement that the subscribers wish to form a company and become members of it. There are also new sets of model articles of association, which can be adopted in full or in part, or ignored entirely in favour of bespoke articles. The objects and powers of the 2006 Act companies are unrestricted, unless expressly narrowed by a provision in the articles. The new model articles are, unlike the various Tables A-F, readable, useable and relatively simple, and they place no

restrictions on objects or powers. It may be that many new small, private, commercial companies adopt the model articles and take advantage of the flexibility afforded by unrestricted objects, but of course this will not be appropriate for most not-for-profit companies, and will certainly not be appropriate for charitable companies. In addition to the new memorandum and articles, almost all of the familiar Companies House forms will 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 be renamed, if not altered substantively. Companies House have issued specimens of the new forms.

The other key changes to be introduced in this, the final round of Companies Act 2006 alterations, are as follows: • Directors and secretaries will be permitted to use a “service address” rather than their home address, for the purposes of the public record. • There will no longer be a need to list additional directorships on directors’ appointment forms. • The notion of authorised share capital will not apply to Companies Act 2006 companies which means that there will usually be no limit set out in the memorandum or articles on the number of shares directors can issue. • Similarly, directors of companies with only one class of shares will not generally need to be expressly authorised to issue new shares.

• There are some simplifications to and relaxations on the procedures allowing private companies to buy-back their own shares. • New companies may “entrench” certain provisions in their articles so that they can only be changed if specified conditions or procedures that are more restrictive than a change by special resolution are fulfilled. • New companies will be able to include in their ar ticles of association procedures for changing their name other than by special resolution. (Sue Greaves, Wrigleys.)

Local­Government… Limited­Powers­of­Wellbeing The judgment against the local authorities involved in establishing a mutual insurer known as London Authorities Mutual Limited is likely to make local government lawyers more cautious in permitting local authorities to act in the best interests of their area under the power of wellbeing. Section 2 of the Local Government Act 2000 introduced what was considered a power to do anything, unless prohibited. The court decided otherwise taking the view that whilst setting up a company might come within the wellbeing power, par ticipation in an insurance company with a view to seeking

cheaper insurance premiums, which involved giving guarantees to the company and assuming what could be substantial liabilities, did not. It seems that indirect wellbeing is unlikely to be sufficient and that there has to be a clear link to the economic, social or environmental wellbeing of the local authority area. The power of wellbeing is a valuable tool in the local authority's armoury to engage in economic, social and environmental activity but it will be important to ensure that the justification for its use is clearly demonstrated. (Local Government Lawyer, Summer 2009.)

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 If you require legal advice on charity and social economy law Please contact Malcolm Lynch at Wrigleys Solicitors, 19 Cookridge Street, Leeds, LS2 3AG, tel: 0113 204 5724 or visit

Unity Trust Bank - Social Economy Newsletter - Issue 97  
Unity Trust Bank - Social Economy Newsletter - Issue 97  

A quarterly bulletin of information for charities, voluntary organisations and social enterprises. This issue covers September - November 20...