Frequently asked questions for Board nominees

Making the decision to join the board of a charity or trust or social enterprise is often a choice which is made without much information.  Often this is simply because the person who may become a trustee is not sure what sort of questions it is that they might want to consider asking.  Below we have set out some of the points which you may want to raise prior to agreeing to join a board.

Do you think there are too many questions?  Others you think we have missed off?  Email Steven at stevenmoe@parryfield.com and let us know so it can be improved for others!

This list originated from the first Legal Mashup we held in early May as it was something that people who came along were asking about.  Obviously whether or not the questions are relevant or not will depend on the particular situation of the entity – so bear in mind and be aware that one that is in start-up phase will have completely different answers to one that has been going for 5 years…

While we wrote this with a social enterprise or charity in mind many of these questions would be equally applicable in other contexts such as joining a board of directors.

Before joining the Board I would like to ask for your responses to the following questions:

  1. A copy of the Trust Deed/Constitution can be accessed _____________________________.
  2. The purposes of the Trust/Social Enterprise are _____________________________.  Any differences in actual activities (compared to the purposes) are ___________________________.
  3. Our plans for the future include _____________________________.  Major projects on at present are  _______________  Any activities overseas?
  4. There is an indemnity for board members contained in the Trust Deed/Constitution:  Yes / No.  We have taken out insurance for board members:  Yes / No.  What insurance is in place generally particularly if holding events?
  5. Potential liability can result from the following key risk areas (eg health & safety): _______________________.
  6. Our meetings are:  monthly / quarterly  / half-yearly.   In addition to scheduled meetings we also expect board members to _____________________________.
  7. What is the management structure?  How does self-governance work for board members eg compulsory retirement after 3 years?
  8. What is the legal entity of the organisation (eg Incorporated Society, Company, Charitable Trust)?  Does it have charitable status?
  9. Are the financial statements available to view? Are they audited or reviewed by an accountant?
  10. For verbal discussion rather than in writing: Any employment disputes in last 3 years? Describe.  Any third party disputes over provision of services in last few years?

We hope that this list is helpful for those who may be wondering about what topics they should be thinking through before joining a board.  You could print this page and give it to your contact to run through the answers with you.  Our intention is that it helps all those involved (both current trustees and the new trustee) to ensure there is clear communication from the outset regarding expectations, plans and the status of the organisation.  If you are already on a trust then it might also trigger some thoughts for you about whether you need to undertake a strategic review to ensure you have clear answers to some of those questions.


This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions.
Copyright © Parry Field Lawyers 2017.

 

Reasons for a Trust Board to incorporate

It is very common for the board of a charitable trust to apply for incorporation under the Charities Act 1957.  To do this certain forms must be submitted to the Registrar of Societies – information and access to those forms are here.

But why bother??

Well, incorporating a charitable board means that a group of trustees has a single identity in the eyes of the law – it then “exists” as a form of legal entity.  The technical term is a ‘body corporate’ and – separately to the trustees who make up the board – it can be sued, can sign contracts (with a common seal, yes you need one) and can own property.

A board (once incorporated by the trustees of the charitable trust) will not end until certain events occur so it can then administer the trust going forward (whether or not trustees come or go).

Perhaps the biggest reason for trustees to incorporate is that the board itself will then enter into contracts and obligations – if things go wrong the incorporated board is liable for that (rather than the individual trustees).  That is important safeguard for the trustees to have in place.  Also, since it can hold trust property in its own name that does not need to be held in the names of the trustees themselves.

Having said all that, it is not a legal requirement to incorporate a trust board.  If that is not done then the property of the trust is held in the personal names of the trustees.

If you have any questions about the process of incorporating a Trust Board or would like to discuss your situation we are happy to have a chat with you.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions. Copyright © Parry Field Lawyers 2017.

 

The Selwyn district continues to grow and at Parry Field Lawyers we are proud to be part of the local community.

Our office on Rolleston Drive has been open since late 2016 and beyond our Rolleston team we have a number of others at Parry Field including partners Steven Moe and Paul Owens who all live locally in the Selwyn district.

Our clients appreciate the convenience of being able to avoid a longer drive into the city.  Get in touch if you are wanting to learn more about the services we can offer you.

We have a diverse and experienced team and can represent your interests across a broad range of matters from property to disputes, commercial leasing or contracts to sale and purchase agreements.

Feel free to drop us a line at Parry Field Rolleston:

You can contact Partners Paul Owens or Steven Moe  or Solicitor  Cora Granger.

O

Do not pass Go: The case of CDC and whether it was a charity (or not).

 

A fascinating case which came before the courts just a few years ago provides a great lesson and insight in to what makes a “charity”.  Canterbury Development Corporation (CDC) is a great organisation doing a lot of good things in Canterbury and it challenged Charities Services over its decision not to allow CDC to be registered as a charity.  CDC eventually lost the case in the High Court to be registered and have tax exempt status.  This is an interesting case to understand because it is likely that other community focussed groups could also be in the same boat as the CDC. 

CDC helps to promote economic development in the Canterbury region. CDC was therefore arguing that it acted for charitable purposes – specifically the relief of poverty, advancement of education and the beneficial effect to the community (due to the development of industry and commerce).  The case analysed whether CDC could come within one of the four charitable heads contained in the Charities Act 2005 (the only head not argued was that of advancing religion).

The court concluded that CDC was not a charity.  Looking first at education, It decided that this was provided not to a broad section of the public but to a narrow group who met strict eligibility criteria.  The Judge said:

“The objects and work of the CDC are commendable.  Its intention is to help fledgling businesses.  By itself this does not establish CDC as having the necessary focus on charitable intent … These are essentially the provision of help to individual businesses in the hope they will grow.  Not all businesses who ask for or indeed need help are offered it.  Only those within a narrow band.  This help may promote these individual businesses.  It may make them more profitable.  This promotion and profitability is not incidental to the work of CDC.  It is at its core.  This illustrates how the spirit and intendment of charitable purpose is not central to CDC’s function and thereby cannot be charitable.”

Regarding whether CDC promoted the relief of poverty through job creation the judge said:

“What is illustrated by this analysis is that the purpose of the CDC is not relief of poverty through providing those who are unemployed with jobs.  It is to improve the general economic wellbeing of the area.  In that sense, therefore, CDC’s purpose cannot be the relief of poverty.  The possibility of helping someone who is unemployed is too remote for it to qualify as the charitable purpose of relief of poverty.”

Regarding public benefit, the Judge said:

“In CDC… the pursuit of the objects is focused on the development of individual businesses.  The provision of support to those businesses is done in the hope and belief that their economic success would be reflected in the economic wellbeing of the Canterbury region…any public benefit therefore from CDC’s purpose and operations is in my view too remote to establish CDC as a charity. Public benefit is not the primary purpose of CDC’s objects or operation.  It’s primary purpose is the assistance of individual businesses.  The creation of jobs for the unemployed, as opposed to jobs for those who are employed and not in need, is the hoped for, but remote and uncertain, result of the way in which the CDC approaches its task…. The general economic lift for the Canterbury region from CDC’s work is the hoped for result of helping individual businesses.  It is remote from the purpose and operation of CDC. Public benefit is not at the core of CDC’s operation.”

You can read more from the time of the decision here to see how it was portrayed at the time:

This case and the conclusions reached are important for other organisations which may have a broad purpose to assist a region by helping individual businesses in that region.  Just because there is good work being done and there may be positive results it does not mean that the organisation will necessarily be able to register as a charity.  It pays to think about this sooner rather than later if you are at the early stages of forming your charity and we can help work through that process with you.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions.
Copyright © Parry Field Lawyers 2017.

 

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