1. Community managed libraries
Legal workshop
Main title and body text type levels. Other type styles could be used when appropriate but should all be Gill Sans MT.
10th November 2017

2. Who’s he?
Anthony Collins Solicitors – based in Birmingham, working all over the country
Leaders in the “space” between the public, private and third sectors
Leading charities practice, focus on community enterprise
Specialising in social enterprise
New models for public services
Community asset transfer
Wide range of social businesses
Welcome to ACS – housekeeping – toilets – fire alarm
Introduce self – head of Social Business – long time supporters of Locality and of community ownership. Through Locality got involved in work for ACE, including on income generation in libraries report, community managed libraries overview,

3. Programme Who’s in the room? Setting up a community enterprise
Dealing with governance
Break
Arrangements with the local authority
Libraries and income generation
Q and A
Lunch
Welcome to ACS – housekeeping – toilets – fire alarm
Introduce self – head of Social Business – long time supporters of Locality and of community ownership. Through Locality got involved in work for ACE, including on income generation in libraries report, community managed libraries overview,

4. Community managed libraries
Setting up a community enterprise
Main title and body text type levels. Other type styles could be used when appropriate but should all be Gill Sans MT.
10th November 2017

5. Where are we going today?
Looking at when you should set up a new legal structure
The options available
Looking at some models in practice
Answering questions as we go along

6. Legal structure Does it matter? Yes it does, because it affects:
What a group can do
Liability
How the group can hold money or assets
Who will fund and how

7. Where do you want to go?
Key issues – do you want to:
employ staff?
enter into contracts?
take a lease or own property?
provide or procure services
... independently, without risking personal liability to people involved
If so, then you will probably need a separate vehicle

8. Are you thinking about:
Where do you want to go?
Are you thinking about:
Running a centre with a library in it
Taking over a library building
Running a library service
Arts and culture generally
… or something else?
Consider your aims in principle before you start thinking about a structure

9. What happens when you create a new structure?
You can decide:
What sort of “thing” it is
What its aims should be
Who should own it
How it is accountable to the community
Who should make the decisions

10. What happens when you create a new structure?
The new entity:
Can own its own money
Can enter into contracts (not the board or committee members) including employing people
Will have a written constitution
Will be registered with a regulator
Will have to do accounts and send them off

11. Choosing the right vehicle
Where do you want to go?
What are your options?
How should you decide?

12. What are the options?
Profit distributing structures:
Companies limited by shares
Including PLCs
Limited Liability Partnerships
Co-operative Societies
Community interest company (CIC) ltd by shares

13. What are the options?
Non profit distributing structures:
Companies limited by guarantee
Community Benefit Societies
Community interest company (CIC) limited by guarantee
Charitable Incorporated Organisation (CIO)

14. But what are we at the moment?
If a group isn’t any of those, then in law its probably:
an “unincorporated association”, an association of two or more people “for common purposes” (but not business); or
a “sole trader”; or
a “partnership” (if its about business)

15. Don’t worry about labels
“Social Enterprise”
“Community Development Trust”
“Community Enterprise”
… don’t worry too much!
Basic options the same

16. Company Limited by Guarantee
Common vehicle for non-profit making organisations
No shares; Members give £1 “guarantee”
Constitution called “the Articles of Association”
Can be a charity or a CIC

17. Community Interest Companies
Introduced as legal form for social enterprise
CIC registration: CIC regulator
“Community benefit”
Annual Community Interest Report
Standard/required provisions in M&A
Asset lock
No tax breaks

18. Co-operative Societies
For the benefit of those who join as a member
Democratic structure – one member, one vote
Members hold a share in the Co-op
Regulated by Financial Conduct Authority
International co-operative principles

19. Community Benefit Societies
Set up to benefit the wider community, not just members
Democratic structure
Members own a share
Can have asset lock, similar to CIC asset lock
Can be charitable
Generally higher set up costs than companies
NB community investment – some useful key features

20. Charitable Incorporated Organisations
A legal structure especially for charities
Created by the Charities Act 2006
Only has to register with the Charity Commission
Comes into existence when registered

21. Charitable Status
In order to be charitable, an organisation must be “established for charitable purposes”
“Charitable purposes” means purposes which are “exclusively charitable according to the law of England and Wales”
13 listed in the Act but a wide range in practice
Charities Act 2011

22. Charitable Status Some social enterprises are charities
Some helpful charitable purposes:
Promotion of education
Promotion of arts and culture
Relieving unemployment
Health warning – Charity Commission guidance!
But what about activities?

23. Charitable Status Tax treatment different to normal companies
Exempt from most forms of Corporation Tax
Other tax advantages
Access to sources of funding
Restrictions on trading
Regulation by Charity Commission
“Burning the bridge”

24. Pause for breath …
With me so far?

25. Some examples New Horizons Community Enterprise:
A charity which is a company ltd by guarantee
Formed for the regeneration of the area
Locally elected residents lead the board
With a trading company, New Horizons Enterprises Ltd
Has a library in its building

26. Some pointers Charitable aims: Tax advantages of charitable status
Promotion of education including literacy
Promotion of arts, culture
Tax advantages of charitable status
Business rates
Limiting liability….

27. How do you make the choice?
Assess what you want the organisation to do
Do you want to give out profits to members or investors, or is it not for profit?
Is it likely to have only charitable aims?
Is it likely to carry out only charitable activities?
Trading?
Are the tax advantages going to be important?
Is it likely to need to borrow?

28. How do you make the choice?
How certain are you – do you need to retain flexibility?
How are you going to raise funds?

29. Community managed libraries
Dealing with governance
Main title and body text type levels. Other type styles could be used when appropriate but should all be Gill Sans MT.
10th November 2017

30. Charity Commission Report: Tackling Abuse and mismanagement 2015-16
“Charities play a vital role in our society. When they are well run, with strong governance and leadership, they can have great impact and do a lot to support their beneficiaries.”
William Shawcross, Chairman, Charity Commission
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31. Charity Commission Report: Tackling Abuse and mismanagement 2015-16
“We have continued to strengthen our work to prevent and stop abuse and mismanagement in charities this year, both in terms of the regulatory action we have taken and in our work with charities to be more proactive and take preventative measures.”
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32. Charity Commission Report: Tackling Abuse and mismanagement 2015-16
7 key risks/themes:
Fraud, financial crime and financial abuse
Safeguarding issues
Abuse of charities for terrorist related purposes
Governance issues – unmanaged conflicts of interest, private benefit and poor decision-making
Charities in financial distress
Fundraising
Registration compliance
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33. So what is the secret………
COMMON SENSE!
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34. Back to basics Do your charity trustees know: that they are trustees
their duties
their liabilities!
the legal structure of the charity
the charitable purposes of the charity
the charity’s governing document
how to run a good meeting?
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35. Beware the illnesses! Founder syndrome Dysfunctional politeness
Head in the sand
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36. Who does what?
The key to a well run charity is being clear who is responsible for what:
the buck stops with the trustees but unless the charity is small they cannot run it on a day to day basis
the “haggling over £20 and nodding through £2m” syndrome
sub-committees
CEO/employees
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37. Managing Risk Charities must manage their risks:
identify the major risks that apply to their charity
make decisions about how to respond to the risks they face
make an appropriate statement regarding risk management in their annual report
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38. Managing Risk Risks charities face: Governance Operational Financial
External
Compliance with law and regulation
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39. Finance Duty – “Great Aunt Maud” Policy Practise Investments
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40. Trading Charitable purposes - activities Primary purpose trading
Ancillary trading
Non-trading e.g. “simple” rental income
Statutory exemption:
the total turnover from all trading activities must not exceed the annual turnover limit; and
profits must be used solely for the purposes of the charity.
The annual turnover limit is £5,000 or if greater than £5,000, 25% of the charity’s gross income subject to an overall limit of £50,000.
Trading companies
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41. Conflicts of Interest Personal/non-personal Direct/indirect
Private benefit
STOP - declare it
LOOK - check governing document &
conflicts policy
LISTEN - leave meeting?
THINK - can they vote
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42. Any Questions?
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43. Community managed libraries
Arrangements with local authorities
Main title and body text type levels. Other type styles could be used when appropriate but should all be Gill Sans MT.
10th November 2017

44. Where are we going today?
Legal models for working with local authorities
Looking at tools
The statutory duty of local authorities

45. Models of working with Councils
Legal models for working with local authorities
Independent community library
Asset owning – owns its own premised, entirely independent
Non asset owning – independently run but not owning premises
Co-produced library
Community managed – community led and delivered
Community supported – support from volunteers
Commissioned community – funded by Council but delivered by third sector body under contract

46. Models of working with Councils
Tools for working with local authorities
Community asset transfer
Short term lease / licence
Management agreement
Commissioned contract

47. Property issues –what’s on offer?
Land issues?
What kind of interest?
What are you getting?
Condition of property, plans for development
On what terms?
Who repairs?
Is there any rent?
Linked to service provision? Why? How?
Restrictions on usage?
What documents are needed?
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48. LA commissioning Who is commissioning what?
Grant agreement or contract
Contract for services?
One library, or lots?
Social outcomes…
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49. Issues for local authorities
Meeting the statutory duty
Public Libraries and Museums Act 1964, section 7:
“It shall be the duty of every library authority to provide a comprehensive and efficient library service for all persons desiring to make use thereof”
People who live, work or study in the area
Bearing in mind the need to:
Have sufficient stock
Encourage adults and children to use the service
Co-operate with other local authorities

50. Community managed libraries
Libraries and income generation
Main title and body text type levels. Other type styles could be used when appropriate but should all be Gill Sans MT.
10th November 2017

51. Where are we going today?
Legal models for delivering income generation
Charging permissions for library authorities
Trading issues

52. Models of delivering enterprise – part 1
In house
LA trading company

53. Models of delivering enterprise – part II
Charitable body
Social / community enterprise (not a charity)
Private sector trading partner

54. Question? Are you currently generating income: In house
Through a trading company
Using a charity
Via a social or community enterprise
With a private sector partner? 54

55. In house - a key issue
Charging
Trading

56. Income generation in house
Hard to secure investment?
Unable to “ring fence” income
Business rates payable

57. Local authority trading company
May be able to secure investment
Could reinvest surplus or gift back to LA
Tax issues – business rates, Corporation Tax

58. Charitable body May have trading restrictions
May be able to secure investment (but not equity)
Able to reinvest surplus; locked in for community benefit
Tax advantages

59. Social or community enterprise
Free to trade
Can secure investment but NB tax?
Can lock in community benefit

60. Private sector trading partner
Free to trade
Can secure investment but NB tax?
Will look for profit margin

61. Charging permissions for library authorities
What must be free
What you can charge for
What about other providers?

62. What must be free The lending of “written material”
To those who live or work in your area
Reviewing reference works in the library

63. What you can charge for Lending to other users
The use of “electronic or other apparatus”
Specifics: reservations, late returns, computer training, research or information collation…

64. What you can charge for
… and any other services that “go beyond those ordinarily provided”
NB distinction between charging and trading

65. What about other providers?
The prohibition on charging applies to the service, not the provider
The permissions apply too

66. The framework for trading
Procurement
State aid
Other trading issues

67. Procurement
If you are giving a contract to someone… there might be a procurement

68. State aid What is state aid?
When it might be a problem in a library income generation context

69. Other trading issues Planning matters – change of use? Business rates
Tax

70. Other trading issues
Decision making processes
Risk
Staffing

71. Summary There is a way to do (most of) what you want to do
Charging vs trading
What kind of trading body

72. Summary Charging – specific permissions and restrictions
Be aware of regulatory issues – but don’t be frightened
Manage the practicalities and the risk

73. Questions and answers
Any queries?

74. Community libraries network legal workshop – lunch, and
thanks for listening!
10th November 2017
If you have any queries or comments in regards to this document please contact David Alcock of Anthony Collins Solicitors LLP on or