Before We Start

You will hear us refer to VCSE a lot, but what does it mean? The answer is Voluntary Community and Social Enterprise (VCSE). The sector itself has been called many names over the years – Civil Society, the Third
Sector, and the VCS to name a few. We use VCSE sector as it’s the ‘catch all’ term that includes any organisation (incorporated or not) working with Social Purposes. This could be a small community based group like a ‘knit & Natter, Sports Club  through to larger registered Charities that operate locally, regionally & nationally.

 

Social Purpose

Here at Catalyst we support many individuals on their path to formalising ideas and concepts into a VCSE organisation. Most ideas come from a problem that needs solving, or a way to make other people’s lives better.

Setting up and leading any charitable organisation can be extremely fulfilling but also sometimes challenging. This guide is a way to introduce you to some of the formalities. Our dedicated support officer can help guide you through the early stages of setting up an organisation, and guidance down the line too.

We want to shed a little light on a common conception that by setting up a charitable organisation that you can get paid to do good things. Whilst we would love this to be the case funding has become more competitive and criteria from funding partners often restricts where monies can be spent. Some funders for example won’t even consider applications until you have been operated for 12-24 months.

Ideas into Plans

Brainstorming is a simple process to turn your ideas into a reality. Explore your ideas and determine which ones are viable and what needs further exploration.

Research is an important step, are your ideas feasible, its a time to ask tough questions and be critical of your ideas. This will help you determine their potential. Knowing other organisations in the space that you intend to operate in will also be part of your process. If you are doing something similar to an existing organisation it’s good to know what makes you different.

Road mapping is a great way to explore how you are going to turn your idea into a detailed plan. What, who, how, why and when will all be starting questions to gaining an understanding of how to make everything a reality.

Our support officer can be that early sound board and even point you in direction to help with this process.

What to think about…

  • Your idea! Think about what it is you would like to do. Ask yourself which part of the community you want to support, how you would like to support them, what activities you want to run.
  • Research what is already available for people to access. Is there anything similar running? What makes you different to other offerings? Do you need another group, if yes why. Have you explored joining forces with someone already out there to build on their support?
  • People are essential to the success of your new venture. Do you have or need people to deliver your idea? Would you be reliant on volunteers? Have you identified skills from those you need to involve? Do you need to work with other groups or organisations, have you identified those?
  • Decide on the best structure for your group. For examples of commonly used structures scroll down this page. Think about if you have a charitable purpose or community benefit. Charitable purpose is defined by law (Charitable purposes – GOV.UK (www.gov.uk)), if your organisation doesn’t fit into one of these purposes it can still have a community benefit and be a not-for-profit organisation.
  • Consider start up costs – do you need funds for room hire, equipment? How will you get these? What are ongoing costs?
  • Look at governing documents and application for registration if applicable.
  • Research & apply for a Community / Charity Bank Account which are available from most high street banks.
  • Look at options for insurance as you will most likely need Public Liability and Trustee Indemnity are commonly needed but it’s worth speaking to an insurance provider or broker.
  • Work on policies which are likely to include safeguarding, health & safety, volunteer agreement to name a few. Visit www.NCVO.org.uk for advice and information on policies relevant to you.

Catalyst are here to help you along the way but we have found the above checklist helps give you focus in the early days. If you would like our help please complete the contact form at the bottom of this page.

Types of Charitable Setup

A Community Interest Company (CIC) is registered with Companies House, and while a not-for-profit organisation, CICs aren’t charitable as defined by law. This can mean that organisations that want to people, but don’t have a charitable purpose may better fit with a CIC. A CIC, as it is a Ltd company, will usually have a trading element and funders will normally expect to see at least 50% of the CICs income to be self-generated.

CICs can be started by an individual, rather than a group of Directors, however the majority of funders won’t fund CICs with a sole Director.

CICs don’t have to be charitable as defined by law, so don’t need to meet the charitable purposes set out by the Chairty Commission. They do have to be determined to be of community benefit by the CIC Regualator, examples of CICs include, health & wellbeing classes charging market rate for those that can afford them and offering free/subsidised places for disadvantaged people; community theatres using ticket sales to fund their shows and trainers offering private sector businesses training & using the profits to fund school sessions.

Before setting something up, take a look at what other groups are already running, as you may be able to offer your support to an established group to avoid duplication and combine skills to make a stronger organisation.

CICs are governed by a Memorandum of Association and Articles of Association that set out the rules it will abide by so they can further their aims and purpose. The CIC will be run by a Board of Directors, they are responsible for the day to day running of the group, including managing finances.

There are 4 options for a CIC:

  1. A CIC with small membership limited by guarantee.
  2. A CIC with small membership limited by shares.
  3. A CIC with large membership limited by guarantee.
  4. A CIC with large membership limited by shares.

A CIC with a small membership have only its Directors as members, meaning that only the Directors have any voting rights within the CIC. A CIC with a large membership has wider members, such as service users, that all have voting rights at general meetings.

A CIC limited by guarantee means that if the CIC were too close down, each of the members would be liable for an amount set out in their Articles of Association, usually this is £1-£10. A CIC limited by shares, distributes shares to its members and once a shareholder has paid the full nominal value of their shares to the company, they have no other liability.

CICs are an incorporated organisation meaning that the CIC is its own legal entity, so can enter contracts in its own name, rather the Directors being liable.

Once you have your Board of Directors and Memorandum of Association & Articles of Association in place, you will need to apply to Companies House to get what your company number. There will be an application form that needs to be completed and submitted for either approval or further questions.

Top Tips:

  • Make sure there are no organisations offering anything similar to what you want to set up – avoid duplication.
  • Make sure your aims and purpose are what you want to do
  • Try to recruit a broad skill set to the Board of Directors so you can tap into a wealth of knowledge.
  • Decide which model of CIC you want your organisation to run as
  • Once registered with Companies House make sure you open a bank account so that any CIC monies is paid into that rather than a personal bank account.
  • When your group is established, it’s worth looking into insurance (public liability etc.).

A Charitable Incorporated Organisation (CIO) is registered with the Chairty Commission, and is charitable by law. A CIO is similar to a charitable company, but this structure allows the organisation to just be registered with the Charity Commission and not with Companies House as well. Many new organisations that want to be a charity choose the CIO route as it offers a more corporate structure, giving more scope to trade if needed.

A CIO starts with a group of like-minded people coming together to address a need, this can be support around a health condition, running a community centre, support for vulnerable or a number of other things. To be a registered as a CIO they group must be considered charitable which means what they want to establish must fall under one of the classifications the law defines as charitable. These are:

  • The prevention or relief of poverty
  • The advancement of education
  • The advancement of religion
  • The advancement of health or the saving of lives
  • The advancement of citizenship or community development
  • The advancement of the arts, culture, heritage or science
  • The advancement of amateur sport
  • The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
  • The advancement of environmental protection or improvement
  • The relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
  • The advancement of animal welfare
  • The promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
  • Any other charitable purposes

More information about charitable purposes here.

Before setting something up, take a look at what other groups are already running, as you may be able to offer your support to an established group to avoid duplication and combine skills to make a stronger organisation.

CIOs are run by a constitution as their governing document that sets out the rules it will abide by so they can further their aims and purpose. The CIO will be run by a Board of Trustees, they are responsible for the day to day running of the group, including managing finances.

There are 2 options for a CIO, a Foundation Model and an Association Model.

Foundation Model

A Foundation Model is a CIO where the only voting members are the trustees themselves. This means that Trustees are able to vote on matters involving the running of the organisations.

Foundation Model CIOs can have wider members but a clear distinction needs to be made between voting members and non-voting members.

Foundation Model CIOs can be converted to Association Model, if the CIO decides the change should be made to better suit their needs.

 

Association Model

An Association Model is a CIO where all members, not just trustees, have voting rights and can do so at general meetings. These rights are usually reserved for things such as voting trustees on to the Board, electing a Chair and other officer roles and agreeing the accounts, amongst other items of business.

You can switch to a Foundation Model from an Association Model CIO, bit it is much harder to do as all members will need to vote for this, which means that members would need to vote away their rights.

 

CIOs are an incorporated organisation meaning that the CIO is its own legal entity, so can enter contracts in its own name, rather the trustees being liable.

Once you have your Board of Trustees and Constitution in place, you will need to apply to the Charity Commission to get what your charity number. There will be an application form that needs to be completed and submitted for either approval or further questions from the Commission.

Top Tips:

  • Make sure there are no organisations offering anything similar to what you want to set up – avoid duplication.
  • Make sure your aims and purpose are what you want to do – delivering something outside of these will mean you aren’t running as you should be and may mean involvement from the Charity Commission.
  • Try to recruit a broad skill set to the Board of Trustees so you can tap into a wealth of knowledge.
  • Decide which model of CIO you want your organisation to run as. If you are unsure, it is easier to set up as a Foundation Model and convert to an Association than the other way around.
  • Once registered with the Charity Commission make sure you open a bank account so that any CIO monies is paid into that rather than a personal bank account.
  • When your group is established, it’s worth looking into insurance (public liability etc.).

A community group starts with a group of like-minded people coming together to address a need in their community, this can be running a coffee morning, a litter picking group or anything else you can think of. Before setting something up, take a look at what other groups are already running, as you may be able to offer your support to an established group to avoid duplication.

For these smaller, grass-roots groups, a community group can be a good option to give them some structure. As a ‘small charity’ they won’t have to register with the Chairty Commission as long as they are bringing in an income of less than £5000 annually, this includes all funding and donations.

A community group is managed by a governing document, usually a constitution, that sets out the rules it will abide by so they can further their aims and purpose. The community group will be run by a management committee (can also be referred to as a board of trustees). This management committee is responsible for the day to day running of the group, including managing finances.

Community groups are unincorporated, meaning that the group isn’t its own legal entity, but is still able to open a bank account and take out insurance in the name of the group. Being unincorporated means that any contracts (e.g. venue hire, taking out any contracts of work) will be signed by the management as individuals rather than the organisation.

 

Top Tips:

  • Make sure there are no organisations offering anything similar to what you want to set up – avoid duplication.
  • Make sure your aims and purpose are what you want to do – delivering something outside of these will mean you aren’t running as you should be.
  • Ensure that you recruit the right people to the management committee, you will need people that are willing to work for the good of the community group and want to help their community in doing so. The work will be unpaid (reasonable expenses can be reimbursed by the group) so the desire to want to make a difference to their community is essential.
  • Once the constitution is signed make sure you open a bank account so that any group monies is paid into that rather than a personal bank account.
  • When your group is established, it’s worth looking into insurance (public liability, trustee indemnity etc.). If something does go wrong with your group, any fines/compensation that has to be paid out will be paid by the insurance rather than the trustees personally been liable.
  • If your income goes over £5000 in a 12 month period then you have to register with the right regulatory body for your group (Charity Commission for Charitable Incorporated Organisations and Companies House for Community Interest Companies).

The most known type of voluntary organisation is a traditional Registered Charity, however this is no longer the most common type of new organisation, being replaced by a CIO (which is still a charity registered with the Chairty Commission).

Organisations looking to become a registered charity will be directed towards becoming a CIO as the newer structure for a charity.

Organisations that registered before CIOs were introduced will still be classed as a Registered Chairty and don’t have to change structures.

A Trust usually manages assets, such as money (being a funder) or a building.

A Board of Trustees is established to manage the asset, in terms of a funder this will be to make funding decisions and ensuring the continuation of the fund for the long term. For a building, it is usually for building that the owners want to continue for a specific purpose beyond their lifetime (historic houses, landmarks, places of cultural significance), the trustees will be responsible for maintain the building and ensuring it continues operating for the right purpose.

A CBS is for the benefit of the whole community (usually a community owned asset, such as social club/pub/shop). There’s no financial benefit for members with a CBS as all profits are put back into the community.

A CBS will be ran by it’s members (though a management committee will be responsible for the running) to ensure the continuation of the asset. To access the asset people would usually have to be a member, but this gives them the right to have a say in how the asset is used.

A CLG in usually a not-for-profit as it doesn’t have share capital that would distribute profits to members. A CLG isn’t a registered charity (unless they also register with the Charity Commission as a charitable company). Members of the CLG are liable for the amount guaranteed in their articles.

The new charitable structure of a CIO offers the same benefits of a CLG but you only need to register with the Charity Commission and not Companies House as well.

Cooperatives are businesses that are run by their members for the economic, cultural and societal benefit of its members. While cooperatives can be run volunteers, they are not classed as not-for-profits as members take dividends from the society.

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