Agree the legal structure of your group
You can set up a group in a number of different ways. The way you set up the group depends on the purpose of your group and whether it is a charity or not. You also need to think about the future and pick the right type of group or legal structure of your group at the start so you don’t run into problems later on.
Deciding on the legal structure of your group is important even if you are setting up a very small group as you will need to have the structure set up before you go to a bank or a funding organisation.
There are 5 main types of group you can setup. Depending on the type of group you setup you will need to create a document that describes how you will run the group over time. This is known as a governing document.
There are 2 main types of governing document: a Constitution (for charitable groups) and Memorandum and Articles of Association (for groups that are set up as companies).
Click on each type of group to find out more.
An Association (also called a charitable unincorporated association) is a type of charity. This could be for example a parent toddler’s group or a resident’s committee.
If you register your group as an Association you need to be able to show that the work the group does is for the benefit of the public. An Association is run by a Management Committee which is made up of a group of volunteers who are voted onto the Committee for a set period of time. The actions and activities taken by the Association are the responsibility of the members of the Management Committee.
If you set up your group as an Association you will need to register your group with the Charity Commission, and submit information to them each year about what your group has done over the year.
You will also have to create a document called a Constitution which describes how you will run or ‘govern’ your group.
A Trust (also known as a Charitable Trust) is usually set up to manage money or property for a charitable purpose. It is run by a small group of people known as trustees.
Trustees can be appointed for life when the trust is set up, or can be changed regularly. This means, for example, people with particular skills could be invited to become trustees.
Actions taken by a charitable trust are the responsibility of the individual trustees. The trustees make all the decisions and have all the responsibility.
If you set up as a Trust you will need to register your group with the Charity Commission, and submit information to them each year.
You will also have to create a document called a Trust Deed which describes how you will run or ‘govern’ your group.
Company Limited by Guarantee
A group set up as a company limited by guarantee is registered just like any company that runs as a business such as a delivery company or a shop.
This might be the right way to register your group if you think your group might get much larger in the future, or you might want to take on employees or buy premises.
A company limited by guarantee can also register as a charity if the service is designed for the public. The group will be run by a Board of Directors, but because it is registered as a limited company the Board members are only legally responsible to pay back a small amount of money if something goes wrong.
If you want to set up your group as a company limited by guarantee you need to register with Companies House and register with the Charities Commission if you want to set up as a charity as well.
If you setup your group as a company limited by guarantee you will need to create 2 main documents which describe the legal setup of the company. These are called Memorandum and Articles of Association. You will also have to submit your annual report and annual accounts to Companies House and the Charity Commission every year.
Community Interest Company (CIC)
The Community Interest Company (or CIC) is a relatively new type of company established by the Companies (Audit, Investigations and Community Enterprise) Act 2004 and regulated by The Community Interest Company Regulations 2005.
The CIC model is designed for those groups who offer services that benefit the community or who trade with a “social purpose,” rather than to make a profit.
While social or community enterprises may want to register as a charity, in many cases this is not possible, and in other cases it may not be the best way to register an enterprise or group. If you register as a CIC it is a way to make it clear to the community and others that the intention of your group is to provide a benefit to the community, while also giving you the advantage of the limited liability of a limited company.
If you set up your group as a CIC you will need to create 2 main documents which describe the legal setup of the company. These are called Memorandum and Articles of Association. You will also have to submit your annual report and annual accounts to Companies House.
Charitable Incorporated Organisation (CIO)
This is a new legal structure specifically for charities and is provided for in the Charities Act (NI) 2008.
A CIO will be an incorporated legal form of charity which is a ‘body corporate’ but not a company.
At present there are no regulations in place however it is expected that a CIO will have a two-tier structure of members and charity trustees. This option is unlikely to be available in Northern Ireland until 2017/2018.