January 23, 2017 : Sandra Hogg
Is it time to incorporate your village hall?Make sure your village hall trustees are protected by checking your legal structure
I love village halls and community buildings. They’re often the glue that keeps communities together by providing space for a huge range of activities.
But they’ve also been around for a long time. 30% of halls are 19th Century and over 70% are pre-1960s, which means their governing documents are often old fashioned, hard to understand, and frankly, not fit for current purposes. So I challenge trustees of village halls to dig out their documents and consider whether it’s time for a change.
Legal structures and property ownership
The majority of village halls are charities established by a Deed of Trust, many constituted by a model trust deed provided by the Scottish Council of Social Services (the old name for SCVO) back in the 1950’s and 60’s. The deed usually vests the hall property in the name of the trustees but may also allow for the establishment of a management committee which is responsible for the general management and control of the hall. In such cases the Office of the Scottish Charity Regulator (OSCR) regards the trustees who hold title to the property and the management committee as charity trustees who have a dual role in the management of the charity.
Property trustees + committee trustees = charity trustees.
Often the management committee is unaware of the Trust Deed and property trustees, or believe they are no longer important.
Reasons to change
Trusts and management committees are unincorporated organisations, collections of individuals with no separate legal identity. Any property or contracts must be held by individuals on its behalf. This increases the risk of personal liability for those involved in running the organisation. It can be particularly important if you are considering a building renovation or extension. The solution is to become an incorporated organisation, usually a Company Limited by Guarantee or a Scottish Incorporated Charitable Organisation (SCIO). Other benefits to incorporation include greater access to funding, simplifying management and better protection for those employing staff.
Check your legal documents. Find the title to the property, often called the disposition. It should refer to the body that owns the building. If this is a trust you’ll need to find the Trust Deed. Good places to check are local accountants or lawyers who have been involved with the organisation, OSCR (who often have copies of original documents) or in boxes under beds and in attics!
The Trust Deed will set out who owns the property, usually the original trustees and their successors. It will state how their successors are appointed. You’ll need to establish who the current trustees are if you don’t know. The deed may allow for you to appoint new trustees from the management committee if there are vacancies. The trustees (property and committee) should agree it is in the best interests of the charity to change legal form.
Check your powers
It’s impossible to change the legal form of a Trust so you will need to set up a new legal body (SCIO or Company) and transfer the assets (including the property) into it. You’ll need to make sure your Trust Deed gives you the power to make the changes you want. Many Trust Deeds don’t allow for the property to be transferred to another legal body or for changes to be made to the terms of the deed. If this is the case you may need to apply to OSCR for a reorganisation scheme to transfer the property of the charity to another charity.
Company or SCIO?
The main choices for incorporation are Company Limited by Guarantee or SCIO. They both will do the job but SCIOs can be simpler and easier. Check out the options. You’ll need to write your new constitution (models are available) and apply to OSCR for charitable status.
Once the new charity is set up, you can apply to OSCR for consent to wind up and transfer the assets to the new charity (if the Deed of Trust/Founding Document gives the trustees the power to do so, which is often not the case) or, where the Trust Deed does not give the trustees the power to wind up, you can apply to OSCR for a reorganisation scheme for a transfer of the property of the charity to the new charity.
Things to consider
There will be costs involved, principally around conveyancing and solicitor’s fees that you’ll need to allow for. Banks may also require you to set up a new account for the incorporated charity. And you’ll need to make sure that you let insurers, suppliers and funders know about your new legal form and bank details.
Incorporating your village hall is not an easy or quick process (you should allow six months to a year) but future trustees will thank you for your efforts and it should make it easier to recruit new trustees.