Our group is "joined at the hip" with the local theatre in which we perform. They ran pretty close to the wind in terms of closing down a while back but all was well in the end. They charge us an ungoing basis for our use of rehearsal space, auditorium time etc which is offset against tickets sales so there could be certain times of year when we have a minus balance with them.
Should the S*** ever hit the fan again and our liability with them was in a minus situation again I believe I am correct in saying that the the officers of our committee may end uo with a personal liability for said debt. Worse case scenario of course - but with me so far?
The question is would it be worth our while the dramatic society becoming a registered charity ourselves, what kind (ie limited by guarentee?) , and how to find out in words of one syllable?
Can you advise?
Full Version: Registered charity
It really depends whether the company is limited or not. I believe it's like any other business.
We are a registered charity and have to comply with certain regulations. Check with the charities commission.
A society I used to be a member of was run as a night school, and therefore obtained funding from the local authority education department. Not sure I would recommend this now though as they were nearly closed down for "not having ethnic minority members"
They obviously didn't look hard enough because we had a Turk and a Moroccan. But then - I guess they aren't black enough....
<_<
We are a registered charity and have to comply with certain regulations. Check with the charities commission.
A society I used to be a member of was run as a night school, and therefore obtained funding from the local authority education department. Not sure I would recommend this now though as they were nearly closed down for "not having ethnic minority members"
They obviously didn't look hard enough because we had a Turk and a Moroccan. But then - I guess they aren't black enough....
<_<
I would expect that, in the absence of any other formal organisation, the officers of the committee - usually the Chairman, Treasurer and Secretary - would be held accountable for any debt built up by the society since they are effectively the "Directors" of the society. A bit like being a sole trader.
OK - who carries the can when a society becomes insolvent is a completely different question to whether to become a charity.
who carries the can?
It may be a bit of a surprise, but for unincorporated associations, each contract that is entered into, is an arrangement between a member of the group and the contracting third party. For example, I enter into a hire contract with the local theatre, and the group doesn't pay, then it is me personally that can be sued. In turn, I could ask for contributions from other members of the society, but this might not be forthcoming if they did not give me permission to enter into the contract (either generally or specifically).
In the normal course, the members are responsible, but they delegate their responsibility to the committee - and any special officers named in a governing document might have special duties.
There is no distinction between your own personal assets and those of the group, since the group does not have a separate legal standing.
In theory, the risk of insolvency can be reduced by converting an unincorporated association into a company. Most companies have shareholders, but there is a special type of company with members, but no shareholders. These companies have limited liability, which means that on insolvency, each member guarantees payment of a sum up to a maximum set in the governing document (typically ?1).
That said, if the managing committee (known as the board of directors for companies limited by guarantee) allows a company to become insolvent, there is always a question as to whether they acted in the best interest of the group and its creditors. If found to be wanting, they (and only the board, not the members) could still find themselves with personal liability.
becoming a charity
Unincorporated associations can be charities. Companies can be charities. Trusts can be charities. The charitable status has no impact on limits on liabilities - potentially it has other advantages, including tax exemptions.
More information:
Try the Metheun Amateur Theatre Handbook out for size!!
who carries the can?
It may be a bit of a surprise, but for unincorporated associations, each contract that is entered into, is an arrangement between a member of the group and the contracting third party. For example, I enter into a hire contract with the local theatre, and the group doesn't pay, then it is me personally that can be sued. In turn, I could ask for contributions from other members of the society, but this might not be forthcoming if they did not give me permission to enter into the contract (either generally or specifically).
In the normal course, the members are responsible, but they delegate their responsibility to the committee - and any special officers named in a governing document might have special duties.
There is no distinction between your own personal assets and those of the group, since the group does not have a separate legal standing.
In theory, the risk of insolvency can be reduced by converting an unincorporated association into a company. Most companies have shareholders, but there is a special type of company with members, but no shareholders. These companies have limited liability, which means that on insolvency, each member guarantees payment of a sum up to a maximum set in the governing document (typically ?1).
That said, if the managing committee (known as the board of directors for companies limited by guarantee) allows a company to become insolvent, there is always a question as to whether they acted in the best interest of the group and its creditors. If found to be wanting, they (and only the board, not the members) could still find themselves with personal liability.
becoming a charity
Unincorporated associations can be charities. Companies can be charities. Trusts can be charities. The charitable status has no impact on limits on liabilities - potentially it has other advantages, including tax exemptions.
More information:
Try the Metheun Amateur Theatre Handbook out for size!!
NODA's legal advice is as follows:
An unincorporated society is not a legal person. Thus it cannot sue or be sued, nor can a contract be made so as to bind all persons who from time to time are members of such a Society. That is not to say that a contract purportedly made by the Society would necessarily be a nullity. If the person or persons who actually made the contract had no authority to contract on behalf of the members of the Society they would probably be held to have contracted personally and be personally liable on the contract. On the other hand if they had the authority, express or implied, of all or some of the members of the Society to contract on their behalf then the contract could be enforced by and against those members.
Thus the sensible thing is for any contract of this sort which the society wishes to enter into to be entered into by one of its elected officers and for that officer to be expressly authorised to enter into the contract by the committee or, if this is a body separate from the committee, such members as hold the Society's assets in the trust for the Society eg. any freehold or leasehold property that the Society owns will be registered in the name of two or more individuals as Trustees and one or more individuals, probably members of the committee, will be signatories on the Society's bank account.
It would be highly desirable for the contract on its face to show that it is being made by the individual for the benefit of the Society either by use of a formula such as "Mr X on behalf of the Committee of Anytown Operatic & Dramatic Society" or by incorporating a recital to the effect that Mr X is authorised by the Committee of the Anytown Operatic & Dramatic Society to enter into, and does enter into, the contract for the society's benefit.
If these steps are taken then other Committee members should be in a position to sue (as well as be sued) on the contract on behalf of the Society and while the individual will have personal responsibility for the contract, he or she will be entitled to an indemnity from the other members of the Committee who have authorised him or her to enter into the contract on members' behalf.
It is up to the Society to determine how it wishes to apportion joint and several liability in the event of the Society being faced with a large debt. It can, for example, apportion it either to the Committee members or across the entire membership of the Society. It must, however, ensure that whichever method it chooses has been ratified by the membership at an Annual General Meeting.
An unincorporated society is not a legal person. Thus it cannot sue or be sued, nor can a contract be made so as to bind all persons who from time to time are members of such a Society. That is not to say that a contract purportedly made by the Society would necessarily be a nullity. If the person or persons who actually made the contract had no authority to contract on behalf of the members of the Society they would probably be held to have contracted personally and be personally liable on the contract. On the other hand if they had the authority, express or implied, of all or some of the members of the Society to contract on their behalf then the contract could be enforced by and against those members.
Thus the sensible thing is for any contract of this sort which the society wishes to enter into to be entered into by one of its elected officers and for that officer to be expressly authorised to enter into the contract by the committee or, if this is a body separate from the committee, such members as hold the Society's assets in the trust for the Society eg. any freehold or leasehold property that the Society owns will be registered in the name of two or more individuals as Trustees and one or more individuals, probably members of the committee, will be signatories on the Society's bank account.
It would be highly desirable for the contract on its face to show that it is being made by the individual for the benefit of the Society either by use of a formula such as "Mr X on behalf of the Committee of Anytown Operatic & Dramatic Society" or by incorporating a recital to the effect that Mr X is authorised by the Committee of the Anytown Operatic & Dramatic Society to enter into, and does enter into, the contract for the society's benefit.
If these steps are taken then other Committee members should be in a position to sue (as well as be sued) on the contract on behalf of the Society and while the individual will have personal responsibility for the contract, he or she will be entitled to an indemnity from the other members of the Committee who have authorised him or her to enter into the contract on members' behalf.
It is up to the Society to determine how it wishes to apportion joint and several liability in the event of the Society being faced with a large debt. It can, for example, apportion it either to the Committee members or across the entire membership of the Society. It must, however, ensure that whichever method it chooses has been ratified by the membership at an Annual General Meeting.
Pardon??
I hope I understood all that
1. so this becoming a charity thing is a red herring? as far as liability goes it makes no difference? We are barking up the wrong tree so to speak?
2. we ought to become a company limited by guarantee with members but no shareholders and the liability set on all members of the society at ?1 (or just the committee?) That sounds like the one I think -
So how do we do that then?
3. I don't think we have a contract as such with the theatre, if we do I am not aware of quite how it works except it is all historical stuff. but any contracts that we do have should be signed by a named individual on behalf of the society which then indemnifies him/her against come back as this person was nominated to act on behalf of the society (???) Did I get that bit right?
4. it is up to the society how joint and several liability is approportioned but whatever it is must be ratified at the AGM. Can we make and record a decision like that without becoming one of those aforementioned companies first or would said decision then have no legal standing?
How confusing
Answer in words of one syllable please
Thanks for all the help - look forward to the reply!
Linda
I hope I understood all that
1. so this becoming a charity thing is a red herring? as far as liability goes it makes no difference? We are barking up the wrong tree so to speak?
2. we ought to become a company limited by guarantee with members but no shareholders and the liability set on all members of the society at ?1 (or just the committee?) That sounds like the one I think -
So how do we do that then?
3. I don't think we have a contract as such with the theatre, if we do I am not aware of quite how it works except it is all historical stuff. but any contracts that we do have should be signed by a named individual on behalf of the society which then indemnifies him/her against come back as this person was nominated to act on behalf of the society (???) Did I get that bit right?
4. it is up to the society how joint and several liability is approportioned but whatever it is must be ratified at the AGM. Can we make and record a decision like that without becoming one of those aforementioned companies first or would said decision then have no legal standing?
How confusing
Answer in words of one syllable please
Thanks for all the help - look forward to the reply!
Linda
Thanks for the postings Mark and Linda.
First - Mark - I think since new legislation has been passed, it is much easier for third parties to make sure they receive the benefit of contracts (unless the contract "opts out" of the new legislation). Also, ratification can take place in a number of ways, not just at the group's AGM.
Second, Linda:
1 Charity status has no impact on limited liability status.
2 You would need to adopt a new rule book (called the memorandum and articles of association), and complete a registration process at companies house. NODA for example have model rules. Experienced solicitors should be able to give you cost effective advice.
3 You will have had contracts with the Theatre, but they might not be in writing - still binding though. If the committee authorised you to sign the contract, you have an implied indemnity that the other committee members will chip in if the society defaults under the contract. A record in the minutes would be good - a signed agreement would be even better, but most people have better things to do with their time!
4 Not quite! The members have control of the society, and can make up any rules they like. They will normally delegate the normal business of the society to the managing committee. As long as the managing committee stay within their delegated responsibility, then should not be an issue going back to the members if it all goes wrong. That said, if the reason it went wrong was fraud or negligence, then the members might have good grounds for resisting any claim. Any decision you make would be binding. If it is recorded, then less grounds for doubt.
There is nothing stopping the group entering into the theatre contract, if the group want to do that.
If you choose the company route, then the group will disband, and be replaced by a totally separate organisation. That company would then sign the contract.
By way of general note - if you think that a contract is that risky, then you must seriously ask if entering into the agreement is in the best interest of the society. Can some other, less risky, arrangement be made?
First - Mark - I think since new legislation has been passed, it is much easier for third parties to make sure they receive the benefit of contracts (unless the contract "opts out" of the new legislation). Also, ratification can take place in a number of ways, not just at the group's AGM.
Second, Linda:
1 Charity status has no impact on limited liability status.
2 You would need to adopt a new rule book (called the memorandum and articles of association), and complete a registration process at companies house. NODA for example have model rules. Experienced solicitors should be able to give you cost effective advice.
3 You will have had contracts with the Theatre, but they might not be in writing - still binding though. If the committee authorised you to sign the contract, you have an implied indemnity that the other committee members will chip in if the society defaults under the contract. A record in the minutes would be good - a signed agreement would be even better, but most people have better things to do with their time!
4 Not quite! The members have control of the society, and can make up any rules they like. They will normally delegate the normal business of the society to the managing committee. As long as the managing committee stay within their delegated responsibility, then should not be an issue going back to the members if it all goes wrong. That said, if the reason it went wrong was fraud or negligence, then the members might have good grounds for resisting any claim. Any decision you make would be binding. If it is recorded, then less grounds for doubt.
There is nothing stopping the group entering into the theatre contract, if the group want to do that.
If you choose the company route, then the group will disband, and be replaced by a totally separate organisation. That company would then sign the contract.
By way of general note - if you think that a contract is that risky, then you must seriously ask if entering into the agreement is in the best interest of the society. Can some other, less risky, arrangement be made?
Me again!
It isn't that the arrangement (contract if you like) is thought to be risky at the present time, it was merely that we were investigating ways of limiting any potential financial liability to the committee members should a "worse case scenario" ever arise.
We have kept enough in the kitty (guided by our treasurer's Maths which is excellent) to be able to pay all charges accrued with the theatre should anything dreadful happen to it or should one of our plays well and truly bomb out.
If you read my original post it sort of explains it. Before we had this ongoing charge for our rehearsal space and auditorium time balanced out against the income we generate every month in ticket sales, we just used to make an annual donation to the theatre which financially came to very much the same thing but it has to now be done the current way due to VAT and stuff.
Instead of making an additional donation to the theatre at our last AGM, we kept some money back to cover our backs for the future. We will however be making a donation this year on top of the charges we already "pay" so at the moment it is not desperate.
We have also "reclaimed" our own membership system which has been tied up with the theatres for some years which will generate an income (albeit a small one!)
We wanted to find out our options and nobody really knew anything, as you probably gathered!
Thanks again
Linda
(Sudbury Dramatic Society based at the Quay Theatre in Sudbury, Suffolk)
www.sudburydramatic.com
It isn't that the arrangement (contract if you like) is thought to be risky at the present time, it was merely that we were investigating ways of limiting any potential financial liability to the committee members should a "worse case scenario" ever arise.
We have kept enough in the kitty (guided by our treasurer's Maths which is excellent) to be able to pay all charges accrued with the theatre should anything dreadful happen to it or should one of our plays well and truly bomb out.
If you read my original post it sort of explains it. Before we had this ongoing charge for our rehearsal space and auditorium time balanced out against the income we generate every month in ticket sales, we just used to make an annual donation to the theatre which financially came to very much the same thing but it has to now be done the current way due to VAT and stuff.
Instead of making an additional donation to the theatre at our last AGM, we kept some money back to cover our backs for the future. We will however be making a donation this year on top of the charges we already "pay" so at the moment it is not desperate.
We have also "reclaimed" our own membership system which has been tied up with the theatres for some years which will generate an income (albeit a small one!)
We wanted to find out our options and nobody really knew anything, as you probably gathered!
Thanks again
Linda
(Sudbury Dramatic Society based at the Quay Theatre in Sudbury, Suffolk)
www.sudburydramatic.com
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