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Constitutions

(Governing Documents)

An organisation's governing document is where its legal structure is enshrined and explained. It provides the basic rule book for the governance of the organisation. While the generic term ‘constitution’ is often used to describe an organisation's rulebook, the formal title given to the governing document will vary depending on the legal status of the organisation, thus:

  • Unincorporated association = Constitution

  • Simple trust = Trust Deed, or Deed of Trust

  • Company (including Community Interest Companies and charitable companies) = Articles of Association

  • Charitable Incorporated Organisation = Constitution

ADOPTING A CONSTITUTION THAT IS FIT FOR PURPOSE

A badly-written or inappropriate governing document can cause all manner of problems. It is an important legal document and can be enforced, by the courts if necessary. Far too many organisations in the voluntary, charitable and social enterprise sectors operate in breach of their own constitutions, or even in complete ignorance of them. We also come across constitutions containing provisions that are do not comply with the prevailing law. In this case the law takes precedence, so a group may be acting illegally even when they are abiding by the regulations contained in their own constitution.

Probably the worst way to acquire a governing document is to take one from another organisation and make a few amendments to it, because:

  • The document will have been prepared for another purpose and may contain provisions that are entirely inappropriate in this case. For instance, I often come across non-charitable social enterprises that have adopted a charitable constitution, even though they have no intention of registering with the Charity Commission (OSCR in Scotland). Their constitution thus contains many charitable rules and restrictions which need not or do not apply.

  • The document may well be out of date. For instance, company law changed radically in 2009 and any company constitution (memorandum and articles of association) dating from before then could not even be registered today.

  • If the original document was drafted by someone who wasn’t fully skilled in relevant law, it may already be riddled with errors.

  • If the amendments are made by someone without the necessary knowledge, they may be rendering the document invalid by changing things in breach of the prevailing law.

Therefore care should be taken that a constitution is acquired from a reliable source, such as a national umbrella body or regulator, or is commissioned from a specialist like myself.

REVIEW

While the adoption of an appropriate constitution is an essential part of the process of setting up an organisation, the document should not then be allow to fossilise. Every organisation should regularly review its governing document in the light of changing circumstances (and sometimes changes to the law), and ensure that it remains fit for purpose and a useful tool in the governance of the organisation.

MODEL RULES

Model rules – i.e. standardised, off-the-shelf constitutions – are available from a number of sources. They make the task of adopting a legal structure relatively cheap, simple and quick. For a small or very simple organisation, model rules may be a perfectly adequate choice. However the use of model rules does have some drawbacks:

  • The constitution will inevitably have been drafted for mass use. Therefore it will tend to contain rather bland or generalised provisions, where things could be tailored to suit the particular requirements of the organisation.

  • There are always constitutional issues where a choice may be made between various options. A simple example would be whether or not the chair of a board meeting has a casting vote in the event of a tie. A model will contain whatever the author believes to be best practice, which may not be the view of others. Most groups adopting a model won’t realise there are many details which they could, in fact, alter if they wish.

  • If a model has been adopted without proper review, it is likely that some within the organisation will not be very familiar with the contents of the constitution. In some cases it may be that no-one has even read it.

BESPOKE CONSTITUTIONS

Though it will never be the cheapest option, it is always desirable that a governing document is drafted specifically for a particular organisation and its particular circumstances, vision and constraints.

Drafting an effective governing document requires an in-depth knowledge of the legal framework (company law, charity law, trust law etc) as well as an understanding of the values and practices of the not-for-profit and social enterprise sectors. Consequently neither commercial solicitors not generalist advisers will usually be able to make the best job of creating a bespoke legal structure: they may have one half of the necessary expertise, but they will rarely have both.

I wrote my first governing document (memorandum and articles of association for a limited company) for a community printing project when I was 18 years old. This involved sitting in the local library and reading the Companies Acts from cover to cover. My entire working life since has been spent working in or for the voluntary, charitable and social enterprise sectors, developing ever more specialised understanding of the legal frameworks in which they operate while retaining close contact with organisations and activists in the field.

HEALTH WARNING

One thing that should be remembered is that no matter how elegant and thorough a constitution may be, it can never absolutely guarantee the smooth running of an organisation. If there is a breakdown of goodwill between members, or if pressure is created by financial difficulties, the constitution can help by ensuring that procedures are in place to deal with such difficulties – but it can't necessarily solve them.

PARTNERSHIPS / CONSORTIA / COLLABORATIVE VENTURES

Partnerships and consortia will not always be structured as separate legal entities (such as a limited company); frequently they will exist as an arrangement between the participating groups, often with one partner organisation appointed as ‘lead body’ (or ‘accountable body’) .

Such joint ventures will also need written agreements to govern the relationship between the members, but the name given to this agreement may vary: memorandum of understanding, partnership agreement, and so on. I can offer assistance with constructing such agreements, plus any ancillary documents that may be required such as agreements between the partnership/consortium and the lead body, or between the lead body and delivery partners.

Constitutional Health Checks

The written constitution provides only some of the rules that govern an organisation. In addition there are likely to be regulatory requirements (for example, if the organisation is registered as a company, or as a charity). These two factors really need to be considered together, which is why I offer...

CONSTITUTIONAL HEALTH CHECKS

Many organisations are a little hazy about constitutional and regulatory issues, which as a result can become a source of anxiety. Are we complying properly with our constitution? Do we know who our members are – and do they know who they are? Why does it matter? (It does!) Are we keeping all the records the law requires us to keep? Are there other rules we ought to be aware of?

I can undertake a Constitutional Health Check to remove this anxiety by reviewing key constitutional issues within your organisation and producing a report with recommendations. Areas covered include:

  • The governing document (constitution, articles, etc)

  • Membership and membership records

  • Appointment of members of the governing body (management committee, trustees, directors etc)

  • GM cycle

  • Record-keeping

  • Returns (Charity Commission, Companies House, etc, as appropriate)

Standard charge: £375 (may be reduced if I find little to report on)