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Legal issues
1. Asset Transfer – The legal issues
Giselle Davies, Partner
Bethan Walsh, Solicitor
2. Outline
• Structuring the community group to minimise
risk for trustees
• Effective legal due diligence
• Funding arrangements
• Process and progression from working group to
operation
• Potential problems
3. Structuring the community group
Unincorporated Incorporated
• Association • Limited company:
• Trust • Shares
• Guarantee
• Community Interest Company (CIC)
• Charitable Incorporated Organisation
(CIO)
• Cooperative or Community Benefit
Society
4. Types of legal structure
• Your choice!
• Our recommendations:-
– Incorporated status
– Depends on other issues
• Membership?
• Share capital?
• Charitable status/need for tax reliefs?
5. Due diligence issues
“What are you going to need?”
V
“What are you going to get?”
Analyse the information – is it viable?
6. Due diligence issues
• Property:-
− What terms are offered?
• Staff:-
− Who is transferring and at what cost?
− Pensions
− History (e.g. grievances/disciplinary)
• Contracts relating to the operation of the
property/business
7. Effective legal due diligence
• Investigating and fact finding
• Is the information you have received sufficient?
• Does it raise further queries?
• Legal due diligence is an ongoing exercise
8. Financial due diligence
• How much will running the asset cost?
• How much maintenance is required?
• Is there a need for urgent expenditure?
• Does the property interest bring liabilities?
• Does the asset come with a ‘pot’?
9. Funding arrangements – some options
• Big Lottery Fund
• Charity Bank
• Grant Finder
• Unity Trust Bank or similar
• WCVA’s Community Investment Fund
• Local authority contribution
• External investment
10. Making progress
• Initial steering group (unincorporated)
• Conduct due diligence
• Set up legal vehicle (e.g. charitable
company/CIO/Community Benefit Society)
• Agree terms with the current asset owner
• Complete transfer
11. Indicative timescales
• Creating a corporate charity
− Approximately 2 to 3 months to obtain
registration with the Charity Commission
− Due Diligence (initial)
− Usually 2 months
• Preparing and completing documentation
− Approximately 2 months
• Negotiating the deal – Your guess!
− Anything up to several years!
13. Creating a new charity
Issues
•Wording your objects clause:-
− Consider the 13 “descriptions” (Charities Act 2011
section 3)
− What/where/who/how
− Public benefit
14. Creating a new charity
Registration with the Charity Commission
•Don’t underestimate timescale
•Providing evidence/examples of activities of public
benefit
•Evidence of funding (pledges generally no longer
acceptable)
15. Creating a new charity
• Registration with HMRC
• Proof required of:-
− Jurisdiction
− Registration
− Management (“fit and proper persons”)
• Online application
• Timescale (8-10 weeks)
16. Potential problems
• Due diligence reveals serious issues:-
− Property (state of repair)
− Staff/pension matters
• Terms offered:-
− Short lease only
− No or inadequate ongoing revenue and funding
• Community resistance
