INFORMATION SHEET 9

September 2013

Organisational Structures
WHY HAVE AN ORGANISATIONAL STRUCTURE?
A structure for your organisation is vital. You cannot run an organisation without it
and funders will not fund your work without one. In some circumstances, not having
an organisational structure can leave you personally responsible for any liabilities.
A structure defines what the organisation aims to achieve (known as objects) and
the means to achieve them (known as powers). Having a structure allows you to do
certain things i.e.

Raise money

Employ staff

Own buildings or other property

Involve local people

Undertake a trading activity

Make a surplus

Involve workers in decision-making

Enter into a lease or other contractual agreements

THERE ARE 13 ORGANISATIONAL STRUCTURES AVAILABLE IN THE UK AT
THE MOMENT:
o
An Unregistered charity without a constitution (not strictly a structure)
o
An Unregistered charity with a constitution
o
A Registered Charity
o
A Company Limited by Guarantee with charitable status
o
A Charitable Incorporated Organisation - CIO
o
An Exempt charity
o
An Excepted charity
o
A Community Interest Company - CIC
o
A Charitable Trust
o
A Friendly Society
o
An Industrial and Provident Society
o
A Co-operative
o
A Company Limited by Shares
The definitions, advantages and disadvantages of each are listed.
Please NOTE: GVOC strongly advise you contact us to discuss which structure

will suit your organisation the best.

AN UNREGISTERED CHARITY WITHOUT A CONSTITUTION
Definition: A collective group of people coming together under a common theme to
work towards a collective idea or purpose.
Advantages
Simple, quick and cheap to establish
It is flexible and you can decide how it will work
Not subject to any regulations i.e. Charity Commission
Disadvantages
It is not a legal entity and the trustees are the individuals responsible and
have personal liability
It cannot hold property in its own name
If there are disputes there is no controlling body to intervene and resolve
them, therefore can be difficult to manage
Often have very unclear aims
Cant fund raise from usual sources (unless have a set or rules rather than
constitution) and cant borrow money
AN UNREGISTERED CHARITY WITH A CONSTITUTION
Definition: A constitution is a legal document, which outlines the group's aims and
objectives and rules of procedure. Model constitutions are available from the
Charity Commission or from GVOC. The model will give the framework and you
can fit in the groups own aims and objects.
Advantages
Democratic and inclusive
Costs nothing to set up
Financial and Tax benefits
Can fundraise
Customer/stakeholder perception
Disadvantages
Restrictions apply as it must be charitable
Record keeping
Unlimited liability
A REGISTERED CHARITY
Definition: A charity is an organisation established for charitable purposes as
determined by the Charities Act 2011.
Advantages
Tax and rate relief
Public credibility
Democratic and open membership

 More funding sources available

Free to set up
Must be charitable as determined by Charities Act 2011
Minimum of 3 people required
Disadvantages
Limited trading powers
No payments to Trustees
Annual returns must be made to Charity Commission
Can take up to 6 months to register depending on complexity
Unlimited personal liability for Trustees
COMPANY LIMITED BY GUARANTEE WITH CHARITABLE STATUS
Definition: This is a structure often preferred by charities. It is an organisation
established for charitable purposes as determined by the Charities Act 2011 but
with limited liability for the trustees similar to that of a Company Limited by Shares.
Advantages
It is democratic
It has limited liability for Trustees
It can own and transfer property
It can borrow money
Is charitable therefore can benefit from tax breaks
Limited Liability for Trustees
Disadvantages
It is subject to more controls ie Company Law and Charitable Law therefore
more administration
It can be expensive to establish depending on complexity of organisation
There is a lack of privacy of information
Large financial penalties imposed for late filing of documents/accounts etc.
CHARITABLE INCORPORATED ORGANISATION CIO
Definition: A new legal charitable form designed specifically for charities which give
Trustees an option of no or limited liability.
Advantages
Limited or no trustee liability
Democratic
Free to establish
Single point of registration Charity Commission only
Company law no longer relevant
Disadvantages
Currently cannot borrow money
No privacy of members

 CIO doesnt exist until its registered by Charity Commission

Very new structure therefore no case law at the moment so we dont know
what can go wrong and what the consequences may or may not be.
AN EXEMPT CHARITY
Definition: Exempt charities do not have to comply with many provisions of the
Charities Act because they are considered to be adequately supervised by, or
accountable to, some other body or authority. Although not subject to Charity
Commission jurisdiction, an exempt charity is still subject to legal rules
Most Universities and Colleges, some schools, Museums, Galleries, the
Qualifications and Curriculum Authority, Church Commission, Libraries and
investment funds or a deposit fund established by a Scheme of the Charity
Commission which permits only exempt charities to participate, are exempt.
Advantages
Exempt charities are entitled to exactly the same financial benefits as
registered charities i.e. tax relief, rates etc.
Can be a registered charity and can incorporate
Limited personal liability for Trustees
Disadvantages
Trustees must comply within 2 months with a written request from any
member of the public for a copy of the charity's most recent accounts.
AN EXCEPTED CHARITY
Definition: An excepted charity is determined by regulation or does not meet the
minimum requirements for registration. However, an excepted charity can register
for charitable status voluntarily if they can show substantial funds will be lost if the
organisation is not registered. Some Scout and Guide Associations, voluntary
schools and some religious organisations fall into this structure.
Advantages
Do not need to register with Commission as it is an excepted organisation
Disadvantages
Some restrictions apply to campaigning organisations and work
A COMMUNITY INTEREST COMPANY (CIC)
Definition: It is a limited liability company with the specific aim of providing benefit to
a community. It can be established as a private limited company, limited by shares
or by guarantee or a public limited company. It must conform to the Companies Act,
including insolvency law, in the same way as other UK companies.
Advantages
Directors can be paid
No limit to level of profit a CIC can make

 Greater flexibility compared to a charity in terms of its activities

No Trustees, therefore no trustee control
Asset lock
Disadvantages
Not all funders will support this type of organisation
Regulated by Companys House and other regulators as fitting i.e. Charity
Commission
Community Benefit reports must be open to public scrutiny
No financial or tax benefits
A CHARITABLE TRUST
Definition: A legal form for endowed, grant giving charities for charitable fund-raising
bodies. Operates under a Deed of Trust rather than a membership. Must have
charitable aims. Must register with Charity Commission. Established to manage
money or property for clearly defined purposes between 3 parties, the donors, the
beneficiaries and trustees.
Advantages
Its quick and cheap to set up and run (note the possibility of legal fees and
stamp duty)
It can hold property
It can be charitable therefore can benefit from tax breaks
Amendments to Trust deed are easily changed if necessary
Responsible to Charity Commission only
Disadvantages
Its an undemocratic structure as decisions lie with trustees
Trustees are usually impossible to remove (but a solicitor might help to draft a
deed that is clearer on this point)
Trustees are liable for all of their actions
A FRIENDLY SOCIETY
Definition: This structure is obsolete so a new organisation cannot register as a
Friendly Society, however there may still be established Friendly Societies from
several years ago.
Advantages
It can be a charity and hold property
It can convert to a company and/or be charitable therefore benefit from tax
breaks
Disadvantages
Unlimited liability, minimum of 7 members required
Very rare structure nowadays
AN INDUSTRIAL AND PROVIDENT SOCIETY (IPS)

Definition: Is a common legal form for housing associations, consumer agencies

and credit unions, having said that, the IPS is a very rare structure nowadays.
Advantages
Community benefit organization
Democratic
Tax benefits as an IPS are recognised by Her Majestys Revenue and
Customs as an exempt charity (only if constitution is approved by HMRC as
charitable before it is adopted)
Open membership
Rules and formalities less rigid than other structures
Disadvantages
Minimum of 7 members
Can be expensive and slow to establish
Interest can be paid to members whove invested money but must be
restricted
Lack of privacy
Shorter filing of accounts deadline than other structures
A CO-OPERATIVE (Co-op)
Definition: A structure designed to increase workers rights and interests through a
democratic process by all its members.
Advantages
Members have an equal say
Open membership to all workers
The Co-operative usually pursue social objectives
Disadvantages
Interest paid to members is restricted
Minimum 7 members
A COMPANY LIMITED BY SHARES
Definition:- An organisation in which each member of the company is liable only for
the fully paid value of the shares they own. A private company limited by shares,
usually called a private limited company also called a private company limited by
guarantee. It has shareholders with limited liability and its shares may not be
offered to the general public, unlike those of public limited companies.
Private companies limited by shares are required to have the suffix "Limited", often
written "Ltd" or "Ltd."
Only a 1 share capital is needed to start up a private limited company.
For further information

Telephone: 0191 478 4103

E-mail: [email protected]

Fax: 0870 705 8702

Internet: www.gvoc.org.uk

Registered charity number 1137389

A Company Limited by Guarantee Registered in England & Wales
Company Registration Number 7302622