What Have Charities Ever Done for Us?

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Cook Stephen. What Have Charities Ever Done for Us?

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“This analysis of charities and their value would be welcome at any time but is especially useful at present with charities facing huge challenges as we emerge from the pandemic.”

Baroness Jill Pitkeathley, President, NCVO (National Council for Voluntary Organisations)

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Many charities, especially larger ones such as Oxfam or CRUK, restrict the personal liabilities of office holders by registering under company law as companies limited by guarantee. These are different from companies limited by shares, which distribute earnings to shareholders. Members of a company limited by guarantee hold no shares, but undertake to pay a nominal sum towards costs if the company goes out of business. Crucially, the company, and therefore the charity, has its own legal personality, which means it can enter into contracts, such as contracts of employment, in its own name rather than those of individuals. From 2013 a new legal form, the charitable incorporated organisation (CIO), was made available, which allows a charity to have the status of a limited company without having to register with Companies House as well as the Charity Commission.

Another legal form is the charitable trust, commonly used when someone donates assets or a sum of money to be used for charitable purposes. As in the case of an unincorporated association, a charitable trust does not have a legal personality of its own, which means that the trustees must act as individuals if they enter into contracts and are personally at risk if the charity is sued. Charitable trusts and so-called ‘foundation CIOs’ are run by trustees and do not have wider memberships, whereas unincorporated organisations and ‘association CIOs’ generally have a wider membership that has a role in some of the decision making. Charitable companies can choose whether or not to have wider membership.

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