Charity Articles of Association - Private Company Limited By Guarantee
These Charity Articles of Association-Private Company Limited By Guarantee are designed for use where it is decided that the charity should be set up in the form of a company under the Companies Acts rather than in an unincorporated form.
These Charity Articles are to be used where the charity is to be set up as a company limited by guarantee. They take into account the needs of charities and the requirements of charity law, and, as appropriate, they include various provisions which appear in the Charity Commission’s model Articles for a Charitable Company.
Setting up the charity in the form of a company under the Companies Acts will be appropriate if the charity is to be quite large, have employees, enter into commercial contracts (including contracts to deliver services), raise finance, or own freehold or leasehold land or other property. It will be preferable for the charity’s trustees because a company will be liable for what the charity does, and the trustees will have better protection from personal liability for the charity’s debts (which may make it easier to recruit trustees).
Where a charity is to be set up as a company under the Companies Acts, it should not be set up as a private company limited by shares. It should instead be set up as a company limited by guarantee. This is because a company limited by guarantee has no shares or shareholders but has members (who agree to contribute a membership fee or subscription, normally have equal voting rights, and elect a board of directors/trustees), and any profits (often known as "surpluses") are not distributed as dividends, but may be used to support the activities for which the charity is formed.
It is also possible for a charity to be to set up as a Charity Incorporated Organisation (“CIO”) under charities legislation (not under the Companies Acts), but most incorporated charities are set up as companies limited by guarantee. CIOs are like companies and are a very new legal form of charity, but to date there has been only a short time for their pros and cons to be considered.
Unless a company creates its own articles excluding or amending the Model Articles provided by the Companies Act 2006, the model articles for that type of company by the Companies Act 2006 will apply by default. However, companies are free to adopt, vary or exclude some or all of the model articles, subject to the provisions of the Companies Act 2006.
At the front of these Charity Articles of Association-Private Company Limited By Guarantee we have attached a set of specific guidance notes to assist in tailoring the Articles. These guidance notes do not form part of the Articles and should be removed before the Articles are used.
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