Strengthening and Understanding Legal Frameworks


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There are many choices of legal structure available to cultural organisations, be they not-for-profit, social enterprises, businesses or registered charities. However, it is often the case that organisations end up with a structure that does not suit their plans. Do you advise organisations on their structure, influence choices as a funder, or run an organisation as chief executive or board? How well do you understand the range on offer? What is the best structure for your organisation or organisations you are advising – and how easy is it to change or adapt structures and what are the pitfalls to watch out for? How well do you know the changes in Company and Charity law and the new options of Community Interest Company (CIC) and Charitable Incorporated Organisation (CIO)?

Seminar and Networking event

Tuesday 14 October 2008

for trainers, consultants, and advisers in governance and related organisational development matters in the arts and cultural sector


The Place
Duke’s Road, London WC1H 9PY (Euston station / tube)


A valuable cpd opportunity, with two formal sessions in the morning, and structured conversations and discussions with peers in the afternoon.

Consultant Susan Royce presents findings from the Cultural Leadership Programme funded Carver Policy Model Research looking at the application of the Carver governance model with a sample of arts organisations. (See below for more information on this session and see www.carvergovernance.com for more on the model.)

Solicitor Nicholas Sharp addresses practical issues on contract issues (including copyright) between freelancers and organisations.
(See below for further information on this session.)

After lunch, a choice of small group discussions that follow up on the morning sessions or explore other topics of interest to participants, including the relationship between governance and leadership (see below for more information).

The final session of the afternoon is an opportunity to discuss the proposal to continue such meetings, perhaps 3 times a year, as a self-sustaining informal network of freelance trainers, consultants and advisers in governance and related matters in the arts and cultural sector.

Breaks and lunch hour provide networking time and refreshments.

The day is also likely to be of interest to CEOs, board members, funding body officers, Local Authority arts development officers and others involved in governance and guiding arts and cultural organisations in development matters.

Coffee and networking from 10am
Start at 10:30am (see below for full timetable of the day)
Finish at 4pm

Cost £15


For a booking form and any enquiries, please email bindi.cartwright@creativepeople.org.uk

For further information on The Place visit www.theplace.org.uk

The Place is generously hosting this meeting, and potentially future meetings of the network. The event is managed by the CreativePeople team and is one of the final events of the GOLD governance campaign funded by the Cultural Leadership programme.

MORE ON THE MORNING'S GOVERNANCE SESSION


Introducing a New Approach to Governance - in theory and in practice

During 2007/2008 Caroline Felton and Susan Royce have worked with eight organisations to pilot the Policy Governance Model as developed by John and Miriam Carver. This approach is relatively new to the UK but has been used extensively to great effect in North America. The pilot has been funded by the Cultural Leadership Programme.

Susan will explain the model and findings from the application of it to UK arts organisations.

A short note summarising the Carver Policy Governance Model will be available to participants before the day.

Susan J Royce
Susan works with arts and cultural organisations throughout the UK to devise and deliver ambitious change programmes with a focus on financial performance. Her practice is rooted in
  • a deep conviction that real change can only come from personal action and that the role of a change consultant is to support, to facilitate and to be a ‘critical friend’ but not an ‘expert’.
  • a passionate interest in and engagement with culture, both of the past and the present
  • 20 years’ experience of working with clients in the private, public and third sectors to devise and implement radical change programmes which deliver real performance improvements
  • strong financial skills
She is a chartered accountant and part-time archaeology student. She worked for 10 years in corporate recovery in the City of London before opting for a life over a job. She is Chair of Axis and a trustee of Creative and Cultural Skills.


MORE ON THE MORNING'S LEGAL SESSION


NicholasSharp, solicitor

Contract issues between freelancers and their client organisations (including copyright)


Using mini case studies drawn from real life situations, this interactive session is aimed at increasing your confidence and competence in these legal aspects of freelance practice.

Topics addressed include:
• What to expect / what to ask for in contracts,
• what’s reasonable and what is not,
• keeping it simple,
• what legal phrases mean and which ones are extremely useful,
• who owns what and permissions and payments needed on further use,
• avoiding possible pitfalls.

A brief guidance note on the basics of both contract and copyright will be available by email before the session, so that time on the day can be used to address specific issues for freelance trainers, advisers and consultants in their professional practice with organisations.


• Nicholas Sharp has over 25 years experience advising big and small businesses, arts organisations, charities and individual practitioners on a wide range of business law, copyright, contractual, governance and other issues. Nicholas has been a board member of a-n The Artists Information Company, the principal UK organisation representing the interests of visual artists in the UK, since 1990. He has written many articles for a-n magazine (formerly ‘Artists Newsletter’) on legal issues for artists, authored a unique series of model Visual Arts Contracts (funded by Arts Council England) and co-authored the Artists Contract Toolkit, a web-based service available enabling a-n subscribers to create their own contracts online. He has given talks, training and legal advice to artists and arts organisations over many years. He is a trustee of Barbican Arts Group Trust (educational charity providing artists’ studio accommodation and schools residencies) and co-founder of The Multiple Store, an arts organisation commissioning and selling limited edition Multiples by contemporary British artists. www.swanturton.com

MORE ON THE NETWORK IDEA


GOLD Net – a proposal for a network for trainers, advisers and consultants involved in governance and organisational development in arts and culture.

Trainers, Advisers and Consultants involved in governance and organisational development in the arts and cultural sector form a significant grouping of influential people who through their work reach a large number of organisations and work with CEOs, chairs and boards.

How strong an appetite is there for cpd among these individuals and what level of interest in a network, gathering or conference that brings them together?

There is a suggestion of forming a network with regular events and use of a website / wikispace that enables these trainers, advisers and consultants to share knowledge and keep up to date with legal and other changes.

This idea will be discussed briefly in the final session of the day. See here for more information about the proposal.

MORE ON THE GOVERNANCE AND LEADERSHIP DISCUSSION


Janet Summerton will lead a discussion about the relationship between leadership and governance. Some questions arising:

Is the concept of shared leadership useful in our settings? Do boards exhibit or practice leadership? How might boards be
encouraged to take a leadership role? What attitudes and behaviours might facilitate stronger leadership among those who govern our organisations?

Janet Summerton is a consultant, researcher and writer who works with individuals, groups and organisations, as a critical friend - mentoring, coaching, planning, reviewing and evaluating. Key approaches to her work are action research and collaborative enquiry. She has been on the board of several arts and cultural organisations (often as chair) and established the Arts and Cultural Management programmes at the University of Sussex. She has edited and written a number of publications including Through the Maze, A guide to planning for arts organisations, Working together: Boards and Staff.


The shape of the day:


10am coffee / networking

10:30 Welcome and introductions

10:45 Presentation: Susan Royce: The Carver Governance Model in theory and in practice

11:30 Coffee break / networking

12:00 Skills development session: Nicholas Sharp: Contract and copyright issues between consultants and client organisations.

13:00 LUNCH / networking

14:00 Small group discussions – a choice of sessions
(1) A conversation on Carver Governance with Susan Royce
(2) Practical applications on contract and copyright with Nicholas Sharp
(3) Discussion on the relationship between governance and leadership with Janet Summerton
(4) topic suggested by participants on the day

15:00 Coffee break / networking

15:30 Discussion on the way forward – a network, another meeting, using the wiki / website?

16:00 FINISH and informal discussions and one-to-one meetings can continue as we have the space until 5pm


What is available though GOLD


- Improved access to good resources (both new resources, and a shared 'library' of resources making it easier to find information
that is relevant).
- Improved networks, so that organisations can share experiences of different legal frameworks, and hosting debate and
discussion on the blog.
- Legal Update sessions and networking Events, helping you choose the best legal structure for your organisation or those you
advise and bringing you up to speed on the new choices available with changes in Company Law and the newer options of CIC
and CIO.
- Legal advice as part of the Experts On Line scheme.



New Choices, New Structures 2

Held on 14 January covered changes in charity law, CIO and CIC


A seminar and networking event for trainers, advisers, consultants, funding bodies and local authority officers

who work with, or advise arts and cultural organisations and chief executives, senior staff and board members.


• Charity Law Changes including the new Charitable Incorporated Organisation (CIO) – an explanation of the changes and their relevance to arts and cultural organisations.
• Community Interest Companies (CIC) – when and how this structure may be useful in the cultural/creative sector.

A legal update, case studies and discussion with legal adviser for the arts Nicholas Sharp and arts management specialist
Madeline Hutchins

Charity Law is changing and the new structure of CIO - Charitable Incorporated Organisation will soon be available as a choice for
arts and cultural organisations. In addition, the Community Interest Company offers a new frame for non-charitable organisations.
These changes have practical implications for organisations you work with or are on the board or staff of.

This was a chance to get tailored information for arts and cultural organisations and have your questions answered by an expert,
then discuss the practical implications with colleagues.



The morning session was an explanation of the key issues for arts organisations who are registered charities arising from the recent
and imminent changes in charity law, and a refresher on the benefits and restrictions of charitable status for arts organisations.

The morning also covered the new structure of the Charitable Incorporated Organisation, designed to simplify matters and remove
the need for boards of organisations to be answerable to both company and charity law.

The afternoon session covered the Community Interest Company structure.

Did you know that the CIC:
• is a Company structure, either Limited by Guarantee or With Shares.
• was developed to support social enterprises and is intended to protect public funding as well as allow for commercial investment.
• allows for Board Directors to be paid (but so does the Company Limited by Guarantee structure without charitable status).
• cannot have charitable status (so cannot have the exemptions on corporation tax, the business rate of the Council Tax, nor use
Gift Aid, nor apply for funding from Trusts and Foundations that give only to registered charities).


The legal update sessions were run by Nicholas Sharp, solicitor and consultant with Swan Turton, a new London media law firm, and
a specialist legal adviser for the arts.

The case study discussions and the Open Space sessions were run by Madeline Hutchins, experienced trainer and consultant in governance and organisational matters in the arts.

• Nicholas Sharp has over 25 years experience advising big and small businesses, arts organisations, charities and individual practitioners on a wide range of business law, copyright, contractual, governance and other issues. Nicholas has been a board
member of a-n The Artists Information Company, the principal UK organisation representing the interests of visual artists in the
UK, since 1990. He has written many articles for a-n magazine (formerly ‘Artists Newsletter’) on legal issues for artists, authored
a unique series of model Visual Arts Contracts (funded by Arts Council England) and co-authored the Artists Contract Toolkit, a web-based service available enabling a-n subscribers to create their own contracts online. He has given talks, training and legal
advice to artists and arts organisations over many years. He is a trustee of Barbican Arts Group Trust (educational charity
providing artists’ studio accommodation and schools residencies) and co-founder of The Multiple Store, an arts organisation commissioning and selling limited edition Multiples by contemporary British artists. www.swanturton.com

• Madeline Hutchins' career in arts management began in 1979 in small-scale theatre, and she was Director of the Independent
Theatre Council (1983-1988). She is a trainer, facilitator and consultant, specialising in learning, designing events, and the legal
and organisational aspects of arts management. Her consultancy work includes choice of legal structure and development of
governance and organisational systems and structures. She has worked with hundreds of arts organisations on board development
and board away days. She has a Masters Degree in Management Development, which included organisational development. She
has had many connections with All Ways Learning, including as consultant, trainer, researcher, designing events, and as board
member. She is core tutor on the MA in Arts and Cultural Management at Sussex University, and a trainer on ITC and other short courses. She is on the board of StopGAP Dance Company.

The event was project managed for GOLD through All Ways Learning by Madeline Hutchins and Sue Webster.


New Choices, New Structures 1

held on 24 September, covered changes in Company Law.


Nicholas Sharp's presentation covered the following main changes in company law affecting arts and cultural organisations that are Companies Limited by Guarantee or Limited Companies with Shares:
• a change in electronic communication with members
• a new list of directors' duties
• enhanced proxy rights
• a change in directors' conflicts of interest
• new procedures for written resolutions
• changes to AGMs and the role of company secretaries
• changes to liability limitation agreements with auditors

Nicholas Sharp's Paper from the day

outlining the changes in Company Law and giving the required and recommended actions:


COMPANIES ACT 2006:

MAIN PROVISIONS COMING INTO FORCE ON 1ST OCTOBER 2007

AFFECTING ARTS AND CULTURAL ORGANISATIONS


The following are the main provisions of the new Act which came into force on 1st October 2007, in each case with guidance about
any action that needs to be taken now.

This is followed by a list of some of the other provisions of the Act which come into force in April and October 2008; more detailed guidance will be posted next year ahead of the implementation dates.

This note only gives guidance of a general nature and is not intended to constitute advice in any specific circumstances.

Although these notes have been designed specifically for organisations which are Companies Limited by Guarantee (whether or not having registered charity status) most apply equally to Companies with Shares (trading companies).

‘Members’ refers to members of the limited company. In many arts organisations, the same people are directors and members;
however some arts organisations have broad democratic memberships.


1. DIRECTORS’ DUTIES


• New set of codified Directors’ duties:

• To act within powers
• To exercise independent judgment
• To exercise reasonable care skill and judgment
• Not to accept benefits from third parties
• To declare interest in a proposed transaction or arrangement with the Company (nature and extent)
• Duty to promote the success of the Company for members’ benefit (or in the case of companies not set up to benefit members, which will be the case with most arts organisations, duty to promote the success of the company in order to achieve its purposes)
and to have regard (amongst other factors) to:

• Likely consequences of any decision in the long-term
• The interests of employees
• The need to foster business relationships with suppliers, customers and others
• The impact of the company’s operations on the community and environment
• The desirability of the company maintaining a reputation for high standards of business conduct
• The need to act fairly as between members

• New duties are still only owed to the Company and not members/other stakeholders, so only company can enforce (except through the new ‘derivative’ action which includes Court approval).

• For financial years starting on or after 1st October 2007, Directors’ Reports must include a ‘Business Review’ showing members
how the Directors have performed this new duty (applies to all companies except Small companies).

Recommended action:

• Provide briefing to board members on the new legal responsibilities
• Incorporate the duties into your role description for board members
• Review board decision-making processes to ensure that decisions are made using the new statutory factors and incorporate
them into your board protocols including the preparation of board papers.
• Be ready to include a ‘Business Review’ for the Directors Report for financial years starting on or after 1st October 2007.


2. DIRECTORS’ SERVICE CONTRACTS

• New: Members can request a copy of any directors’ service contract on payment of a fee.

• New: Members’ approval is needed for any service contract of guaranteed duration of 2 years or more (new) entered into on or
after 1st October 07; previously only contracts of 5 years plus required members’ approval,

• ‘Service Contract’ includes contracts of service (employment), contracts for services (freelance) and letters of appointment to the office of director, whether or not the director is remunerated.


Required action:

• Obtain members’ approval to any new service contracts of over 2 years’ duration which are entered into on or after 1st October 2007: approval obtained previously under previous law will suffice.

• Ensure procedures in place for members to obtain copies of directors' contracts/letter of appointment on request.


3. ENHANCED PROXY RIGHTS

• New: Automatic right for all members to appoint a proxy to attend, speak and vote at a General Meeting (even where Articles prohibit this). A proxy need not be a member of the company.

• Articles can extend statutory rights.

• New: All notices of General Meetings must include a statement in the required form informing members of their right to appoint a proxy.

Comment:

• These changes give increased powers to any dissatisfied minority of members.

• Companies may wish to encourage members to appoint the Chair as proxy but this cannot be mandatory.

• Organisations with large memberships may wish to review their structure to reduce the number of members.

Required actions:

• Introduce required language in all Notices of EGMs and AGMs sent out after 1st October (even if Proxy voting is not permitted by
the Articles).

Recommended action:

• Consider changing the Articles to include provisions consistent with the new Act.


4. WRITTEN RESOLUTIONS (ie decisions made by members signing sheet(s) of paper rather than in a meeting)

• New: companies can now pass written Ordinary Resolutions by a simple majority and written Special Resolutions by a 75%
majority; previously they had to be signed by all the members.

• The change applies even if the Articles specify otherwise.

• The detailed procedures set out in the Act must be followed.

• Written resolutions cannot be used for resolutions dismissing a director or the auditors.

Recommended actions:

• No need to change the Articles to take advantage of these new provisions but Articles can be customised to provide (say) for
longer than 28 days for members to respond to written resolutions.

• If changing the Articles for other reasons, consider removing any wording that contradicts the Act.


5. ANNUAL GENERAL MEETINGS

• New: Private companies (all Companies Limited by Guarantee and Limited Companies with Shares) will no longer be required to
hold an AGM every year (though they may continue to do so).

Recommended action:

• Each Board should decide whether to continue to hold AGMs; they can be useful as an opportunity to report to members and stakeholders on the company’s activities and to allow election/re-election of directors.

• If Articles currently require an AGM (most will), the Articles will need to be changed if AGMs are to be dispensed with.


6. NOTICE-PERIODS FOR GENERAL MEETINGS

• New: The notice-period for all AGMs and EGMs is reduced to 14 days (even if a Special Resolution is to be passed), unless the Articles state otherwise.

• Companies whose Articles call for 21 days notice for AGMs and Special Resolutions will have to amend their Articles to take advantage of the new 14-days notice-period.

Recommended action:

• Consider changing the Articles to reduce the notice period to 14 days.


7. LAYING ACCOUNTS BEFORE GENERAL MEETINGS

• New: There is no longer a requirement (for private companies, that is all Companies Limited by Guarantee and Limited Companies
with Shares), that the Accounts be laid before members at a general meeting, unless required by the Articles. Members must still
be sent accounts.

• If the Articles specifically require the accounts to be laid before the company in general meeting (most will) then companies must amend the Articles to remove this provision in order to take advantage of the change.

• Change applies to annual reports and accounts for financial years ending on or after 1st October 2007.

Recommended action:

• Consider changing the Articles to remove this requirement.


8. ACCESS TO REGISTER OF MEMBERS

• New rules apply for anyone inspecting or requesting information from the Register of Members.

• The request must now include name and address of the person seeking access and the intended purposes.

• Companies then have five days to comply or apply to the Court; Court will allow companies not to comply if access is not being sought for a proper purpose.

• Applies to all companies filing their annual returns made up to a date after 30th September 2007.

Recommended action:

• Provide a briefing on the new rules to staff members likely to be asked for access to the Register of Members.


9. ELECTRONIC COMMUNICATIONS: (note: these provisions came into force in January 07)

• The Act makes is easier for companies to communicate with members electronically.

• Companies still need to seek agreement from individual members to receive information by email. If a member does not agree or
fails to respond, hard copies must be sent.

• Companies wishing to use website communications must pass a members’ resolution and seek agreement of individual members;
if a member fails to respond in 28 days, his/her consent is presumed.

• If an individual has opted out of website communications, the company cannot ask for his or her agreement again within 12 months.

• Companies who want to post material on its website must notify the individual members that the notice has been posted (either by email or hard copy).

• Members are entitled to hard copies on request even if they have consented to e-communications.


Recommended action:

• Review Articles and members’ resolutions in place to ensure necessary powers are in place to use website communications.

• If powers already in place, ensure that provisions are wide enough to catch all electronic documents.

• Continue to seek consents from members to use e-communications.


PROVISIONS COMING INTO EFFECT IN 2008 (IN BRIEF):

From April 08:

COMPANY SECRETARY

• Companies need no longer have a Company Secretary although they may continue to do so.

AUDITORS: LIMITATION LIABILITY AGREEMENTS

• Auditors and companies can enter into binding agreements limiting auditors’ liability for negligence, default or breach of trust or duty.

From October 08:

DIRECTORS’ CONFLICTS OF INTEREST

• New tougher rules on Directors’ conflicts of interest.
• Independent Directors are permitted for the first time to authorise a director’s conflict of interest.

MEMORANDUM AND ARTICLES OF ASSOCIATION

• In future the Memorandum will only contain the names of the subscribers and the Articles will become the only governing instrument.

DIRECTORS’ ADDRESSES

• Directors will no longer have to provide their home addresses when they agree to become directors.

COMPANY NAMES

• New right of objection to Registrar if name is the same or misleadingly similar to a name in which the objector has goodwill.


Nicholas Sharp
Solicitor
Nicholas.sharp@swanturton.com
T: 020 7520 9579



Coming soon - notes from the Open Space discussion sessions.