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Governance models

Overview

Aside from operating within a Local Authority or University, there are five common forms of legal status used by museums

  • Trust
  • Unincorporated Association
  • Limited Company
  • Industrial and Provident Society (Community Benefit Society or Co-operative Society, also sometimes called ‘BenComs’)
  • Charitable Incorporated Organisation, in Scotland these are referred to as SCIOs

Many museums are interested in becoming a ‘social enterprise’. There is no legal definition of ‘social enterprise’. It is commonly agreed to be:

a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

Nearly any type of organisation can be a social enterprise, as long as they have social objectives and reinvest some surpluses for that purpose. You can find out more about social enterprises, get support, and locate opportunities to develop some of the skills you may need to integrate this type of working into your business model, from the Social Enterprise Academy. (https://www.socialenterprise.academy/scot/)

Trust

Appropriate for managing a specific collection or building.

A Trust Deed will set out the terms of the Trust, including purposes for which buildings, collections and monies are held and by whom.

Benefits:

  • Simple to set up
  • Can become a charity
  • Inexpensive to administer

Things to note:

  • Cannot employ people or own property (including collections) without a ‘holding trustee’
  • All trustees are individual and severally liable
  • Directors can’t be paid
  • Constitutional form potentially eligible for Accreditation

Unincorporated Association

More appropriate for local history societies and groups.

A constitution or ‘rules’ will set out the powers and objectives of the organisation.

Benefits:

  • Fast and simple to set up
  • Can become a charity
  • Inexpensive to administer

Things to note:

  • Cannot employ people or own property (including collections) without a ‘holding trustee’
  • All trustees are individual and severally liable
  • Need to keep track of legal members with voting rights (as opposed to supporters)
  • Constitutional form not eligible for Accreditation

Limited company

The organisation is governed by Articles of Association. Common forms include

  • Company Limited by Guarantee
  • Company Limited by Shares
  • Public Limited Company
  • Community Interest Company

These articles need to be approved by the Office of the Scottish Charity Regulator (OSCR) in order for the company to be considered a charity. The company is also regulated by Companies House. Community Interest Companies must also have their articles approved by the CIC Regulator.

Benefits:

  • Has a legal identity; can employ people and own property in its own right
  • Can have a membership, but this is not essential
  • Limited liability for members and directors
  • Share or membership models can create additional sources of income
  • Some models allow for payment of directors/trustees

Things to note:

  • OSCR will not accept companies limited by shares
  • OSCR does not allow the distribution of profit or benefit to members
  • If a charity, the organisation is accountable to two regulators which brings increased administration
  • Company Limited by Guarantee is eligible for Accreditation, Company Limited by Shares is not eligible for Accreditation, and Community Interest Company may be eligible for Accreditation

 

 

Cooperative Society or Community Benefit Society (previously an Industrial and Provident Society)

Often used to buy or sell goods or services for the benefit of their members or community.

The Cooperative and Community Benefit Societies Act 2014 replaces the ‘industrial and provident society’ legal form with two new legal forms:

  • co-operative society - formed primarily to benefit their own members, who will participate in the primary business of the society.
  • community benefit society - run primarily for the benefit of people who are not members of the society, and must also be in the interests of the community at large. It will usually be charitable or philanthropic in character.

Industrial and provident societies remain registered but are now deemed 'pre-commencement societies' (generally referred to as 'registered societies').

These organisations are regulated by the Financial Conduct Authority and some are considered ‘exempt charities’. This means that they are not currently eligible to become traditional Registered Charities but they can be treated as charitable for tax purposes by HMRC.

Benefits:

  • Has a legal identity; can employ people and own property in its own right
  • Local ownership through sale of shares can build support and generate income
  • Opportunity to offer dividends to members
  • Can be recognised as a charity

Things to note:

  • OSCR will only accept some CCBSs as charities
  • Future regulation of charitable CCBSs yet to be agreed
  • Must demonstrate why another governing model is not appropriate
  • Share capital can be withdrawn (subject to rules)
  • Constitutional form is potentially eligible for Accreditation

Scottish Charitable Incorporated Association

Frequently used by smaller museums that want to limit their liability. The Scottish Charitable Incorporated Organisation (SCIO) model has most of the benefits of a traditional company limited by guarantee. The main difference is that the SCIO has to report to OSCR and not to Companies House.

Benefits:

  • Has a legal identity; can employ people and own property in its own right
  • Only one regulator – no need to report to Companies House

Things to note:

  • Can be time consuming to set up
  • Relatively new model – some grant distributing trusts and foundations might not recognise an SCIO as eligible
  • Possible complexity when using assets as collateral for a loan or for remortgaging
  • Constitutional form eligible for Accreditation

Things to consider

  • Make sure that the governance model you choose allows you to operate within the law
  • Look especially at liability – does it protect your people against risk? If not, should your museum default on a loan or be taken to court, your trustees or directors could be individually liable for all costs
  • Check that your trustees or directors understand their responsibilities.
  • Local authorities and universities are empowered by national legislation to run museums and do not require a separate governing document
  • Take legal advice from a recognised specialist before taking any final decisions

Is my governance model eligible for Accreditation?

Not all constitutions are considered appropriate for Accredited museums, even though they might meet your needs. All Accredited museums must be operated by public bodies or charitable organisations. Charitable and noncharitable companies limited by shares which distribute dividends are excluded.

When reviewing an application for Museum Accreditation, assessors will need to see your governing document and may suggest amendments to make it compliant with the Scheme. The assessor will be consider:

  • Does governing document gives you the powers to operate a museum?
  • Is the museum registered with the Office of the Scottish Regulator (OSCR) or recognised as such by HM Revenue and Customs?
  • Does the constitution give the power to hold a collection(s) and assets?
  • Do you provide opportunities for public access and engagement with your collection(s)?
  • Do you have a governing body constituted under your governing document(s)?
  • Do you have a long term purpose?
  • Does the statement of purpose define why the museum exists and for whom?

For more information on whether a governance model is eligible, see each of the sections above. If you're still unsure, please contact us.

Learn more

Association of Independent Museums: Successful Governance

http://www.aim-museums.co.uk/ downloads/727b74d1-04e4-11e3-b572- 001999b209eb.pdf  

Get Legal: Decision Tool (produced for an English audience, but is a useful decision-maker)

http://getlegal.bwbllp.com/decision-tool  

Office of the Scottish Charity Regulator

www.oscr.org.uk

Scottish Council for Voluntary Organisations: Setting up a Charity – Get Started Guide

www.scvo.org.uk/setting-up-a-charity  

Voluntary Action Scotland

www.vascotland.org