Limited by Guarantee - Members of the Trust

Members of the Trust

The precise rights and duties of members will depend upon the Memorandum and Articles of Association - its constitution. These can be drafted to allow organisations or individuals - or both - to be members.

Members can be given rights to elect the directors - or this right can be restricted to a particular class of member, perhaps the main sponsoring organisations. The structure of a company limited by guarantee is highly flexible and can be tailored to the particular circumstances.

Responsibilities of the Board and Trustees

The Board of directors of the company take responsibility for the actions of the company, but - provided they are not negligent - the personal liability of the directors is limited to the extent of their guarantee (usually £1).

The directors usually concentrate on policy issues and may delegate action to staff and/or subcommittees. In a charitable company the Board of directors also act as Trustees of the charity, and as such have additional responsibility to ensure funds are only used for its charitable purposes.

Generally the aim should be to have only two layers of control - the directors and the staff. Don't build too much complexity into the constitution - set up subcommittees when they are needed.

Representation on the Board

Directors should be chosen for the benefits they can bring to the Company in terms of their contacts, personal skills and standing within the community.

There is a case for having a range of different skills represented on the Board - finance, project development, community involvement - so the Board can make a significant contribution to the work of the Company.

Trading companies

A charity should not trade unless it does so as a means of directly achieving its objectives (for example, a workshop for the blind). For this reason some Trusts set up parallel trading companies which can sell products or services and covenant profits back to the Trust.

Specialist advice

Setting up a Trust requires specialist expertise. It does not form part of the day to day work of most solicitors in private practice or the public sector, and consequently it is wise to use a company familiar with companies limited by guarantee and securing charitable status. This will avoid delays in drafting an appropriate charitable objects clause for the memorandum and articles, and considering options on membership and voting rights.