1
Directors Manual
Contents:
Preface2
Disclaimer4
4
1. Overview Minds objectives;1.1 Mind Cymru 5
1.2 Mind Aberystwyth 5
2. A company as a business vehicle;
2.1 Introduction 6
2.2 A company limited by guarantee6
2.3Why form a company limited by guarantee? 7
2.4 What is the constitution of the company? 7
2.5 What are the objects of the company? 7
2.6 The principle of governance 8
3. Directors and Charity Trustees; 8
3.1 Introduction 8
3.2 Charity trustees 9
3.2.1 You are a charity trustee if; 9
3.2.2 Responsibility 9
3.2.3 Managing finances 9
3.2.4 Raising funds10
3.2.5 Complying with law10
3.3 Directors10
3.3.1 Introduction10
3.3.2 Duties of directors - see job description11
3.3.3 Liability and consequences11
3.3.4 Minimising risk11
4. Structure of the board11
4.1 Composition and activities11
4.2 The board involvement11
5. Role of directors12
5.1 Objects12
5.2 Powers13
5.3 Legal duties13
5.4 Knowledge base for responsible decision making 13/14
5.5 Individual directors14
5.6 Avoiding danger14
5.7 Risk management14
6. Health and safety14
6.1 Introduction14
6.2 Principle requirements on the employer14
6.3 Other duties15
6.4 Adequate equipment15
6.5 The main principles of prevention15
6.6 The enforcement of Health and Safety at work16
6.7 What the court takes into consideration16
7. Employer17
7.1 Introduction17
7.2 Duties17
7.3 Examples of breaches17
7.4 Information when they start18
7.5 Employment statements18
7.6 Why have a contract employment18
7.7 Contract employment template 19/20
7.8 Statutory obligations20
7.9 General procedure for dismissal20
8. Business plan structure20
9. In the future- Charitable Incorporated Organisations21
10. Conclusion22
Appendix
- Definitions Guide 22/24
- Form for Directors to declare their personal interest 24
- Directors & Chair Job Description25/27
- Conflict of resolutions28
- Exit Strategy29/30
- Directors Contract 30/31
- Mind Aberystwyth’s Mission Statement32
- Memorandum and Articles of the Association33/38
ix.Current Task and Finish Chart38
Preface
This manual has been put together for the benefit of the directors and charity trustees of Mind Aberystwyth by the students of Aberystwyth University, Legal Practice Course as an outline of some of the duties and responsibilities which come with being on the board of directors.
Being a director/charity trustee is a rewarding but demanding position, it encourages community based leadership while providing invaluable support to the surrounding area. You hold a noble position within an organisation which really makes a difference to the people around them.
However, this does mean that your actions in relation to Mind Aberystwyth are heavily regulated and you have a number of implied duties when fulfilling your position.
This could include areas such as the meetings of directors, the handling of employees as well as the charity’s books and finances.
This manual also highlights the main factors where, as a director/charity trustee you could be held personally responsible if a serious breach were to take place within the charity and provides some ideas on how you can safeguard yourself against potential problems arising.
We hope that the information provided in this manual does give you an insight into some of the responsibilities and duties required and that you do find it to be a clear and useful guide to the relevant law.
It would be good to note,
There may seem to be some overlap between the duties of a director and the duties of a charity trustee as well as some differences between the two.
So as not to seem confusing, as you are a Director of Mind Aberystwyth you will also be a Charity Trustee.
We have divided the two positions in this manual due to the law seeing the positions having individual responsibilities. Duties and responsibilities between the two overlap but also differ; therefore everything stated within this manual applies to you whether it is relation to a director or a trustee.
Disclaimer
The contents of this booklet are provided for a guide only. No responsibility is accepted by or on behalf of Aberystwyth University for any errors, omissions or misleading statements in this manual. The Aberystwyth University also assume no responsibility or liability as a result of any use or reliance upon the information and material contained within this manual. The University of Aberystwyth has taken considerable care in preparing information and materials displayed within, however The Aberystwyth University is unable to provide any warranty concerning the accuracy or completeness of any information contained within.
1.Overview Mind’s Objectives
1.1Mind Cymru:
Mind Cymru is the leading mental health charity in Wales.
It works to create a better life for everyone with an experience of mental distress by:
Advancing the views, needs and ambitions of people with mental health problems.
Challenging discrimination and promoting inclusion
Influencing policy through campaigning and education
Inspiring the development of quality services which reflect the expressed need and diversity
Achieving equal rights through campaigning and education
In all, Mind Cymru aims to promote and achieve such values as:
Determination
Diversity
Integrity
Partnership
1.2 Mind Aberystwyth
Mind Aberystwyth is a mental health charity operating in Aberystwyth. It provides a number of services with the mission of working with people, 'Who are affected by mental illness and promote positive mental well being within the local community.
'(See Mind Aberystwyth’s Mission Statement - Appendix viii)
This aim can be furthered by business planning which includes all aspects of finance include: funding, identifying funding shortfalls, helping to manage the current budget and developing new business opportunities, operational planning and long term strategies.
Although Mind Aberystwyth is a charity it is also registered as a company which is not run for a private profit and is limited by guarantee. Company law sets out a range of duties and responsibilities that must be carried out by the directors/trustees of the company. (See appendix iii- Directors job description)
2. A company as a business vehicle:
2.1 Introduction
Mind Aberystwyth is not just a charity, it is also a limited company, and this means that it goes some way in protecting its members and directors from any financial consequences if a breach were to occur.
This is because a company has its own artificial legal personality which is separate from any natural persons, any individuals who are members of the company or any employees.
This has important practical consequences. When a company enters in to business it does so as a separate person, not on behalf of its members.
It is more like the individuals who work on behalf of the company are actually employed by the company.
A companies existence will be unaffected if all original members cease to exist as long as there are sufficient new ones and the company can also take legal action or be sued in its own name
This limited company structure facilitates the separation of ownership and the ultimate oversight of a company’s business from the day to day management of that business. Members are the ultimate decision making body and in most articles that means the directors.
This is a different role in the management of a company from the executive director or CEO/CE and other management staff.
2.2 Limited by guarantee.
A company can be either limited by guarantee or limited by shares. A company limited by guarantee is an alternative type of corporation used primarily for non profit organisations that require a legal personality, like Mind Aberystwyth.
It does not have a share capital but instead has members who are guarantors, this is instead of shareholders.
Guarantors give an undertaking to contribute a nominal amount towards the winding up of the company (usually a very small amount) in the event of a shortfall upon cessation of the business. Members guarantee to meet the debts of the company up to a specific limit in the event of its failure.
They have no further liability for the debts of that company beyond the guarantee.
However,
If there is a failure by the directors in their duty to the company as directors the liability towards them may become unlimited. This means that in some circumstances directors can be held responsible for the company debts.
2.3 Why form a company limited by guarantee?
Guarantee companies are useful for non profit organisations that also require company status. This means that your profits are not distributed to members but are retained to be used for the purposes of your guarantee company.
This does not mean that your business cannot make a profit, as it is indeed paramount that it can and does so. Where your organisation is likely to enter into contracts, for example with fundraisers it may need the benefit of limited liability to protect those on a voluntary basis.
This business medium provides you with a clear legal identity and enables you to own property in the company’s name.
2.4 What is the constitution of the company?
The constitution of the company limited by guarantee is the memorandum and articles of association (see appendix ix).
The memorandum sets out the objects of the company as well as the powers of the company that may be exercised to meet these objects.
As a registered charity your memorandum must be acceptable to the charity commission.
The memorandum will also state how much money the members of the company will guarantee to pay in the event of the company being wound up. The articles of association state when meetings of the company will be held and proceedings of the meetings.
They also state the voting rights of members, number of directors and the powers of directors. The articles also include the procedures for appointing and retirement of members and directors.
2.5 What are the objects?
The objects set out what a company limited by guarantee (charity) is set up to do.
They should therefore be described unambiguously in the governing document, using words with a commonly accepted meaning. A charity may have more than one object.
As a registered charity:
All of the objects must be charitable, because if any aspect of them is not, the organisation cannot be accepted as a charity because it will not be exclusively charitable;
The objects should reflect what the organisation intends to do; and
The objects should be understandable
Tailoring your companies objects carefully will also assist you in obtaining funding from other associations or government bodies as they will be able to clearly see your intended objects in the constitution.
2.6 Governance:
Governance principles have been formulated to assist in improving the management of companies.
Governance encompasses legal duties as well as suggested processes for overall management of the company, ensuring accountability, risk management, optimal performance and compliance within the legal framework and within an internally set framework.
Governance principles may be relevant to determining the objective test of the care and diligence to be exercised by the directors in discharging their duties.
This principle of governance is referred to later on in this manual in relation to employment and health and safety. It is important when regarding the level of care you should exercise when making decisions on behalf of the company.
3. Directors and Charitable Trustees
3.1 Introduction:
In the case of an organisation that is both a company and a charity, the governing body has both responsibilities as a company director and a charity trustee. A charitable company will be subject to additional requirements concerning who may serve on the board, and additional duties as imposed by charity law.
The will be some overlap between the duties and responsibilities of directors and charity trustees but as they are outlined individually in law we have divided them also. (see appendix iii- Directors and Trustee job descriptions)
Company directors are responsible for the management of their companies. Where the company is a charity then they are also regarded as charity trustees and are responsible in a fiduciary capacity.
Company directors have to act as members of their company and carry out the roles expected of them, charity trustees must focus their and their company’s efforts on meeting and furthering the charity objects which are set out in the governing document and therefore need wide powers.
A charitable director must ensure that their company pursues only the charitable objects stated in its governing document. If the directors act outside the company’s stated objects or pursue improper purposes the company may have an action against them on the footing that the directors have failed to meet their fiduciary obligations as charity trustees and directors.
Many charitable companies that work closely with local authorities which are its members are subject of and a party to a member agreement. This agreement sets out how the company finances and business will be accounted, managed and reported, the audit disclosure arrangements, how interface between the local authorities and the company’s functions will be managed and so on.
The directors are empowered and committed to confirm to the members agreement by their company being a party to it.
3.2 Charity trustees:
3.2.1 You are a charity trustee if you are:
- The trustee of a charitable trust (for example, a charity founded by someone else’s will)
- The director of a charitable company
- A member of the management or executive committee of a charitable organisation.
What this means is that the directors of Mind Aberystwyth, an incorporated charity, have certain responsibilities that they accepted as charity trustees. The charity commission have published paper CC3 which is titled;
“The essential trustee: What you need to know”, explaining in its simplest detail what these responsibilities are, the main points have been outlined below.
Trustees have and must have and must accept ultimate responsibility for directing the affairs of a charity, and ensuring that it is solvent, well run and delivering the charitable outcomes for the benefit of the public for which it has been set up.
3.2.2 You and your fellow trustees have full responsibility for your charity and must:
Act together and in person and not delegate control of your company to others, you may delegate areas of work but they must remain under your control;
Act strictly in accordance with the charity’s governing document;
Act in the charity’s interests only and without regard to your own private interests;
Manage the charity affairs prudently and take a long term view as well as a short term one;
Do not without explicit authority derive any personal benefit or gain from the charity of which you are trustees.
3.2.3 When managing the company’s finances:
Make sure that the bank accounts are operated by more than one person and make sure that all the charity’s property is under the control of the trustees;
Make sure that funds held for different purposes are kept in a separate bank account or that the charity’s accounting records show clearly at all times the amount of funds held for each purpose;
Keep full and accurate accounting records;
Collect in full all money owed or due by the charity, including all tax and rating reliefs.
Note:
A trustee who fails to show prudence and causes a loss to the charity, either through a lack of proper care or by spending money for purposes outside the charity’s objects can be called upon to refund the charity out of their own resources.
3.2.4 If you raise funds by appealing to the public you should:
Make sure that your appeal properly describes what the public donations will be used for;
Be open and honest if asked about the costs of the appeal;
Do not use fund raising methods which exert undue pressure on people to give;
Approve in advance any fundraising or advertising campaign carried out on your charity’s behalf;
Require fund raisers to hand over money raised or collected by them before deducting fees and expenses.
3.2.5 Comply with the law:
Ensure that the charity complies with charity law and with the requirements of the charity commission as regulator; in particular ensure that the charity prepares reports on what it has achieved and annual returns and accounts as required by law.
Ensure that the charity does not breach any of the requirements or rules set out in the governing documents and that it remains true to the charitable purpose and objects set out there.
Comply with the requirements of other legislation and other regulators (if any) which govern the activities of the charity.
Act with integrity and avoid any personal conflicts of interest or misuse of charity funds
Consider getting external professional advice on all matters where there may be a material risk to the charity or where the trustees may be in breach of their duties.
3.3 Directors:
3.3.1 Introduction
Directors are responsible for the management of their companies. They must act in a way most likely to promote the success of the business which benefits the members.
The directors may also have other responsibilities which are set out in the governing document, Memorandum and Articles of Association (appendix ix), agreements with fund providers and other laws, for example, employment law (see also appendix iii- Directors job description)
Generally it is the board’s responsibility to identify an organisations strategic directions and goals.
They also have responsibilities to the company employees, its trading partners and the state. As a director wide powers are needed to help promote the company.
However, you can face serious penalties if those powers are abused or are used irresponsibility.
3.3.2 Directors must:
- Pursue the objects clause which is listed in the memorandum of association and if the directors object to carrying out these duties then the company can bring proceedings against the directors.
- There are also statutory factors which include long term consequences in regards to the decisions made by directors in relation to the reputation of the company, the interests of employees as well as other stakeholders.
- As the company is a separate legal personality it is separate from its directors and employees. Directors are personally responsible for ensuring that the company complies with company law.
- Employment, in regards to employees the directors can be sued on behalf of the company for claims such as unfair dismissal, discrimination or unfair work practices. They must also take reasonable care to ensure the health and safety of the employees. Directors can be prosecuted for dangerous practices started or continued with director’s consent; this applies to an illness or accident attributable to your negligence.
- Directors must also ensure that they are paying the right amount of tax, vat and national insurance contributions and to make sure they are paid on time. Prosecution can occur through data protection, defamation, libel or for providing misleading information.
What are the qualities needed to be a director/trustee?