Converting City of Sanctuary

into a Charitable Incorporated Organisation (CIO)

Introduction

City of Sanctuary is currently set up as an unincorporated registered charity. As such there are strict legal limitations on its ability to enter into contracts. Because it is unincorporated it lacks the legal status to enter contractual arrangements in its own right. As a consequence, all contracts are, in effect, directly with the Trustees.

As the charity is unincorporated, there is potentially no limitation on the Trustees (and Members) personal liability in respect of moneys owed under the contracts they enter into or claims brought because of those contracts (for instance claims brought by City of Sanctuary staff).

Given City of Sanctuary’s rapid growth over the last 12 months (and its continued growth) and given that it, or rather the Trustees, now employ several staff, it is essential that, for their own protection, the Members and Trustees take steps to incorporate the charity and to limit their personal liability. The present situation puts the trustees in an invidious position and creates an unacceptable level of potential risk.

The Proposed Solution

The obvious solution is for City of Sanctuary to incorporate and to do so in a way that offers the Members and Trustees limited liability. The most appropriate corporate vehicle is called a Charitable Incorporated Organisation (CIO). This is a limited liability charity, regulated by the Charity Commission, and which, as a legal entity, is capable of contracting in its own right.

The Process & Timescale

The simplest process for achieving this is for a new CIO charity to be established and then for the funds, staff and liabilities of the existing charity to be transferred to it whereafter the existing charity will be wound down.

Propose establishing a new Charitable Incorporated Organisation called City of Sanctuary UK.

On incorporation, it will have a constitution containing the same objects and principle rules as the existing constitution. All existing members of City of Sanctuary will become members of the new CIO and the current Trustees will become the initial Trustees of the new CIO.

We have prepared a draft constitution for the new CIO and attach it at Appendix 1. You are asked to consider and approve that draft constitution. It is based on the Charity Commission model CIO constitution and we have been advised not to seek to amend it unless necessary as we know that this model is already acceptable to the Charity Commission.

To assist you in considering this new proposed constitution, we also attach a copy of the existing constitution.

The process of establishing the CIO and transferring the assets and liabilities of City of Sanctuary (UK) to it will take several steps and will be completed within 12 months. The process will be, broadly, as follows:

  1. The Governance Sub-Group at City of Sanctuary will prepare a constitution for the proposed CIO and, once approved, submit it to the Charity Commission for registration;
  2. Once registered, the current Membership of City of Sanctuary will become Members of the new CIO and the current Trustees will become its initial Trustees;
  3. The Trustees, being for the time being Trustees of both charities, will affect the transfer of assets and liabilities (and all contracts and associated obligation) from City of Sanctuary to the new CIO;
  4. The final accounts and returns for City of Sanctuary will be produced and appropriately filed;
  5. City of Sanctuary will be dissolved with all appropriate notices being given.

The Proposed Resolution

The Members of City of Sanctuary are asked to approve the following resolution:

“In light of City of Sanctuary’s rapid growth and changed risk profile, the Membership and Trustees have determined that a new Charitable Incorporated Organisation (CIO) be established and registered with the Charity Commission and that the Membership, assets and liabilities of City of Sanctuary be transferred to it, after which City of Sanctuary will be dissolved. In furtherance of this aim the Membership agree as follows:

  1. That the proposed CIO constitution dated 20thJune 2017 is approved as the initial constitution of the new CIO;
  1. That the new CIO be called City of Sanctuary UK;
  1. That the current Members of City of Sanctuary will become the initial Members of the CIO (carrying over their membership on the same terms as it currently exists);
  1. That the current Trustees of City of Sanctuary become the initial Trustees of the new CIO;
  1. That the process of creating the new CIO and transferring the business of City of Sanctuary to is be overseen, for the Members and Trustees, by the Governance Sub-group (comprising Sian-Summers-Rees, Jeni Vine (Chair), Andrew White, Jeff Morgan, Pam Inder and John Mellor) and that group will have the Membership’s and Trustees’ full authority to implement the steps set out in this Resolution. That sub-group need not report back to the full Membership or Trustee Board except unless:
  2. It becomes clear that the steps set out in this resolution cannot be taken as anticipated when this Resolution was passed;
  3. The terms of the new constitution for the CIO are necessarily materially different than those contained in the constitution for City of Sanctuary;
  4. There are difficulties transferring assets or contracts to the new CIO;
  5. Otherwise as the Members of the Sub-committee (or a majority of them) consider appropriate.
  1. The new CIO constitution dated 20thJune 2017, having been approved by the Members, be submitted to the Charity Commission for registration. The staff at City of Sanctuary are expressly authorised to pay any proper registration fees from funds belonging to City of Sanctuary.
  1. Once registered and capable of holding property and contracting, the staff at City of Sanctuary and the Governance Sub-group shall take such steps as are necessary to transfer the funds, funding agreements, contracts (including contracts of employment) and other liabilities from City of Sanctuary to the new CIO (retaining only such funds as are necessary to affect the proper winding down of this current charity);
  1. Once all funds, funding agreements, contracts (including contracts of employment) and other liabilities have been transferred to the new CIO the Trustees shall take such steps as are necessary to prepare and file the final accounts and returns for City of Sanctuary and, having reasonably satisfied themselves that there are no outstanding debts or liabilities, to call a meeting of the Members in order to dissolve City of Sanctuary.

In addition the Chief Officer at City of Sanctuary is directed to engage with current staff, funders and contractors to determine whether they are willing to have their funding or contracts transferred to the new CIO and to report to the Governance Sub-group on and issues or concerns that might adversely impact the plan set out in the above Resolution. “

Appendix 1

Proposed CIO Constitution

20thJune 2017

Constitution of City of Sanctuary UK

The name of the Charitable Incorporated Organisation (“the CIO”) is City of Sanctuary UK

2. National location of principal office

The CIO must have a principal office in England or Wales. The principal office of the CIO is in England.

3. Object[s]

The objects of the CIO are:

  • To advance the education of the public in general and the issues relating to refugees and thoseseeking asylum.
  • To advance the education and training of those seeking asylum and those granted refugee statusand their dependants in need thereof so as to advance them in life and assist them to adapt withina new community.
  • To advance education and relieve financial hardship amongst those seeking asylum and thosegranted refugee status.
  • The promotion of equality and diversity for the public benefit by promoting activities to fosterunderstanding between people from diverse backgrounds.

4. Powers

The CIO has power to do anything which is calculated to further its object[s] or is conducive or incidental to doing so. In particular, the CIO’s powers include power to:

(1) borrow money and to charge the whole or any part of its property as security for the repayment of the money borrowed. The CIO must comply as appropriate with sections 124 and 125 of the Charities Act 2011 if it wishes to mortgage land;

(2) buy, take on lease or in exchange, hire or otherwise acquire any property and to maintain and equip it for use;

(3) sell, lease or otherwise dispose of all or any part of the property belonging to the CIO. In exercising this power, the CIO must comply as appropriate with sections 117 and 119-123 of the Charities Act 2011;

(4) employ and remunerate such staff as are necessary for carrying out the work of the CIO. The CIO may employ or remunerate a charity trustee only to the extent that it is permitted to do so by clause 6 (Benefits and payments to charity trustees and connected persons) and provided it complies with the conditions of those clauses;

(5) deposit or invest funds, employ a professional fund-manager, and arrange for the investments or other property of the CIO to be held in the name of a nominee, in the same manner and subject to the same conditions as the trustees of a trust are permitted to do by the Trustee Act 2000;

5. Application of income and property

(1) The income and property of the CIO must be applied solely towards the promotion of the objects.

(a) A charity trustee is entitled to be reimbursed from the property of the CIO or may pay out of such property reasonable expenses properly incurred by him or her when acting on behalf of the CIO.

(b) A charity trustee may benefit from trustee indemnity insurance cover purchased at the CIO’s expense in accordance with, and subject to the conditions in, section 189 of the Charities Act 2011.

(2) None of the income or property of the CIO may be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to any member of the CIO. This does not prevent a member who is not also a charity trustee receiving:

(a) a benefit from the CIO as a beneficiary of the CIO;

(b) reasonable and proper remuneration for any goods or services supplied to the CIO.

(3) Nothing in this clause shall prevent a charity trustee or connected person receiving any benefit or payment which is authorised by Clause 6.

6. Benefits and payments to charity trustees and connected persons

(1) General provisions

No charity trustee or connected person may:

(a) buy or receive any goods or services from the CIO on terms preferential to those applicable to members of the public;

(b) sell goods, services, or any interest in land to the CIO;

(c) be employed by, or receive any remuneration from, the CIO;

(d) receive any other financial benefit from the CIO; unless the payment or benefit is permitted by sub-clause (2) of this clause, or authorised by the court or the Charity Commission (“the Commission”). In this clause, a “financial benefit” means a benefit, direct or indirect, which is either money or has a monetary value.

(2) Scope and powers permitting trustees’ or connected persons’ benefits

(a) A charity trustee or connected person may receive a benefit from the CIO as a beneficiary of the CIO provided that a majority of the trustees do not benefit in this way.

(b) A charity trustee or connected person may enter into a contract for the supply of services, or of goods that are supplied in connection with the provision of services, to the CIO where that is permitted in accordance with, and subject to the conditions in, section 185 to 188 of the Charities Act 2011.

(c) Subject to sub-clause (3) of this clause a charity trustee or connected person may provide the CIO with goods that are not supplied in connection with services provided to the CIO by the charity trustee or connected person.

(d) A charity trustee or connected person may receive interest on money lent to the CIO at a reasonable and proper rate which must be not more than the Bank of England bank rate (also known as the base rate).

(e) A charity trustee or connected person may receive rent for premises let by the trustee or connected person to the CIO. The amount of the rent and the other terms of the lease must be reasonable and proper. The charity trustee concerned must withdraw from any meeting at which such a proposal or the rent or other terms of the lease are under discussion.

(f) A charity trustee or connected person may take part in the normal trading and fundraising activities of the CIO on the same terms as members of the public.

(3) Payment for supply of goods only

The CIO and its charity trustees may only rely upon the authority provided by sub-clause (2)(c) of this clause if each of the following conditions is satisfied:

(a) The amount or maximum amount of the payment for the goods is set out in a written agreement between the CIO and the charity trustee or connected person supplying the goods (“the supplier”).

(b) The amount or maximum amount of the payment for the goods does not exceed what is reasonable in the circumstances for the supply of the goods in question.

(c) The other charity trustees are satisfied that it is in the best interests of the CIO to contract with the supplier rather than with someone who is not a charity trustee or connected person. In reaching that decision the charity trustees must balance the advantage of contracting with a charity trustee or connected person against the disadvantages of doing so.

(d) The supplier is absent from the part of any meeting at which there is discussion of the proposal to enter into a contract or arrangement with him or her or it with regard to the supply of goods to the CIO.

(e) The supplier does not vote on any such matter and is not to be counted when calculating whether a quorum of charity trustees is present at the meeting.

(f) The reason for their decision is recorded by the charity trustees in the minute book.

(g) A majority of the charity trustees then in office are not in receipt of remuneration or payments authorised by clause 6.

(4) In sub-clauses (2) and (3) of this clause:

(a) “the CIO” includes any company in which the CIO:

(i) holds more than 50% of the shares; or

(ii) controls more than 50% of the voting rights attached to the shares; or

(iii) has the right to appoint one or more directors to the board of the company;

(b) “connected person” includes any person within the definition set out in clause [30] (Interpretation);

7. Conflicts of interest and conflicts of loyalty

A charity trustee must:

(1) declare the nature and extent of any interest, direct or indirect, which he or she has in a proposed transaction or arrangement with the CIO or in any transaction or arrangement entered into by the CIO which has not previously been declared; and

(2) absent himself or herself from any discussions of the charity trustees in which it is possible that a conflict of interest will arise between his or her duty to act solely in the interests of the CIO and any personal interest (including but not limited to any financial interest). Any charity trustee absenting himself or herself from any discussions in accordance with this clause must not vote or be counted as part of the quorum in any decision of the charity trustees on the matter.

8. Liability of members to contribute to the assets of the CIO if it is wound up

(1) If the CIO is wound up, each member of the CIO is liable to contribute to the assets of the CIO such amount (but not more than £1) as may be required for payment of the debts and liabilities of the CIO contracted before that person or organisation ceases to be a member, for payment of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributing members among themselves.

(2) In sub-clause (1) of this clause “member” includes any person or organisation that was a member of the CIO within 12 months before the commencement of the winding up.

(3) But subject to that, the members of the CIO have no liability to contribute to its assets if it is wound up, and accordingly have no personal responsibility for the settlement of its debts and liabilities beyond the amount that they are liable to contribute.

9. Membership of the CIO

(1) Admission of new members

(a) Membership is open to individuals over eighteen or organisations who are approved by theTrustees.

(b) There shall be voting and non-voting members.

(c) Voting members shall be

(i) groups and organisations whose main purpose is to build a culture of welcome andhospitality in their city or town and which have adopted the title of city or town

(or similar) of sanctuary;

(ii) individuals who give considerable effort, time and commitment to the national City ofSanctuary movement.

(d) Non-voting members shall be

(i) groups and organisations which affirm the core principles of City of Sanctuary;

(ii) individuals who are committed to the core principles of City of Sanctuary.

(e) Non-voting members are entitled to attend general meetings of the charity but not to vote andthey shall not count in the quorum.

(f) The criteria for each category of membership may be further specified by the trustees and setout in standing orders. Any such criteria shall be made publicly available on the City ofSanctuary website and through other usual channels of general communication within thecharity. A member, by applying for membership, has indicated his, her or its agreement to become a member and acceptance of the duty of members set out in sub-clause (3) of this clause. A member may be an individual, a corporate body, or an individual or corporate body representing an organisation which is not incorporated.

(b) Admission procedure

The charity trustees:

(i) may require applications for membership to be made in any reasonable way that they decide;

(ii) shall, if they approve an application for membership, notify the applicant of their decision within 21 days;

(iii) may refuse an application for membership if they believe that it is in the best interests of the CIO for them to do so;

(iv) shall, if they decide to refuse an application for membership, give the applicant their reasons for doing so, within 21 days of the decision being taken, and give the applicant the opportunity to appeal against the refusal; and