CTC Article 11 - correspondence with Charity Commission

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Simon L6
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CTC Article 11 - correspondence with Charity Commission

Postby Simon L6 » 5 Apr 2012, 8:50pm

okeydokey

what isn't immediately apparent from the stuff on the website is this bit of correspondence concerning Article 11 - my underlining

CC to CTC 28th Feb
Article 11 – Poll of the whole Club

I notice that there is a provision in Article 11 whereby the whole Club may be polled on any question. Any decision arrived at by a poll of the whole Club shall bind the Club and the Council (i.e. the charity trustees) for six months.

Although this Article doesn’t affect charitable status, it isn’t really appropriate for a charity.

By way of explanation, the term “charity trustees” has a legal definition, set out in section 97 of the Charities Act 1993. This states that ‘”charity trustees” means the persons having the general control and management of the administration of a charity”.

What this means is that trustees are the persons who are ultimately responsible for the management of their charity. They are under a legal duty to act as trustees only in the best interests of their charity in furthering its charitable purposes. They can be held jointly and personally liable for the consequences of their actions and decisions.

Trustees therefore have to be free to exercise their discretion, otherwise they would be unable to fulfil their duties and responsibilities to their charity. It is not appropriate for a charity’s governing document to limit the exercise of the trustees’ discretion, or to make it exercisable only on the approval of someone else, or to vest powers and duties that rightly sit with the trustee body in someone else.

In the case of a charity with a membership, the members’ role in its administration is normally to elect the trustees. The members can make recommendations to the trustees if they wish – either individually or as a body – and we would recommend it as good practice that the trustees give consideration to those recommendations (though they are not obliged to). But it would not be appropriate for charity trustees to be obliged to act on the recommendations of the membership, for the reasons explained above.

This particular Article could bind the trustees into taking an action, or refraining from taking an action, contrary to what they might otherwise decide would be in the charity’s best interests if they were free to exercise their discretion. For all of the above reasons it is not an appropriate provision for a charity and we would strongly recommend that it is deleted. Ultimately, the decision whether or not to do so is one for the members of the company.

CTC to CC 29th Feb
Poll of the whole Club

This is the first time this has been mentioned to us in three years of working on this subject and we have limited possibility to consult and address the alternatives open to us. The poll of the whole club was used for the first time in many years during the campaign by a small CTC faction to try and stop this charitable proposal. To suggest its removal at this point could antagonize this group again and jeopardize the prospects of getting the new objects approved which we understand is the most important issue in front of us.

I would be grateful for your further thoughts as this is a very new concern for us.

CC to CTC 2nd March

Turning to Article 11, I appreciate that this could be a delicate area. As I said in my previous e-mail, this doesn’t affect charitable status but it can affect the governance of a charity so we would strongly recommend its deletion.

Whether or not this is actually proposed by the trustees at the AGM is entirely up to them. If they think it wouldn’t be in the charity’s best interests to propose it at the AGM – for example, because a faction of the membership might then vote against the adoption of the charitable objects - then that is their decision, and we would not criticise them for it. They may decide to propose it at a later AGM, or possibly at a General Meeting called for that specific purpose, after charity registration has been secured, or possibly not at all. That is a matter for the trustees to decide.

This Article illustrates the difference between a non-charitable organisation that is established for the benefit of its members, and a charitable organisation that may well benefit its members in many ways, but is established for the benefit of the public as a whole.

In the former case, the organisation is inward-looking and it would be reasonable for the members to be able to direct those running the organisation as to what actions they should take or refrain from taking for their own benefit. But a charity is established for the benefit of the public, not its members (though those members may benefit), and is outward focussing. The trustees are legally defined in charity law as the persons responsible for administering the charity. As such, charity trustees have a duty to act in the best interests of their charity. It is therefore they – not the members – who should decide what the charity does in its best interests in furtherance of its objects. Any member who has a different vision for the charity is of course entitled to put their views to the trustees for their consideration (though the trustees may decline to do so), and stand for election themselves. Ultimately, the trustees are liable for their actions and for any losses that may be incurred as a result.

The danger in retaining this provision indefinitely is that its exercise by the members could bind the trustees into taking an action, or refraining from taking an action, contrary to what they might otherwise decide would be in the charity’s best interests. It is the trustees who are ultimately liable for their actions, so if a loss to the charity arises as a result of the trustees being so bound the question arises as to who would be liable to make good that loss – would it be the trustees, who have acted (or not acted) contrary to what they consider to be in the best interests of the charity as a result of Article 11, or would it be the actual members who voted to so bind them?

We can’t advise you where the liability would fall – ultimately that would be a decision for the courts, taking into account all the circumstances in that particular case, and we cannot predict or speculate on what decision the courts would take in any particular instance. If it is clear to the court that the trustees would have acted differently if they had not been bound by the members so that a loss would not have occurred, then the court may possibly decide that, by binding the trustees on this matter, the members who bound them were de facto trustees for this particular matter and so the liability should rightly fall on them.

All we can advise is that, should the trustees be bound in this way contrary to what they would otherwise have done, they ensure the minutes of their next meeting after the Poll has been taken clearly record what they would have decided to do if not bound in this way together with any concerns they may have about what they have been bound to do by the members. Similarly, if concerns arise later or it becomes clear that problems are occurring as a result of the binding, the trustees should ensure this is clearly recorded in their minutes, together with details of what they would have done if not bound by the members.

If the exercise of a Poll on any matter causes the trustees any concerns about being bound in this way, then we would suggest they immediately take legal advice regarding their position and their options. The cost of that advice would be a legitimate expense for the charity. Similarly, if a loss to the charity is incurred as a result of the trustees being bound into taking, or not taking, an action contrary to what they would have done (hence the importance of recording their disagreement and concerns in the minutes soon after the Poll has been taken), they again immediately take legal advice regarding their position and where the liability might fall. Again, the cost of that advice to the trustees would be a legitimate expense for the charity. The cost of any legal advice to the members who bound the trustees would not be a legitimate expense for the charity however, because it is not appropriate for the members of a charity to bind trustees in this way. Those members would have to meet their own costs.

If you do decide to propose deleting Article 11 either now or in the future then you may wish to consider putting these arguments to the members at that time. Similarly, if you retain the Article and any members seek to bind the trustees in future contrary to what the trustees would otherwise have done, again you may wish to put these arguments to the membership before the Poll is conducted.

I hope this will be of some assistance to the trustees in deciding what action to take.

CTC to CC 5th March

Once again our thanks for your useful clarification, especially in respect of Article 11.

I have consulted with the Executive Committee about the item and they found the feedback useful. They too recognise that the wording of Article 11 may be problematic in a wider sense, the Trustees have to assure themselves that any action in respect of a pool must be both legal and charitable, clearly the membership cannot bind the Trustees to any action that fails either of these tests. Your suggestions on practical ways of dealing with this are most helpful.

The availability of a poll pre-dates recent changes to the Companies Acts with introduced mandatory proxy voting which has in effect replaced the need for such a facility and we think it would be less likely to be used in the future.

As such the Executive Committee has asked me to tell you that they have already planned to conduct a further review of the articles for a future AGM or General Meeting and as part of that process your guidance will be taken on board.


Next steps.

Your original email contained next steps for us which I will put in process.

With your agreement what we would very much like to do is present to our members for our AGM your main advice and some of the guidance given by ……………….. summarised in a single document, preferably originating from the Commission. We recognise that all other correspondence will be available but for our magazine and AGM papers we have limited space in which to sum up.

I have brought together what I believe to be the summary of your advice and what the Trustees must do.

If at all possible could you confirm that the summary is acceptable, or preferably return it to me as a summing up document, with any amendments you feel are necessary. If I have this by the end of this week it can go in our magazine.

Thank you

thirdcrank
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Re: CTC Article 11 - correspondence with Charity Commission

Postby thirdcrank » 5 Apr 2012, 9:27pm

The issue of the duties of trustees came up in 2010 on another thread.

thirdcrank wrote:I think the "only" way this would affect the CTC is that trustees are responsible for the proper running of the charity, rather than being responsible to members. Part of the case for conversion seems to include the argument that trustees would be elected as councillors are now, which may well be so, but their obligations would be quite different.

Several years ago my wife was asked to be a trustee of a small local charity. I researched the obligations for her...


viewtopic.php?f=38&t=44873&p=364680&

Of course, nobody on that brief thread predicted any cloak-and-dagger stuff.

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Simon L6
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Re: CTC Article 11 - correspondence with Charity Commission

Postby Simon L6 » 5 Apr 2012, 9:30pm

well, in fairness, it would appear that this came to the fore only last month. But the reaction of whoever wrote to the Charities Commission isn't clever. He or she must have known that this would come out before too long.
Image
having made the point, maybe it's time the local groups recognised themselves for what they are - cycling clubs that purchase services from the CTC. Perhaps it's time they gave up on owning the CTC, and concentrated on getting value for money....

thirdcrank
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Re: CTC Article 11 - correspondence with Charity Commission

Postby thirdcrank » 5 Apr 2012, 10:07pm

Simon L6 wrote:well, in fairness, it would appear that this came to the fore only last month. ...


I presume by that that you mean that the Charity Commission only raised it then. As I'm always saying, I'm no lawyer, but I don't think there's much between what I said on that earlier thread in 2010 and what the CC is saying now. When my wife was asked to be a charity trustee, she was quite flattered and the way it was put to her - by somebody who didn't know the legalities but was acting in good faith - gave her the impression that the duties were a pure formality.

I looked it up on the CC website and even to my layman's eyes, it was pretty obvious that a trustees duties were no mere formality and that a trustee found to be in breach of their duty of trust might be facing a big bill.

The line has constantly been that the CTC Council has had top legal advice about the charity conversion proposals. So why has it suddenly become an issue?

Just suppose an organisation with plenty of £££ offered to sponsor the CTC in some sort of project such as taking a pro-helmet stance or accepting that the future of cycling lay in farcilities. The trustees could reject that money but I think they would have a very good reason to do so because of the importance of the £££ to the charity: the view of the membership would be irrelevant. This may be no big deal, except that if there were to be any funding offered of that type, it would hardly be likely to come from an anti-compulsion, anti-farcility source.

Regulator
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Re: CTC Article 11 - correspondence with Charity Commission

Postby Regulator » 7 Apr 2012, 10:35am

thirdcrank wrote:
Simon L6 wrote:well, in fairness, it would appear that this came to the fore only last month. ...


I presume by that that you mean that the Charity Commission only raised it then. As I'm always saying, I'm no lawyer, but I don't think there's much between what I said on that earlier thread in 2010 and what the CC is saying now. When my wife was asked to be a charity trustee, she was quite flattered and the way it was put to her - by somebody who didn't know the legalities but was acting in good faith - gave her the impression that the duties were a pure formality.

I looked it up on the CC website and even to my layman's eyes, it was pretty obvious that a trustees duties were no mere formality and that a trustee found to be in breach of their duty of trust might be facing a big bill.

The line has constantly been that the CTC Council has had top legal advice about the charity conversion proposals. So why has it suddenly become an issue?

Just suppose an organisation with plenty of £££ offered to sponsor the CTC in some sort of project such as taking a pro-helmet stance or accepting that the future of cycling lay in farcilities. The trustees could reject that money but I think they would have a very good reason to do so because of the importance of the £££ to the charity: the view of the membership would be irrelevant. This may be no big deal, except that if there were to be any funding offered of that type, it would hardly be likely to come from an anti-compulsion, anti-farcility source.



I had to snigger at that line...

As you say, people thin being a trustee is a doddle. It isn't.

thirdcrank
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Re: CTC Article 11 - correspondence with Charity Commission

Postby thirdcrank » 7 Apr 2012, 2:30pm

I'm amazed thas hasn't caused more reaction.

I'm also amazed about this bit of the exchange(I'm not sure if the emphasis was in the original or if that's been aded.)

... This is the first time this has been mentioned to us in three years of working on this subject and we have limited possibility to consult and address the alternatives open to us. The poll of the whole club was used for the first time in many years during the campaign by a small CTC faction to try and stop this charitable proposal. To suggest its removal at this point could antagonize this group again and jeopardize the prospects of getting the new objects approved which we understand is the most important issue in front of us.I would be grateful for your further thoughts as this is a very new concern for us.

CC to CTC 2nd March

Turning to Article 11, I appreciate that this could be a delicate area. As I said in my previous e-mail, this doesn’t affect charitable status but it can affect the governance of a charity so we would strongly recommend its deletion.

Whether or not this is actually proposed by the trustees at the AGM is entirely up to them. If they think it wouldn’t be in the charity’s best interests to propose it at the AGM – for example, because a faction of the membership might then vote against the adoption of the charitable objects - then that is their decision, and we would not criticise them for it ...


I can understand the Charity Commission not wanting to get into the realms of being seen to give, or even appearing to give advice, but the bit I've highlighted in red seems pretty poor judgment from somebody. Isn't the Commission bothered that if the CTC Council is prepared to use tactics like this to outflank members legitimately trying to use the (inconvenient) safeguards built into the CTC's rules, that a similar approach may be taken towards the Commission itself in future?

Karen Sutton
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Re: CTC Article 11 - correspondence with Charity Commission

Postby Karen Sutton » 8 Apr 2012, 7:53pm

So we have to watch out for moves to delete Article 11 at some point ht in the future? Am I right in thinking that without it we wouldn't have been able to insist on the poll of the whole club, and its deletion would prevent anything similar happening again. It wouldn't do to have members able to have a say in the running of things would it?

The more I see and hear of this the more inclined I am to leave CTC when my membership expires; and the more likely it is that Member Grops will become affiliated clubs.

swansonj
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Re: CTC Article 11 - correspondence with Charity Commission

Postby swansonj » 10 Apr 2012, 9:53am

Karen Sutton wrote:It wouldn't do to have members able to have a say in the running of things would it?


But surely that battle has already been lost? Wasn't one of the several reasons that many of us (sorry, "a small faction") opposed conversion to a charity precisely this point, that once converted to a charity, members cease to run the CTC? I thought the Charity Commissioners explained the situation very clearly. The Trustees now have a legal duty to run the charity according to its objectives and the views of the members are now largely irrelevant. I think the Charity Commissioners are dead right about Article 11. It is a provision that is relevant to a member oprganisation but not to a charity. The CTC has ceased to be a member organisation and become a charity. Article 11 - allowing the members to tell the Council how they want the organisation to proceed - has no place in the new CTC organisation, because in the new CTC organisation, members have ceased to be the final voice in the organisation's future.

It's an open question whether the membership at large realised they were voting themselves out of existence (as the ultimate controlling authority of the CTC, as opposed to the people who pay the bills, a function we still fulfill) and didn't care, or didn't realise. But I am absolutely sure that Kevin Mayne et al knew exactly what was happening.

Karen Sutton
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Re: CTC Article 11 - correspondence with Charity Commission

Postby Karen Sutton » 10 Apr 2012, 6:26pm

swansonj wrote:
Karen Sutton wrote:It wouldn't do to have members able to have a say in the running of things would it?


But surely that battle has already been lost? Wasn't one of the several reasons that many of us (sorry, "a small faction") opposed conversion to a charity precisely this point, that once converted to a charity, members cease to run the CTC? I thought the Charity Commissioners explained the situation very clearly. The Trustees now have a legal duty to run the charity according to its objectives and the views of the members are now largely irrelevant. I think the Charity Commissioners are dead right about Article 11. It is a provision that is relevant to a member oprganisation but not to a charity. The CTC has ceased to be a member organisation and become a charity. Article 11 - allowing the members to tell the Council how they want the organisation to proceed - has no place in the new CTC organisation, because in the new CTC organisation, members have ceased to be the final voice in the organisation's future.

It's an open question whether the membership at large realised they were voting themselves out of existence (as the ultimate controlling authority of the CTC, as opposed to the people who pay the bills, a function we still fulfill) and didn't care, or didn't realise. But I am absolutely sure that Kevin Mayne et al knew exactly what was happening.


Of course, as a Charity members will have no say in the running of the Club. I am aware that it is probably only a formality, but the CTC is not yet registered as a charity in England. That is the fact I based my comments on. I'm only surprised the CC is saying they are prepared to accept CTC as a charity with clause 11 still in situ.