West Malvern Social Club

the new constitution - 2015

 
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the new constitution - 2015

At the next AGM (on Wednesday, 15 April 2015 at 8pm), the Committee will propose that the Club adopt a new constitution and register as a charity. The Committee believes that this will have benefits for the Club: we shall be able to claim Gift Aid on donations to the Club; we shall be better able to seek and find charitable donations. It will be necessary to make some changes to the Club rules; we shall take this opportunity to make them more in line with the Club's current needs.

Under these proposals, the Club would become a Charitable Incorporated Organisation (a CIO) which is a new form of charitable status. We would also create a private company limited by guarantee which would be wholly owned by the Club; it would be named WMSC House Limited; its purpose would be to carry out the trading functions of the Club (eg: owning the house and running the bar) which sit uneasily in a charity.

There is a fuller description below of what is proposed. There are copies of the relevant documents available:

What is proposed.

In summary, what we are proposing is:

  • Some Rules changes made necessary by the overall changes.
  • Incorporate WMSC as a Charitable Incorporated Organisation (or CIO).
    We propose to register as West Malvern Social Club with WMSC as a working name.
  • By incorporating as a CIO, you are registered as a charity with the Charity Commission.
  • Incorporate WMSC House Limited.
    This will be incorporated as a private company limited by guarantee. It will be wholly owned by WMSC.
  • Put the house into the ownership of WMSC House Limited.

We are also proposing to change the membership rules of the club so that instead of there being an annual subscription, there will be only an initial subscription with no annual payments. See here for the reasons.

At the 2015 Annual General Meeting the club will be asked to approve these changes. See here for the details of the motion to be voted on. There is also a timeplan for what has to be done.

Why do all this?

At the moment, the Club pays tax (about £1500 a year) on the profits made from renting the house. Under the new scheme, we shall be able to save that tax.

There are lots of grants available for registered charities; we shall be able to apply for such grants; this will improve our finances.

As an unincorporated body, the Club's officers may be liable for its debts; incorporation removes this risk.

As a pair of incorporated bodies (a CIO and a limited company), the Club would be subject to oversight by the Charity Commission and Companies House. This would give members re-assurance that the officers are less likely to be able to embezzle the Club's funds and assets.

We are proposing to abolish the annual subscription renewal as its administration is more trouble than it's worth.

What changes to the Rules are proposed?

The present constitution of the West Malvern Social Club is this set of Rules.

We have to change some rules to meet the requirements of the Charity Commission. For example: we have to be clear about what happens to the Club's assets if the Club is dissolved.

The need for some rules disappears with the revised ownership of the house. For example: if the house is owned by WMSC House Limited, there is no longer any need for the Trustees as currently defined, and the rules which refer to them can go.

We propose to change some rules to reflect better the way the Club now works. For example: we propose to make membership simpler by making everyone a life member with no annual membership subscription.

There is a cross reference table which shows, for each existing rule, where it is implemented in the new constitution or if not why not.

In addition to the WMSC CIO Constitution, there is a new document which lists the Club Rules not included elsewhere; it is called WMSC Rules.

What has to be done?

We need to do a number of things:

  • register as a charity (a CIO)

    To register as a charity (a Charitable Incorporated Organisation or CIO) with the Charity Commission, you need to ensure that your Rules cover all that the Charity Commission requires. (For example: keeping accounts, preparing an annual statement of accounts, the annual checking of the accounts, preparing an annual report and sending it with the accounts to the Charity Commission, and sending an annual return to the Commission.)

    The Charity Commission publishes standard forms of constitution for various types of charity. We have copied one of these. This covers many of our existing rules, so we propose to modify our rules to suit. This is the source of the document named WMSC CIO Constitution.

  • update the Club's objectives
    These now read as follows:
    "The objectives of the Club shall be:
    1. the provision of opportunities for recreation, social activities, and music within and around West Malvern;
    2. the promotion of sporting contests;
    3. the sharing of mutual interests among the people of West Malvern and the surrounding area, provided that such activities are consistent with the doctrines of the Church of England;
    4. the supply of refreshments for members and guests;
    5. the provision and maintenance of a club-house at 145 West Malvern Road, West Malvern for use by the community;
    6. to further such charitable purpose or purposes as the trustees in their absolute discretion shall think fit."

  • set up WMSC House Limited - See the next section.

  • register the house at the Land Registry in the name of WMSC House Limited.

    Since WMSC House Limited will be wholly owned by the Club, this will mean that the house will be wholly owned by the Club. There will no longer be a need for Trustees to own the house on behalf of the Club.

Why WMSC House Limited?

Why do we need to set up WMSC House Limited as a separate company? There are several aspects to this.

  • separate the accounts
    It's essential, as a charity, to separate the charity from any trading arms that it may have. Letting the house and running the bar are trading, so need to be done in a separate company - WMSC House Limited.
  • WMSC House Limited will own the house.
    The directors of WMSC House Limited will be the same people as are the Committee of the Club (this is written into the CIO Constitution and the Articles).
  • the members still control ownership of the house
    It is written into the Articles, that "The company shall not sell or transfer any property of the WMSC without a majority of three quarters of the WMSC at a general meeting";
  • there will no longer be Trustees
    If there is a company which owns the house, and that company is run by directors who are elected by the members, there will no longer be a need for the house Trustees. The house will be owned by WMSC House Limited which is owned by the Club. The Trustees will be no more.
  • the Articles of WMSC House Limited are made up from:
    • the model articles for private companies limited by guarantee which are in the Companies Act 2006;
    • the special requirements for WMSC.
  • Articles of Association of WMSC House Limited

How to get this done.

There are several steps we need to take:

  • approval by the AGM
    The WMSC AGM has to approve these changes to the Rules. We need general approval to do what is proposed here plus any minor revisions that emerge during the registration process.
  • register at Companies House
    We need to register WMSC House Limited with Companies House; this costs £15.
  • register with the Charities Commision
    We need to register the Club as a CIO with the Charity Commission.

What effects will there be?

Members will want to know the effects that these changes will have. In summary, they are:

  • There should be no noticeable effect on members.
  • There should be little effect on the Committee.
  • The house Trustees will be no more. Their role will be taken by WMSC House Limited.
  • There will be some effect on the officers (chairman, treasurer, secretary) as we shall have to produce two sets of accounts (for the Club and the house).
  • We shall have to produce an annual report for the Charities Commission. This will, comprise:
    • Annual Return
      This is done on-line and comprises standard data (eg: the names of the charity trustees - the Committee).
    • Annual Accounts
      The Charity Commission provide a template for this. We simply transfer data from our in-house accounts to the CC form.
    • Trustees' Annual Report
      This is a report from the WMSC Committee. (The Charity Commission refer to 'trustees'; we call them 'members of the Committee'.) The required information is readily available.
  • We shall have to produce an annual report for HMRC and Companies House. This can be done via on-line submission. The data can be extracted from our in-house accounts.
  • Our finances will be better: we shall save over £1500 in Corporation Tax and accountancy fees; we shall be eligible to apply for grants.

It will continue to be West Malvern Social Club; but some of the paperwork will be different; most important, we shall be better off financially.


FAQs about the changes

Q: What are the likely costs?

A: Annual accounting costs will be about £100 less. There will be a £13 annual fee to Companies House. There will be a tax saving of £1500 or more.

Q: What will be the legal costs for making the change?

A: It will cost £15 to register WMSC House Limited at Companies House.

Q: What is to stop the directors from running away with the money?

A: It will now be more secure as the company which will hold the house will be subject to the Companies Act, and the charity will be governed by the Charity Commission. Further, stealing is a crime.

Q: What would happen to the assets of the club if it were wound up?

A: Under the new constitution, the club can be wound up only by a vote of 75% at a general meeting of members. The club’s assets must be applied for charitable purposes the same as or similar to those of the club.

Q: Will the members in the new structure have any less power than now?

A: No. The Committee will run the club as now; the Committee will be elected annually by the AGM as now.

Q: Will the directors be able to spend the club’s money without asking the members?

A: The Committee will have the same powers as it has now. Any significant change to the club’s policy on cash reserves would be put to a general meeting.

Q: Why would the Trustees cease to exist under the new constitution?

A: The current Trustees exist because the club is not a legal entity; the Trustees are legal persons and can hold property; they hold the house on behalf of the club in trust. Under the new constitution, the club would be a legal person (a Charitable Incorporated Organisation or CIO) and can hold property itself. So, there will be no need for there to be Trustees.

Q: Why will the house not be owned by the CIO, but will instead be owned by WMSC House Limited?

A: WMSC House Limited will be wholly owned by the club. We are advised that the Charity Commission would prefer it that way.

Q: What are the pros and cons of changing the annual subscription?

A: The proposed change to the subscription regime (ie: life membership rather than annual membership) is such that:

  • It will cost about £400pa in directly lost revenue.
  • It will greatly simplify the administration of membership matters.
  • It will make our position vis-à-vis our drinks licence tenable.

NB: keeping things as they are is not an option; we cannot continue to run the club where the vast majority of those attending many of our events are not paid-up members; that would contravene our drinks licence. If we continue with annual subscriptions, we will have to introduce a much more rigorous membership subscription and renewal regime; this will not be popular and is not how we want to run the club.

What is the motion on which the 2015 Annual General Meeting will vote?

“The club has agreed that:

  1. the club shall have a new constitution as a Charitable Independent Organisation as defined in the constitution dated 19 February 2015 together with WMSC House Limited as defined in the articles of association dated 15 February 2015;
  2. the rules of the club shall be superseded by the above constitution, the above articles, and the Rules dated 16 January 2015;
  3. if, in registering either the CIO or WMSC House Limited, it becomes necessary to amend any of the above documents, Rule 22 shall be suspended until the next AGM, and an EGM shall be allowed to change the club's constitution.

Item (c) may need some explanation. Rule 22 says that "No amendments to the rules of the Club shall be made except by a majority of at least two thirds of the members present at an Annual General Meeting."

There is a possibility that during the registration process, we shall find the need to make minor amendments to the constitution etc. Were this to happen, with Rule 22, we would have to wait until 2016 to complete the registration process. By suspending Rule 22 and allowing minor changes to be made by an Extraordinary General Meeting (ie: an EGM), we can avoid this year's wait.

What is the timeplan for achieving registration as a CIO?

The following timeplan is a worst-case plan as it assumes that our initial application will have something wrong with it so that we have to make amendments and have an EGM approve them. This is a real possibility, so it as as well to allow for it.

#activityduration
days
planned
date
actual
date
1 prepare paperwork for the AGM done
2 AGM: vote to go ahead - 15Apr2015 15Apr2015
3 submit application to the Charity Commission - - -
3.1 prepare paperwork for CC submission 10 29Apr2015
3.2 submit papers to CC 1 30Apr2015
3.3 respond to CC queries and re-submit 10 14May2015
3.4 await response from CC 45 16Jul2015
3.5 prepare any required changes from CC comments, and call EGM 20 13Aug2015
3.6 hold EGM 1 14Aug2015
3.7 re-submit to CC 5 21Aug2015
3.8 await response from CC 45 23Oct2015
3.9 Charity Commission registration is now complete 0
4 register WMSC House Limited with Companies House 5 30Oct2015
5 transfer house ownership to WMSC House Limited 20 27Nov2015
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