New Organisations

Some projects require the establishment of a new organisation in order to progress a project. This may be because:

  • There is no other organisation that can acquire a suitable interest or stake in the ownership of the land and buildings involved.
  • There is no other organisation that can enable the degree of community control of the project - through formal membership of the organisation - that is required.
  • There is no other organisation that is willing or able to take on the implementation of the project due to their legal structure and powers, their lack of track record or financial strength. Charities for example may have to set up trading subsidiaries in order to undertake a project.

If this is the case there are a range of legal structures to choose from that have been successfully used in the past. You can see a list of them here. But before choosing a legal form to establish a new organisation, the following three issues require careful consideration by stakeholders:

  • Identify what it is the new organisation will want/need to do – including into the future.
  • Identify the values/ethos of the proposed organisation
  • Consider the way that the organisation may fund its activities into the future – will one structure be more helpful than the others?

Exploring the answers to the following questions with all stakeholders in a project will help to provide guidance to legal advisors on the form of any new organisation.

  • Members – who are they and what do they get to decide?
  • Will membership be open to organisations as well as individuals?
  • Will the organisation employ staff who will also be members?
  • Will the services provided by the organisation only be available to members?
  • Conflicts of Interest – are they an issue and how can they be addressed?
  • Trading – what kind and how much is likely to take place.
  • Payments of dividends
  • Use of profits and surpluses
  • Limiting liability
  • Fundraising for grants
  • Powers to borrow money
  • Involvement of volunteers
  • Ability to sell interests in land and building assets and on what terms
  • Whether to take advantage (given other project objectives) of the tax and fundraising advantages of being a charity?