Starting Your Group - A Community Action Derby Guide

To help you on your journey to setting up a new voluntary or community group, we have designed a user-friendly guide to take you through the initial stages to ensure that you have all the necessary policies and documents - constitution, bank account, forming a committee and writing your own policies - in place.

Before You Start

Want to set up a group?  You need to think about the following:

• Where did the idea come from? Was it one person’s idea or did it arise from discussions between several like-minded people?
• Find out if there are other groups in your area doing the same thing. If there are, do their services exactly match what you are considering, or would your group be providing something extra?
• What evidence do you have to show that your group is needed?
• Who else do you need to make this happen?
• Who will be your members?

 You are now ready to start your journey to setting up your new community organisation!

Step 1: What Is A Community Group?

A Voluntary and Community Group is defined as a ‘group or organisation which works for the public benefit’ and has the following characteristics:

• Structure – rules around how the group is organised and run.  This is called a ‘governing document’ or constitution
• Self-governing and independent from any other organisation.  Voluntary and Community groups are free to appoint their own management committee
• Not for Profit – no-one within the group will profit from that group.  It is run by volunteers who can be reimbursed for volunteer expenses but apart from that any profits made must be reinvested in the group
• Public/Community Benefit – the activities carried out by the group will benefit a particular group of people within the community
• Funding – voluntary and community groups can apply for funding to get their group started and help with developing their activities
• Generating Income – there are lots of ways of bringing money in - for example, membership fees, donations, fundraising. These aspects are covered in the Fundraising section later on.

There are other structures that you can adopt depending on the kind of work you plan to do.  These are covered later on in the Legal Structures section.

Step 2: What Are Your Aims?

What is your organisation trying to achieve?

Consider the following:

• What changes do you want to make to help people in the community?
• How will these changes make a difference to people’s lives?
• Keep the aims broad so that you don’t limit your activities
• Two to three aims are sufficient
• Keep them short and simple for clarity

Who are you going to benefit?

Are you setting up to support a specific group of people, for example, carers, young people, older people?

Where are you going to work?

Are you going to work locally across Derby City and/or the county? 

Step 3: Forming Your Management Committee

Your first committee will probably evolve out of your steering group. Every organisation should have a Chair, Treasurer and Secretary. These three posts are the minimum that any committee needs to operate. These officers don’t have any more power than the other committee members; they just have additional duties to carry out. You may decide to have other posts as necessary, depending on the exact nature of your group, such as Vice-Chair, Fundraiser, and so on. There should also be another two to three people supporting the named roles.

Decide how often your committee will meet and make sure there is an agenda for each meeting, to prevent discussions from going round in circles without anything being decided.

As time goes on, there will be a need to get more people onto the committee, and some of the original members may drop away, perhaps through lack of time or loss of interest.  This is quite normal with any new organisation.  The aim should be to continually strengthen the committee by persuading people with particular skills or talents to come on board.

What is a committee for?

• Ensure that the aims and objectives of the group are met
• Comply with the group’s legal requirements and ensure transparency
• Support and motivate each other – all committee members have equal responsibilities for running the group
• Ensure the group is run efficiently and fairly
• Plan and make decisions about the group’s future
• Make sure that the group is accountable to its members, users and funders
• Raise and manage the group’s funds
• Monitor and evaluate funding received

Choosing your management committee

Someone with managerial experience is an asset to any committee, perhaps as Chair. You will need someone with some basic bookkeeping experience to be Treasurer. Somebody who is organised and meticulous is needed for the Secretary’s post. 

What makes a good committee member?

• To be familiar with the group’s aims and objectives
• Gives their time to the group
• Has the relevant skills and knowledge or is willing to learn to develop these skills
• Respects other people’s views
• Ensures that the group operates within its constitution 

 The Chair

• Making sure that the committee works together effectively in the interests of the group
• Making decisions and taking action between committee meetings (if this is allowed by the constitution or by the committee)
• Signing cheques and liaising with the Treasurer
• Ensuring members’ rights are met as stated in the constitution
• Helping to deal with disciplinary action against members
• Providing leadership to the group in ensuring it meets its agreed objectives and follows policies and procedures set up by the group
• Ensuring the group holds the meetings required by its constitution.  Representing the group to outside bodies
• Ensuring that decisions are made, agreed and summarised so that everyone understands 

The Treasurer

• Pays the bills promptly
• Ensures that funds are being spent in accordance with the group’s aims and objectives and that money given for a specific purpose can be seen to have been used correctly
• Deposits cash and cheques on a regular basis
• Keeps accurate up-to-date financial records
• Keeps receipts for money in and money out (this shows that the group is able to handle money which is important to possible funders)
• Works closely with the Chair and other committee members – report feedback to committee at each meeting
• Pays some small expenses in cash
• Communicates with the bank, ensuring that bank statements are regularly received and kept safely and that cheque signatory mandates are kept up-to-date
• Checks bank statements and reconciles them with the cash book on a regular basis

The Secretary

•  Preparing the agenda (with the Chair)
• Receiving correspondence and reporting it back to the committee
• Writing letters on behalf of the group – these may need to be checked and signed by the chair
• Ensuring that appropriate information is obtained and provided for committee members before the meeting
• Sending out agendas well in advance and keeping a copy of each agenda in the minutes book
• Taking and filing accurate minutes and keeping them in the minutes book
• After meetings, to inform members who were absent of any action they need to take
• Keeping an up-to-date register of all members, committee members and officers and filing these records in the minutes book
•  Keeping files of all correspondence sent out or received and any other information;
•  Keeping the group’s constitution
•  Ensuring that the group has adequate insurance
•  Organising meetings (in consultation with the Chair) 
•  Being familiar with the group’s policies and procedures

Other committee members

It’s always a good idea to have some other committee members to support the chair, secretary and treasurer. Someone who has skills in social media will really help your group to market your services.  Also, having a website enables you to raise awareness of your group and demonstrates all the good work that you are doing.  It will also help you when applying for funding, as potential funders will check your website to have a look at what you’re doing.

Step 4: Choosing A Legal Structure

Before you start

In the eyes of the law, an organisation is either:

• a collection of individuals working together, such as an unincorporated organisation or charitable trust. Types of unincorporated organisations include Association, Charitable Association, Charitable Trust, Registered Charity (which is not registered as a company) and Friendly Society.

or

• An incorporated organisation which exists as a separate legal entity from the individuals belonging to it.  Types of incorporated organisations include Company Limited by Guarantee, Community Benefit Societies, Community Interest Companies, and Charitable Incorporated Organisations.

Unincorporated and incorporated – what’s the difference?

Unincorporated	Incorporated
Unlimited personal liability (joint & several)	Limited personal liability (usually £1), i.e. committed to a maximum loss
Ownership of property by individual people	Ownership of property by the organisation
No statutory framework – no governing law (unless a charity)	Clear statutory framework (with penalties for non-compliance & automatic fines for late returns)
No real accountability (unless a charity)	Clear accountability both to members/ shareholders and to a regulatory body
No automatic set-up/running costs	Set up and ongoing costs (e.g. filing fees)

 

There are many different structures that voluntary organisations can adopt.  Below are some that may be appropriate for you to consider.

Unincorporated association/community group

This may be the best option for you if your group is small, has a limited or specific purpose, operates on a small budget, does not own property or need to employ staff or has no long term commitments or plans to enter into lease agreements for any equipment etc. It is a popular simple structure commonly used by small voluntary organisations and is quick and cheap to set up.

Most voluntary organisations begin as unincorporated organisations, and may stay that way, particularly if they are small.  It is worth agreeing some basic rules and writing these down, so that everyone is clear about the aims for the organisation and how it will be managed.  If the voluntary organisation is developing into a larger concern and needs to lease buildings, employ staff or enter into large contracts the structure needs to be to reviewed. 

Unincorporated organisations can take different forms, such as:

• Charitable Trusts
• Friendly Societies
• Registered Charities (which are not registered as companies)
• Unregistered voluntary and community groups

Advantages

• Can be set up quickly and cheaply (no setting up fees unless you involve a solicitor)
• Cheap and relatively easy to run – no need to notify changes in office bearers to any public register
• Offers a democratic structure with reasonably flexible procedures
• If your group’s aims and purposes are considered ‘charitable’ (as defined by law) you can apply for charitable status

Disadvantages

• The group cannot hold property or enter into contracts in its own name
• Members may be held personally liable for the organisations debts

Charitable Trust

A charitable trust is a special sort of unincorporated association, set up to administer money or property (or both) and which will usually be registered with the Charity Commission.  Many trusts administer charitable bequests. Some voluntary organisations choose to have trusts to hold property called a trust deed. A model trust deed can be obtained free from the Charity Commission. The trust consists of a small group of trustees, who manage the money or property in accordance with the trust deed. There is no membership apart from them.  Problems can arise when trustees die or resign, or if new trustees want to replace them or run the organisation differently from the founding trustees. Since a trust is unincorporated, trustees are personally responsible for its actions and liable if it runs into debt. There are ways of limiting this, but it is advisable to seek legal advice when the trust is set up.

Friendly Society

Less popular nowadays, this structure dates from the 19th Century when it was designed to offer insurance benefits for members. To become a Friendly Society your group must have a ‘benevolent’ purpose and a minimum of 7 members.

Advantages 

• Simple to transfer property between trustees
• Access to arbitration in the case of disputes
• Eligible to apply for charitable status if your group’s purposes are considered charitable (as defined by current law) and you can satisfy the Charity Test.

Disadvantages

• Unincorporated, which means personal liability of trustees/members for any debts of the organisation
• Regulations to abide by:- groups must comply with Friendly Societies Act 1974 and are liable to investigation by Registrar of Friendly Societies
• Not such a well-known structure may complicate dealings with banks and funders

Registered Charity

A charity is an entity that has been set up for purposes which are exclusively charitable and for the public benefit. Charitable purposes that are for the public benefit are set out in the Charities Act 2006. In order to be a charity, an organisation must be able to demonstrate it is set up with aims that are charitable, and that these aims are carried out for the public benefit. It is a requirement that applies to each of an organisation’s aims, so a charity cannot have some aims that are for the public benefit and some that are not.

An organisation that is established for charitable purposes in England and Wales must register with the Charity Commission if it has income over £5,000 a year.

Advantages 

• Charities are regularly recognised and enjoy considerable support from funders and other potential supporters
• Charities attract considerable tax advantages, including 80% mandatory (depending on the local authority) relief from business rates.

Disadvantages 

• There are limits on the ability of a charity to raise funds by trading
• Regulation by the Charity Commission involves a significant administrative burden
• When a charity is wound up, surplus assets/funds must generally be transferred to a charity with similar purposes.

Incorporated organisations

An organisation that is a corporate body can enter into contracts, hold property, and take part in lawsuits, in its own right. It enjoys limited liability. This means that if it has more debts that it can pay and is wound up, its members as individuals are only liable for their shareholdings or the amount they have each guaranteed.

Incorporated organisations are more complicated to set up, and more closely controlled by the law, than unincorporated associations. There are four sorts of incorporated structure suitable for voluntary organisations:

• Company Limited by Guarantee
• Community Interest Company (CIC)
• Charitable Incorporated Organisation (CIO)
• Community Benefit Society (formerly the Industrial and Provident Society).

Companies Limited by Guarantee

 A Company Limited by Guarantee does not have shares or shareholders, and cannot distribute profits. Instead it has members, who may pay a subscription and are each liable for a limited sum if it is wound up (the guarantee). The members elect a board, or committee, or directors, and can remove them but the board has day-to-day control.

A limited company’s rules are set out in a legal document called the memorandum and articles of association. This must be carefully drafted, preferably with legal advice, because the company has no power to do anything not covered by it. The Charity Commission has produced a model which is available free of charge.

 Advantages

•  The structure and its day-to-day operation is widely understood
• Quick and easy to establish with low registration fees. 
• Can be either charitable or non-charitable (for example, as a social enterprise).  If charitable, all usual charity tax reliefs are available
• Flexible as to numbers of members and whether subscriptions charged

Disadvantages

• No possibility of equity investment – can’t issue shares
• High penalties for delay/failure to file information with Companies House
• If charitable, it would be registered with Companies House and the Charity Commission – need to file information/accounts with two regulators

Community Interest Company (CIC)

These are limited companies that exist to provide benefits to a community or a specific section of a community. Registered at Companies House and with the regulator of CICs. Must have objects and activities that are in the community interest – as assessed by the regulator. Community can mean a section of the community (whether in Great Britain or elsewhere). Can be limited by shares or by guarantee. Must have an ‘asset lock’ i.e. memorandum and articles must require any transfer of assets to be for full consideration – unless to another CIC or charity.

Advantages

•  Flexible – can be company either limited by guarantee or by shares
• Flexibility to pay directors
• If limited by shares it can pay dividends up to a ‘dividend cap’ and can also have nonprofit shares with no entitlement to dividend.  Loan capital possible but with an interest cap
• Not restricted by objects/purposes which qualify as charitable

Disadvantages

Does not receive the tax advantages extended to charities - for example will not obtain business rate relief but may qualify for discretionary relief.

Charitable Incorporated Organisations (CIO)

This legal structure is available to new organisations and existing charities that wish to convert into the CIO form.  It is registered and administered solely by the Charity Commission. Charities that are already limited companies can convert to CIOs if they wish. The main advantages are a simpler governing document, and no longer having to deal with Companies House at all – only the Charity Commission, therefore less bureaucracy.

Advantages 

• Main intended benefit is having a single regulator – the Charity Commission
• Conversion from a company limited by guarantee should be fairly straightforward
• Simpler governing document
• No longer having to deal with Companies House – less bureaucracy.

Community Benefit Societies (formerly Industrial and Provident Societies)

These are not-for-profit organisations with charitable purposes and a built-in democratic structure. They must give all members an equal say in the running of the society. The society has corporate status, and can have a share and loan capital, but must pay only moderate interest on any loan capital. Industrial and Provident Societies for the benefit of the community cannot register with the Charity Commission, but must register with the Financial Services Authority. They can apply to the Inland Revenue Charities Division to be classed as charitable for tax purposes.

Types of governing document required for each legal structure

Legal Structure	Governing Document
Unincorporated Association	Rules of Association / Simple Constitution
Unincorporated Charitable Association	Model governing document from Charity Commission / Charity Law Association
Charitable Trust	Trust Deed from Charity Commission / Charity Law Association
Charitable Company	Memorandum & Articles of Association from Charity Commission / Charity Law  Association
Company limited by guarantee/shares	Memorandum & Articles of Association from Charity Law Association
Community Interest Company (CIC)	Memorandum & Articles of Association from CIC regulator
Community Benefit Societies	Rules
Charity Incorporated Organisation (CIO)	Constitution

 

For more information on registering as a charity, visit the Charity Commission website.

Step 5: Writing Your Constitution

All voluntary groups, whether registered charities or not, should have a written constitution.  Many funding bodies now make it a condition that a group has adopted a suitable constitution before granting funding.

What is a constitution?

•  A written document that sets out how a group works 
• A set of rules or terms of reference 
• Makes sure that a group is properly organised
• Checks are built-in to make sure one person can't make decisions without reference to other members of the group 
• Helps to smooth the path in meetings and avoid disagreements as to how to deal with issues 
• Helps to protect the management committee against criticism for not acting correctly, provided they have acted in accordance with the procedures laid down in the constitution 
• It makes sure that the group members know what they are supposed to be doing and prevents an individual from doing something different

What’s in a constitution? 

• Name of the group – this should be simple and clear 
• Aims or objectives – this sets out the main purpose of your group, why it exists, what it hopes to achieve, who will benefit from your group and where you will do it 
• Membership (how people can join) – in legal terms a member is a person who agrees to abide by the constitution in return for rights given in the constitution 
• Management - how the group is managed and the duties of the committee members. Your group will need to set up a management committee to make decisions about the group 
• Duties of the officers – Chair, Secretary and Treasurer 
• Finance - how the money will be managed 
• Annual General Meeting – it is standard practice for a group to have one formal meeting of all members each year 
• Special General Meeting – the group can call any member meetings other than the AGM 
• How alterations to the constitution can be made – there is a process in which amendments can be made to the constitution 
• Dissolution - what happens if the group decides to finish 
• Adopting the constitution (a committee should have discussed, agreed and adopted the constitution.  This can be shown by being signed and dated by each committee member.

Templates 

• We have created a simple template constitution for small unincorporated groups
• The Charity Commission has models, templates and guidance for constitutions, articles of association and trust deeds for a new charity or charitable trust available online: www.gov.uk/government/publications/setting-up-a-charity-model-governing-documents
• The Office of the Regulator of Community Interest Companies has model constitutions and Articles of Association for Community Interest Companies (CICs) available online: www.gov.uk/government/publications/community-interest-companies-constitutions

Now that you've written your constitution, organise your first committee meeting to formally adopt (sign) this document and officially appoint your management committee.

Once that's completed, you can start running your group!

Step 6: Opening A Bank Account

What to think about when opening an account 

Type of account

Bank accounts generally fall into one of two categories:

• Current (day-to-day banking)
• Deposit (savings) accounts.

Which bank to open an account with

For example, you may wish to consider the following:

• Accessibility – is the bank easy to get to if you want somewhere with a physical location, or do they offer online banking if you would prefer that?
• Facilities – for example, if your group does fundraising events, you may wish for a bank that has a night safe, as disposing of the cash as soon as possible means that no cash is left on your premises.
• Charges - are there any charges or fees, and if so, are they cost-effective?

Information required

Banks and Building Societies generally require proof that your group is a voluntary, non-profit making organisation and not a private business.  This could include:

• Letter from the Chair/Secretary of your organisation
• Copy of your organisation's constitution
• Charity registration confirmation/Trust deeds (if group is a charity).

Other considerations

• Authorisation of cheques – who will the cheque signatories be?  They must not be related, and you will need at least two signatories  
• Proof of your identity – passport, driving license or two utility bills with name and address
• Bank mandates - who in the charity will be authorised to manage the charity’s bank accounts?

Bank Accounts for voluntary organisations

The Charity Excellence Framework has a list of UK charity and community group bank accounts available on its website: www.charityexcellence.co.uk/community-and-charity-bank-accounts/

Better Business Finance has opened a business bank account finder that can help you understand the options that are available to your charity: https://app.finpoint.co.uk/partners/BetterBusinessFinance/banking

Next Steps

If you have followed and completed these steps, you will now have a management committee, a constitution and a bank account!

Our Growing Your Group page has advice and guidance on how to develop your group to become more sustainable.

This includes information on:

• Policies and procedures
• Putting together a business plan
• Project planning 
• Getting started with fundraising.

Visit the Growing Your Group page to find out more!

 

Further Support

Setting up a Social Enterprise or CIC in Derby

If you are, or are looking to set up, a social enterprise or a CIC, you can contact Keith Jeffrey from Derby Social Ventures, which is funded by Derby City Council to provide free support. You can read more about the support Derby Social Ventures offers here. You can contact Keith at: keith@socventures.org

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NCVO (The National Council for Voluntary Organisations)

NCVO is a national support organisation for small charities and voluntary organisations. It has a really useful website with guidance on a wide range of topics, from setting up an organisation, all the way through to closing an organisation down. It also offers support via a helpline.

Find out more at: www.ncvo.org.uk/about-us/our-services/support-small-charities-voluntary-organisations/

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Charity Commission

The Charity Commission is the government department responsible for registering and regulating charities in England and Wales. Its website offers a range of guidance to help you set up and run your charity.

Find out more at: www.gov.uk/government/organisations/charity-commission