A key issue in asset development and transfer projects is the establishment of new organisations. If a new organisation is required, advice will be needed on its legal structure.
There are many reasons why a new organisation may be required to take ownership of an asset project either before or after it is improved or developed, for example:
- There is no existing 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 or share ownership of the organisation - that is required by the Community Empowerment Act.
- 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.
There are a number of legal structures that can be looked at depending on the specific circumstances of an asset project. The most important thing before the options can be evaluated is to be clear about what the asset is to be used for and what your organisation will be doing with it, both in the present and into the foreseeable future.
Starting up
Don't rush - if you are exploring taking on an asset, whether it be management, lease or ownership, it is very important that you don't rush into setting up a new organisation until you have worked out what it is you want to do and whether it is actually feasible.
First steps - if you are a new group that has come together to explore asset transfer then you will probably be hoping to apply for some funding to some initial feasibility work. The easiest way to do this is to see if you can use an existing group, that is already established with a bank account, to do this for you. This is a role that a Community Council or a Development Trust could do for a group.
Constituted group - if this is not an option, you could consider adopting a basic constitution which will allow you to set up a bank account. These means you can apply for funding to do your feasibility work, and explore the first steps. This constitution can be quite basic - just enough to get the job done.
Moving to a legal entity - once you have made up your mind to definitely submit an asset transfer application or take ownership of an asset through other means you will need and want to set up a legal entity.
To become eligible for any form of asset transfer under the Community Empowerment (Scotland) Act 2015 a group needs to be considered to be a “community transfer body”. Full details on eligibility can be found in Section 5 of the Guidance for Community Transfer Bodies. In summary, this can either be a “community-controlled body” or a body designated by Scottish Ministers - further details on eligibility can be found in the Community Group Structure section of this site.
If you are setting up a new organisation for your asset transfer, you can download Model Documents suitable for Asset Transfer from the Scottish Government website.
If you are unsure what type of organisation is best for you, SCVO has information on the various legal structures, but always check with your COSS advisor that these are eligible for asset transfer.
Most existing organisations have to make some changes to their governning document to be eligible for asset transfer. You can discuss this with your COSS advisor who will be able to assist you.
Considering your Legal Structure
Beyond eligibility for Asset Transfer, there are other key issues to consider when choosing a legal structure for a new organisation:
- Are you a community of geography or community of interest?
- Might you want to raise funds through running a community shares issue?
- 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
- Trading
- 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 benefits of being a charity?
