Purpose: This guidance details what a corporation is, how one is created, the forms it can take and our policy on appointing one.

Divisional responsibility

For action:

Charity Support Division

For information:

All operational divisions

Contents

1. The need for this guidance
2. What is a corporate trustee?
3. What is a corporation?
4. How is a corporation created?
5. Types of corporation
6. Our policy on the appointment of corporations as trustees
7. Powers available to a corporation acting as a charity trustee
8. Accounting requirements

Meaning of expressions - list of Glossary terms used in this Guidance
Index to further related information

1. The need for this guidance

Caseworkers need to be aware of a number of issues when considering cases involving corporate trustees. For example:

• What is a corporation?

• What restrictions are there on their activities?

• What factors affect their appointment or removal?

• When do we need to use our powers to appoint or remove them?

This guidance sets out to address these issues and other aspects we need to consider in relation to the role of corporations as trustees.

2. What is a corporate trustee?

For the purposes of this guidance, a corporate trustee is a corporation which has been appointed to act as a trustee of a charity.

The corporation may be:

• a "trustee for all purposes" acting on its own (a sole trustee);

• one of a number on a body of charity trustees;

• a holding trustee (or "nominee" or "custodian" under the Trustee Act 2000 - see OG 86 B4); or

• a custodian trustee.

A corporation does not itself need to be charitable to be a trustee of a charity. For example local authorities are not exclusively charitable and yet are trustees of many local charities. Further examples of corporations which act as trustees and the roles which a corporate trustee can take on are given in OG 38 B1.

3. What is a corporation?

A corporation has a legal existence (and rights and duties) separate from those of the individual persons who form it from time to time. So, for example, third parties enter into contracts with the corporation and not with the individual directors or members. The corporation also has its own liabilities and assets which are distinct from those of the directors or members (see also OG 38 B4).

A corporation has perpetual existence and a name or title of its own; it may also have a common seal for use on official documents. Another name for a corporation which staff will come across, particularly in legal volumes or documents is a body corporate.

4. How is a corporation created?

• under the Companies Acts (limited companies);

• under Part VII of the Charities Act 1993 (incorporation of an existing trustee body);

• by an Act of Parliament (which can be either a public general Act or a specific private Act); or

• by Royal Charter.

These are some ways of creating a corporation. Examples of corporate trusteeship are given in OG 38 B1.

5. Types of corporation

Corporations are of two main kinds, both of which are likely to be encountered by caseworkers. The most common corporations are those where collections of persons are incorporated - corporations aggregate. However, a corporation can be constituted in a single person - a corporation sole.

Companies incorporated under the Companies Acts are usually corporations aggregate, but may now also be corporations sole.

• Corporations aggregate, consist of several members at the same time. Examples include municipal corporations (such as local authorities where, under the Local Government Act 1972, a council is created and then incorporated).

• Corporations sole, consist of only one member at a time, with the corporate character being kept up by a succession of solitary members over time. Corporations sole are always holders of a particular office; one example is the Official Custodian for Charities. The holders of certain offices in the Church of England (eg vicars) are also corporations sole (though their equivalents in the Church in Wales and the Roman Catholic and non-conformist churches are not). The Public Trustee is another example of a corporation sole. Further information on the role of the Public Trustee my be found at OG 38 C3. Property (which includes not only land and buildings, but also cash and investments) which the member holds by virtue of his or her office passes on retirement, resignation or death to his or her successor.

When dealing with the latter it is important to be clear if we are dealing with the individual as a person or the office that they hold.

6. Our policy on the appointment of corporations as trustees

6.1 General policy
6.2 When we need to use our powers to appoint a body corporate
6.3 Factors to take into account

Where a corporation is to be appointed as trustee, those who are responsible for the appointment must be satisfied that its duties as trustee will be compatible with the objects for which the body corporate is set up to achieve. They must also ensure that the corporation has the necessary authority to act as trustee.

This being the case, in principle there is no objection to appointing a corporation as trustee. There are some cases, however, which may need careful consideration and these are discussed in OG 38 B1.

In many cases the trustees or those responsible for appointing new trustees will have the power to do so through the provisions of the governing document. If this is not the case there may be powers of amendment available to the trustees to change the governing document to allow them to appoint.

Where neither of these powers is available, however, then we may need to become involved in the process of appointment and make an Order or a Scheme.

Whether the appointment is made by the trustees or the Commission, there are several factors which need to be taken into account when considering appointment of a corporation as trustee. These include such questions as:

• Does the governing document allow the appointment of a corporation as trustee?

• Does the proposed corporation have the authority to act as a trustee of a charity?

• If the corporation is to be appointed, does it need to be a trust corporation in order to fulfil the role it will be required to take on?

• Is the corporation going to be appointed as a sole trustee (a "trustee for all purposes") or one of a number of trustees?

• If it is to be sole trustee, does the governing document stipulate a minimum number of trustees?

Full guidance on these points is in OG 38 B2. Where the Commission is making the appointment, caseworkers may find the flowchart in OG 38 F1 helpful.

7. Powers available to a corporation acting as a charity trustee

When a corporation is appointed as a trustee, the powers available to it for the purposes of administering the charity will be those set out in the governing document of the charity. The powers in the corporation's own governing document will not be available. Where we receive a request to change the powers of a charity, we will need to consider these in line with our usual policy - see, for example, guidance in CC22 - and the guidance on specific powers such as remuneration, trustee indemnity insurance, disposal, income reserves and borrowing. (See also OG 38 B3.)

However, the constitution of the body corporate is relevant to the question of how the body corporate signifies its corporate will as trustee of the charitable trust. For example, if the constitution of a body corporate enables the directors to delegate functions to a committee of two or more of their number, the corporate trustee can signify its corporate will as trustee via a decision of such a committee. It does not matter that the governing document of the charitable trust contains no power of delegation, and that the delegation is outside the scope of section 11 of the Trustee Act 2000.

8. Accounting requirements

Where a charity is administered by a corporate trustee, solely or jointly with others, we must make clear to the officers of the corporate body that it is a separate legal entity from the charity. The charity's books and accounts and those of the corporation should normally be kept and prepared separately. This applies equally whether the corporation is itself charitable or not. (The exception to this may be where we have made a "uniting direction" for accounting purposes.)

This is a very brief statement on the accounting requirements for charities with corporate trustees.

The following words and phrases are defined in the Glossary of Terms:

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1993 Act
body corporate
corporation
governing document
Official Custodian for Charities
order
scheme
trust corporation
trustees
uniting direction

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