Legal Feamework
This is an AP created by Sandy, Allan and SamThe question - What should our new legal framework be (how much risk, and who does it fall on if something were to go wrong)?It will run from now to December 6th 2024. What has gone beforeIn 2022 when humans started Celtic Burn, a group of humans set up Northern Regional Ltd (company limited by guarantee) to act as our legal framework. It was called Northern Regional so that other burn events could act within the same umbrella.
The company had directors. Although they were not meant to have any more control or authority than any other CB human. They had legal responsibilities, including to administer accounts.
In summer 2023 the directors held an annual general meeting (AGM) to call for new directors, no one stepped forward.Three of the five directors stepped down after the AGM.
In October 2024 Northern Regional ltd was dissolved under recommendation by Companies House for administrative reasons. NorthernRegional ltd is currently in the final stages of dissolution, and is expected to be tied up within the month with no issues. Celtic Burn will not be affected by this dissolution in the future. It's important to remember that we’re all volunteers. Noone gets paid. We do not make profit. We aim to break even.
2. What might happen nextThere are several forms of organizational structure we could use, we discuss here four options:a) Have no legal structure protection. Many other burns do this, however it’s important to note that other countries in Europe appear to treat unincorporated type organizations at least a little differently to the UK. We might treat it like a group of friends going camping in a field or with one of the looser legal entity models. It's the simplest legally but most risky to individual burners. If there was an incident, for example, then it’s hard to say who would be liable. In a decentralized Burn, who are the organizers? The liability would usually fall to the person who collected the money, made the booking, whose name is on the bank account. No-one involved in drafting this AP would be in favor of CB going ahead under this optionb) Create a new Company Limited by Guarantee (CLG). This would be similar to the setup we had with Northern Regional, with the only difference being new directors. It could use a similar basic constitution to Northern Regional ltd.
With a CLG in the event of an accident liability would be on the new company rather than on individuals, Though ultimately directors will be responsible under UK law claims or debts would be made against the CLG rather than individuals.It would have to file annual accounts with Companies House and HMRC. Essentially it would need to do all the same things Northern Regional had to do.
Legal responsibilities of a CLG director: https://www.gov.uk/guidance/being-a-company-director
c) Community Interest Company - It’s the most complicated, requiring a written constitution and to have some level of legal and administrative accountability for its social function.These entities are regulated by a governing body. It is the most administratively demanding and restrictive of the models discussed here.
d) A PLC. This puts the responsibilities most on directors and would require shareholders.
3. What we are proposing.
Regardless of the specific legal model chosen, we suggest that the members of Celtic Burn are officially considered to a greater extent than with Northern Regional. Of the models discussed we favor the Company Limited by Guarantee.
In order to fulfill the legal requirements, directors will need authority to make and act upon certain decisions. It is still important that Directors do not hold more decision making power than required for this above other community members because of their status.
To make it work we would need:
The stepping forward of new directors. Minimum of 3, preferably 5 (odd number for split voting).
A written definition of director responsibilities:- File financial accounts with HMRC and Companies House
An easily accessible constitution. This could be amended from our previous one.
New directors then register our new company with Companies House. New company names welcome.
The community to throw a directors party once a year so that the directors can come and do their accounting work and then be fed, fluffed and appreciated
To make this work well directors need to be organized and on the same page about collective responsibilities. They need to schedule dates to work together on responsibilities. It can be a thankless job so the whole community needs to be aware of and support the work that they do.
Proposed next steps:We propose that voluntary directors (and any other interested parties) form a Working Group and take forward the concluded decision of this AP, write a constitution and open a legal entity and bank account for CB25. This AP does not represent a competence to go to Companies House tomorrow and register a new organization. To get to that stage we need transparent community understanding of what our specific organization looks like. New directors to step forward and complete the above steps. CB is scheduled to happen in 6 months. We believe that we have this long to form a new appropriate legal entity. It may be that expediency calls for parts of this be temporary for the 2025 burn (e.g. new bank account) and revisited regarding the longer term.
Carl Fri 15 Nov 2024 5:30PM
I would think of all the options CLG is the most appropriate. CIC is almost certainly more work than necessary particularly since we are talking about relatively small amounts of money. And a PLC is not appropriate at this scale
Isabelle Fri 15 Nov 2024 6:26PM
I'm not an expert in the differences between the legal systems, so I definitely don't have a strong technical/legal opinion here!
I understand that being a company is the default world way of dealing with liability (and I accept that that's what you, the AP holders, are proposing because after all, we still exist inside the default world ^^)...
But I'd like to also understand a little more about how we would need to be organised as a proper membership organisation as an alternative way of responding to the same liability question. I'm not thinking of just being "members of the Scottish Burners community" like we are at the moment. But an organisation with formal memberships, which provides services to its members, not to the general public. So there would not be this separation between "those who would sue" and "those who put an event who would be held responsible", but all members would be on a level? (besides, obviously having insurance cover that I accept as a reasonable level of default-world-ness and peace of mind!)
I feel that this would engender care and responsibility for ourselves and each other in what we do and how we deal with the eventualities of "something going wrong", etc., as well as of course decentralisation - basically embodying something a lot closer to our values.
Just for my curiosity, can someone help me understand why we shouldn't have that kind of set-up, although it looks/feels so nice and congruous and principled? ❤️
Sandy Ryalls Sat 16 Nov 2024 2:05PM
@Isabelle
I hadn't gotten as far as envisioning how this would work exactly but it felt like an opportunity, as you say, for greater connection and ownership.
If we're going to have this legal framework, why not leverage the tools within it to make it more reflective and supportive of us?
Allan Thu 28 Nov 2024 2:32PM
@Isabelle
You say "But an organisation with formal memberships, which provides services to its members, not to the general public. So there would not be this separation between "those who would sue" and "those who put an event who would be held responsible", but all members would be on a level?"
I'm not sure how this would work with UK law.
We could write a constitution which split legal liability among members, but in the event of serious injury leading to a court case (several millions for Public Liability awards in UK is standard) I'd expect serious problems in paying any liabilities we have to & ongoing legal and administrative hassles. Celtic Burn might have to pursue its members for money or pass the right to do so to a third party, and we'd probably fold as an org anyway. So I don't think in practise it'd be an improvement, in that scenario.
It might be possible to do, but it'd discourage people from becoming (actual legal members) if they had a potential obligation to pay a share in any liability incurred by Celtic Burn.
Sandy Ryalls Sat 16 Nov 2024 6:37PM
One thing we really need is prospective directors. And ideally a wider working group of a few people to get this done. So please do indicate if you would be up for being part of that.
Gareth Sat 16 Nov 2024 8:05PM
Look there's a lot of reading needed before I can comment on the nitty-gritty. But I'm certainly more than happy to function as a director for whatever structure we go with. (That is, assuming most demands are of an annual nature: I'm the kind of kid who has his tax return in on April 6th every year religiously, but might not answer emails for a month.)
Sandy Ryalls Sun 17 Nov 2024 3:42PM
@Gareth My understanding is that most of the responsibilities are of an annual nature. @Sam Lee - Can you confirm
Allan Tue 3 Dec 2024 11:31AM
@Sandy Ryalls @Gareth I can only speak for Nest where we have a Directors meeting each month: dealing with getting people in post, managing any communications, reviewing finances, pre-event planning, site issues, event wrap-up.
Celtic Burn isn't an official BM event, so Directors of CB won't have that workload. Also CB structures and manages itself a little differently, so may not need directors to deal with some of the same things.
It is important to stress that it isn't just a job of filing the accounts on time once a year, directors have an ongoing legal responsibility for the management of the company & it's events. The attached docs are good but anyone considering being a director should be clear about what they're getting into & what's involved.
It'd also be useful for any potential directors to have a conversation & plan out (before filling the docs) what the workload will be, when things need done, what the expectations and requirements will be from them, etc. This should help manage expectations & ensure that everything needed to be done can be done without people feeling they've got in too deep & resigning after a year.
Sandy Ryalls Thu 21 Nov 2024 1:44PM
Just a wee note that Guy(Sean) has also expressed an interest in being a direct
Jakub Hajko · Thu 14 Nov 2024 10:48PM
Thank you for putting this together. I've had a look at CIC vs CLG differences because I didn't have much knowledge about either (too foreign to know that from school). The two of them seem like the best fit for us.
The articles I've found put some focus on profits and profit/money-making abilities of the company. I'm not entirely clear on how this relates to us - do membership fees form the "revenue" of the company and what's left over after site, dreams, insurance (?) would be the profit? Do we not make any reportable profit at all? Is this a completely tangential and irrelevant question at this stage?
CIC to me seems the morally/ethically better option but I appreciate the increased admin burden of it. On the other hand, I feel that CLG is better known by people meaning we could potentially get better support and ideas not only from professionals but also from friends. Both do offer a level of protection to individuals which is good. The biggest difference in my view is how they handle money, which might not be hugely relevant to us.
I found this article helpful.
Based on my brief research and understanding I agree with the proposal for CLG and would be happy to help, whether as a director, secretary or other function.