Structure for LETS groups - Do we need to incorporate?
This is a brief note, following recent enquiries about the ideal
structure for a LETS from an existing group, which is considering
a proposal from within their membership that they become incorporated,
a structure that is usually used only for businesses. LETS are generally
viewed as membership organisations, which have a charitable rather
than a business purpose. We will be looking into the latest recommendations
of the charity commission, and will add anything of relevance to
Meanwhile, from current knowledge, we would comment that when you
set up a company, need also to report to Companies House twice annually,
once to report the names of your company directors, and another
time to submit your annual accounts. Failure to comply can result
in heavy fines, which can only be avoided by ask to be struck off
the list of companies. The main advantage of company structure is
"limited liability" which means if the company's business
plan fails and money is owed, of if they get sued for whatever reason,
the directors are protected from having their own assets used to
pay what is owed.
Member organisations, by contrast, typically set themselves up
as an "unincorporated association", which means they do
not have to report to anyone except their own members, and any regional
or central organisation they may be affiliated to. The key instrument
for decision-making is the Annual General Meeting, which provides
the opportunity for:
Officers to report back, to be given a mandate to continue
in their roles, and/or to gracefully resign and be replaced by other
willing persons - there may or may not need to be a formal election.
Often members are happy for things to continue as before, but some
organisations recognise that it's healthy to rotate the responsibilities
and may have a rule limiting the length of time that an officer
The accounts to be presented to members. This ensures that
finances don't get out of hand and obviates the need for the committee
members to be protected from bankruptcy. The rules of operation
are set out in the Constitution - for a typical format, see here.
LETS require a great deal of team-work to support the activities
of members. There is usually some form of complaints procedure,
so that if anything goes wrong it can be set to rights. However
the organisers are basically providing contacts and services to
members so that trading may occur, and cannot be held responsible
for the way they behave with each other. The detailed rules of operation,
as far as members are concerned, are set out in a Members Agreement,
which provides guidelines, and usually, one clause in this indemnifies
officers from responsiblity for the actions of members. A typical
wording is Clause 9 in this model Members'
Funding bodies may advise groups to adopt more formal structures
and/or to insure themselves. Like formal structures, revenue funding
can be counter-productive as it may disrupt the balance of the group.
Apart from small sums for project-boosting, most LETS groups do
not need funding for the ongoing work of managing themselves, which
is either done voluntarily, or they may use their own currency to
remunerate the various tasks necessary to run the scheme, which
are described in the LETS info-pack, an updated version of which
is in development..
LLUK/mf - as at 24th January 2014