Understanding your legal structure

(Supporting principle to Principle 2 of The Code of Good Governance)

Most groups and organisations in the community and voluntary sector describe themselves as community groups, voluntary organisations, or charities. Whilst these are helpful everyday references, these categories do not explain the actual legal structure of an organisation.

What are legal structures?

All organisations have a legal form i.e. how they are defined and established in law. This legal structure is based on how your group or organisation has been formally set up or constituted, and impacts on:

• how your organisation operates;
• what a Management Committee is allowed to do;
• the role and responsibilities of a Management Committee;
• the rules for the organisation (e.g. constitution or governing document); and
• the personal liability of Management Committee members.

In order for a Management Committee to function effectively, it must be familiar with all of these areas.  See checklist for Management Committee members for a self assessment tool to check your level of knowledge about your organisations legal structure.

The most common types of organisations formed within the community and voluntary sector include:

• Association (e.g. community association);
• Trust (e.g grant-making organisation);
• Company limited by guarantee (e.g. charitable company); and
• Industrial and provident society (e.g. community business).

These groups each fit within an overarching legal structure that divides organisations into two categories:

• those that are unincorporated (i.e. association; trust); and
• those that are incorporated (i.e. company limited by guarantee; industrial and provident society).

This distinction is significant particularly because it determines the personal liabilities taken on by individual Management Committee members. (These terms are covered in more detail in the section Legal Terms Explained.)

Organisations whether incorporated or unincorporated, may also be charities. Whilst being charitable is different from your legal structure, it restricts some activities under law, but brings a range of benefits such as tax exemptions. 

More on charities
Legal terms explained
How do legal structures affect personal liability?
Choosing a legal structure

Legislative changes

Under the Charities Act (Northern Ireland) 2008, a Charity Commission for Northern Ireland was established in June 2009. This Commission is a Non-Departmental Public Body sponsored by the Department for Social Development and will be responsible for the regulation of charities in Northern Ireland and for promoting best practice in the management and governance of the charitable sector.  The Act also provides for the establishment of a register of charities in Northern Ireland.

For more information and details of recent developments, go to Changes to Charity Law.  The temporary website for the new Commisssion can be found by clicking here where more information on the Act, the Commission and the timetable for implementation are available.