If you are considering setting up a studio space with a group of artists, you may find it easier if you agree some rules or terms within which you will operate.  These may be informal, but they should be written down. As soon as money is involved, the clearer these rules are the better, so that everyone knows what their role and responsibility is. These rules may take the form of a legal document, or a written constitution, and there are several different formal and legally recognised structures which organisations can adopt as they grow. These include co-operatives, limited companies and trusts. A range of possible structures which a group could work under are set out below, together with some of the pros and cons of that option. If you need more guidance there is a list of organisations at the end of this note that will be able to help you further.

These notes are not a substitute for legal advice. If you intend to enter into a legally binding constitution, you should take professional advice. See our disclaimer for more information.

What a Constitution contains

This is a list of the most common things that are covered in a constitution.

• Name of the group
• Objects of the group, which can be called aims, objectives, or purposes. These are generally a few brief, overall statements.
• Powers - this is a description of how the group may achieve its objectives or purposes.
• Committee - a description of how the management committee is elected or appointed.
• Membership - if the group has a membership, a description of how people can join. NB - if the group is set up for the benefit of members the membership must be available to all those who could reasonably benefit.
• Payment or benefits - if expenses or other costs are made to members or the management committee this should be explained.
• Closing down - a description of what will be done with any surplus funds or assets if the group is wound up; this is sometimes called dissolution.

The Constitution must be signed and dated as agreed and adopted by your committee. Model constitutions, and detailed guidelines for writing them, can be found on the Charity Commission website.

Different group structures

Unincorporated Association
Despite the name, this is actually a legally recognised structure. It usually consists of a management or executive committee and a number of members. The association normally has a constitution, which sets out its aims and objectives and provides the terms of reference which regulate the association's activities. The membership may attend meetings (apart from the Committee meetings). The committee is normally elected during the Annual General Meeting where members are nominated to serve as officers and members of the Committee and members attending the meeting vote on these proposals. The classic example of this kind of group is a local community association where there will be a continuous membership, which represents the community. The members will come together to co-operate on a project but not all the members will want to be involved in the detail of everyday activity and will be happy for the Committee to take over these responsibilities. This structure is ideal where there are no serious contractual obligations (such as leases or full-time employees) for which the management committee members could become liable.

Partnership
At its simplest, a partnership consists of two or more individuals who set up together in a business activity, generally for profit. The partners share profits and losses and are jointly and severally liable for liabilities of the partnership (i.e. they can become personally bankrupt as a result of their partners' activities). It is necessary to have a partnership agreement, although this need not be written. Any partnership applying for Lottery funding will need to show evidence of a written partnership agreement.  Registration and information at Companies House.

Co-operative
This structure was very popular for many of the first community arts groups, which were formed for the benefit of all members, perhaps without a core management team. There are two legal structures for co-operatives, either the Friendly Society, or the Industrial and Provident Society, regulated under different Acts of Parliament. The benefit of a co-operative is that there is some limited liability for those running them, and less rigid rules than the Companies Act requirements. However, they can take some time to set up, and can soon prove inappropriate for more complex businesses. It can be hard to operate if there is no committee or hierarchy of members to take specific responsibilities. If you are planning to set up this form of organisation it is worth thinking carefully about the practical difficulties which might result.

Company
Companies can be constituted in two basic forms - the Company Limited by Shares and the Company Limited by Guarantee. The first of these is the most common for commercial organisations, where any profits can be distributed amongst the members or shareholders who may also take the risk of losing money if the company fails. The Company Limited by Guarantee is the most common solution for not-for-profit organisations, such as arts groups, as the risk to the members is minimised. A Company Limited by Guarantee can also be a charity.   Registration and information at Companies House.

Community Interest Company
Community Interest Companies (CICs) are limited companies with special additional features created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. CICs can be limited by shares, or by guarantee, and will have a statutory 'Asset Lock' to prevent the assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role.  Registration and information at CIC Regulator.

Charity
A charity is an organisation set up for exclusively charitable purposes, which carries out activities to achieve these purposes. A charity must be set up to help the public and not particular individuals.

Charitable purposes can be broken down into these four main categories:

1. the relief of the poor, handicapped and the aged;
2. the advancement of education;
3. the advancement of religion;
4. other charitable purposes which help and benefit the community.

A charity must register with the Charity Commission if:

• it is set up in England or Wales and/or
• the majority of charity trustees live in England or Wales and/or
• the majority of the assets are in England or Wales and/or
• it is a company and is incorporated in England or Wales.

Furthermore, it must be registered if any one or more of the following apply:

• the organisation has permanent endowment (land, buildings, investments or cash which may not be spent by a charity);
• the organisation has total income of more than £1,000 a year;
• the organisation has a rateable occupation of any land, including buildings. This applies even where the local authority has agreed not to charge any rates, or has reduced the rates.

For more information, see the Charity Commission website (through which you can order advice booklets) or contact the Charity Commission. Most charities in England and Wales have to register with the Charity Commission for England and Wales.  The Charity Commission also publishes online documents for trustees and others involved in charity work.

Further information

Arts Council England has published a Model Constitution for Unincorporated Associations and Model memorandum and Articles of Association for charitable arts organisations.  Both are available online free of charge.

Charities Direct is the home of the CaritasData Charities Database, providing regularly updated information on over 10,000 UK charities. Among other information, you can use the site to find charity details or a professional adviser for your existing charity.

ACME Studios can help with studio queries or property disputes around studios.  Contact ACME for more information.

If you are looking for existing studio groups, you may also be interested in our Studios listing on the main Artquest website.

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