Second Anniversary Edition

October 1978 marks the second anniversary of the birth of this column and of Art Monthly itself; it also sees the establishment of Artlaw Services Limited, a non-profit distributing company limited by guarantee, registered as a charity to provide legal services for the arts community.

To celebrate these happy events, it seems entirely appropriate to focus attention this month on the formation of organisations.

Artists are well known for their resourcefulness and independence, yet many have found that working with colleagues can itself be a major resource. There are numerous examples of two or more artists associating for their mutual benefit and for the benefit of other colleagues: to create artworks; to purchase materials; to acquire facilities (housing, studio-/work-/exhibition-space, equipment); to foster and promote professional interests (unions and associations); and to publish news, ideas, information, comment and criticism (magazines and journals).

Some relationships are ‘one-off’ ventures, some are for a fixed period and others are intended to be permanent; many are deliberately loose and open-ended.

Whatever the objects, the length of the project or the numbers involved, the most important consideration is the form the association is to take. It must be created to suit the members’ needs, artistic, legal, managerial and financial. There is no single solution, but there are many possibilities and each has its own characteristics, merits and drawbacks. There are four main ones.

Partnership
Two or more artists working together on a project(s) for mutual gain whereby the partners share profits and losses. There can be a written partnership agreement containing terms and conditions, or the relationship may just occur informally. Where there is no evidence of agreement (written or oral) or where the agreement is silent on any matter, the Partnership Act 1892 imposes standard terms and conditions which the courts will use to settle any disputes. Obviously, a written agreement is best, since it can reflect what the partners want.

A partnership is recognised as a legal body (called a ‘firm’) and can exist or be created to execute any lawful venture, e.g. where two or more artists are co-authors of an artwork. Because such a relationship is private and for mutual gain, a partnership cannot be registered as a charity. Its name can be registered with the Registrar of Business Names and it can have its own bank account. Each partner is legally responsible for the acts and omissions of the whole firm.

Unincorporated Association
Two or more artists sharing mutual interests and aims who agree to abide by certain rules and procedures. (Though the association may be for mutual gain, it may not be intended to make and share profits, and therefore is distinguishable from a partnership.) It may be formed by oral agreement or by members simply acting as associates, or by members signing a memorandum and agreeing to abide by certain rules and procedures, called a ‘constitution’.

Often referred to as a club, society, institution or group, an unincorporated association is recognised as a legal body and, if constituted for purposes beneficial to the public, it can be registered as a charity. Its name can be registered with the Registrar of Business Names and it can have its own bank account. Each member is legally responsible for the acts and omissions of the whole association. (‘Unincorporated’ signifies that the founding members have not constituted the group in the formal manner required by the Companies Acts.)

Registered Company or Corporation
This legal body can only be formed in accordance with the Companies Acts: two or more people must sign a memorandum of association stating their mutual aims and sign articles of association stating the rules and procedures of their ‘company’. These documents are sent with a fee to the Registrar of Companies and, if they comply with the requirements of the Companies Acts, he will register the company and issue a registration certificate which is the ‘Birth certificate’ of the new legal body.

Membership may be open to the public or remain private, and members are legally responsible for its liabilities. However, if the founding members wish to limit the amount of their legal liability, they must state the amount in the memorandum of association and must always state ‘Limited’ or ‘Ltd.’ after using the company’s name.

These formalities ensure that anyone dealing with a ‘limited company’ is immediately alerted and can consult the Registrar of Companies to investigate the company’s objects, rules, names and addresses of Directors and the limit of each member’s financial liability.

There are many types of public and private company, limited and unlimited, some of which are co-operatives, housing associations or friendly societies. If incorporated for purposes beneficial to the community and not for private gain, a company can also be registered as a charity.

Trust
In law, ‘trust’ describes a situation where one or more persons holds something for the use of another or others. It is usually formed by one person, the ‘settlor’, who determines what the objects of the trust are and writes them in a trust deed which ‘vests’ or gives the ‘trustees’ legal ownership of property or money to hold ‘on trust’ for the use of others, the ‘beneficiaries’.

The rules governing the behaviour of the trustees and their relationship with the beneficiaries can be written in the trust deed and, in any event, are regulated by the Trustee Acts. Obviously, it is best for the settlor to execute a trust deed to reflect his/her wishes.

One important feature of a trust is that the trustees cannot also be the beneficiaries – unlike a company or unincorporated association. This can be particularly valuable where the settlor does not want the trustees to have the power to allow the organisation to change or vary its main aims or character. The law guards trust very preciously and impose strict standards of honesty and integrity on trustees to safeguard the interests of the beneficiaries and the wishes of the settlor. (See ‘The Rothko Wrangle’: Art Monthly, No.6 April 1977). Each trustee is legally responsible for the whole trust and, if established for purposes beneficial to the public, a trust can be registered as a charity.

Each of the above forms of organisation can be constituted with power to buy or rent property, receive grants and awards, borrow money, generate and receive income, and to empty staff. Registration as a charity can mean exemption from liability for taxes and rates.

Artists should engage in detailed discussions involving experienced and understanding arts administrators and lawyers in order to select the form most appropriate for the group. The early involvement of such lawyers will ease the burden (and any cost) of their future legal work when called upon to constitute the organisation and, later still, to advise on its maintenance. Getting the form right is crucial; it immediately clears the ground for the group’s aims to be carried out in the right way and helps to avoid problems in the future.

© Henry Lydiate 1978

 

 

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.