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The future legal structure of WACC UK

A proposal to convert to a Charitable Incorporated Organisation

1. Background
1.1 In 2006 WACC was registered as a Not-for-profit corporation in Canada. In 2009 the Canada
Notforprofit Corporations Act (NFP Act) established a new set of rules for federally incorporated
notforprofit corporations in Canada.
1.2 All existing federally incorporated notforprofit corporations had to take action to make the
transition to the NFP Act. WACC, therefore, had to replace its previous governing documents by
filing new Bylaws in order to obtain a Certificate of Continuance.
1.3 Notforprot corporations had to make this transition by October 17, 2014.

2. Extraordinary General Meeting


2.1 On 18 March 2014 the President, Dr Dennis A. Smith, an Extraordinary General Meeting of
Corporate Members and Personal Members voting separately passed a Special Resolution that:

The Directors of the Corporation are hereby authorized and directed to make an
application under section 297 of the CNCA to the Director for a Certificate of
Continuance of the Corporation;

The Articles of Continuance (transition) of the Corporation, which have been


submitted to this meeting and are annexed to these minutes as Schedule A, are
hereby approved;

The Bylaws of the Corporation (as amended) are repealed and the new General
Operating By-law No. 1, which has been submitted to this meeting and is annexed to
these minutes as Schedule B, is approved and will be effective on the date that the
corporation continues under the CNCA; and

Any one of the Officers and Directors of the Corporation is authorized to take all such
actions and execute and deliver all such documentation, including the annexed
Articles of Continuance (transition), the notice of registered office and of directors in
the forms fixed by the Director, which are necessary or desirable for the
implementation of this resolution.

2.2 In view of both Corporate and Personal Members voting separately having approved the
Resolution by at least two thirds (2/3) of the votes in both instances, the President declared the
Resolution carried.

3. Impact on WACC UK
3.1 The new Constitution of WACC Canada did not alter or replace the Constitution of WACC
UK. However, it brought to the attention of the Board of Directors the matter of the ongoing legal
relationship of WACC UK to WACC Canada and it raised the question whether the current status
of WACC UK as a registered charity and a company limited by guarantee still best served the
organisation in the context of changes that had taken place in recent decades. In addition, it was
noted that with WACC Canada taking the lead in the global movement of communicators that
began with WACC UK in 1968, there was now an opportunity to align the two organisations and
to reconstitute WACC UK as a Charitable Incorporated Organisation (CIO), which might better
serve new realities.
3.2 At the present time WACC-UK is both a Registered Charity (number 296073) and a
Company registered in England and Wales (number 2082273). In the UK, charities exist to
benefit the public, not specific individuals. Because of this, charities pay reduced business rates
and receive tax breaks, but are restricted in what they can do and how they can work. WACC
UKs current public benefit status is for: The advancement of the Christian faith throughout the
world by all means of communication.
3.3 In the UK WACC is also a Company Limited by Guarantee and Not Having a Share Capital.
All limited companies in England, Wales, Northern Ireland and Scotland are registered at
Companies House (an Executive Agency of the Department for Business, Innovation and Skills).
The main functions of Companies House are to incorporate and dissolve limited companies;
examine and store company information delivered under the Companies Act and related
legislation; and make this information available to the public. All companies must prepare
accounts for their members and for filing at Companies House.
3.4 As legislators noted, charities that adopted a limited company structure were subject to a
legal framework that was never intended for charitable organisations producing constant tension
between the regulations that charities had to comply with under the Charities Acts and the
obligations imposed on them by company law.
3.5 These considerations all point to the need to adapt WACC UKs legal framework to the
changing circumstances in which WACC UK operates.

4. Officers meeting 19 May 2014


4.1 With regard to the reorganisation of WACC UK, the matter was discussed in 2014 by the
Officers at their meeting in Manila, Philippines, where the idea of moving to a Charitable
Incorporated Organisation (CIO) was explored. The Officers subsequently passed a Motion that:
If the way be found clear to pending questions, WACC seek the consent of its members
to convert WACC UK into a Charitable Incorporated Organisation by means of an AGM,
EGM, or by way of a written resolution; using the Foundation model and naming the
Officers of WACC Canada as its Trustees; and bring about this transition at the earliest
opportunity before the end of 2014.

5. Vote of the Board of Directors of WACC-UK


5.1 In November 2014 the Board of Directors of WACC UK unanimously approved the following
Motion:
That the Officers take steps to convert WACC UK into a Charitable Incorporated
Organisation by (a) obtaining the consent of Members, and (b) implementing the
necessary legal procedures.

6. The Charitable Incorporated Organisation (CIO)


6.1 The UK 2011 Charities Act introduced a legal structure designed exclusively for registered
charities. The Charitable Incorporated Organisation (CIO) gives the benefits of incorporation to
registered charities within a more attractive legal framework regulated solely by the Charity
Commission.

A CIO is an incorporated body with a constitution and a legal identity that is quite separate
from its trustees or members, but it is not a Company. CIOs come in two types: Foundation
CIOs where the same people are both the trustees and the members; and Association
CIOs which may have a body of members which are quite distinct from the trustees.
The Charity Commission believes that CIOs will have the following advantages over
ordinary charitable companies:
i. Single registration.
ii. Simplified reporting.
iii. Simplified filing.
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iv. Simplified constitution (CIOs are given certain statutory powers which cover a
number of matters which would otherwise have to be spelled out more fully in a
charitable companys constitution.
v. Greater flexibility for CIOs to establish their own governance procedures.
vi. Less punitive.
vii. Clear duties (the regulations governing CIOs set out clear duties for trustees and
members).
However, since CIOs are new, the Charity Commission also flagged possible drawbacks:
i. As CIOs are a new form of legal entity, it will be some time before the law
surrounding them has evolved in the same way as the law governing companies,
trusts and associations.
ii. If charity established as an incorporated company ceases to qualify as a charity for
any reason, this does not mean that it ceases to exist. However, if a CIO stops being
charitable, it will cease to exist and its assets will be distributed to other charities.
iii. Unlike a company, a CIO will have no way to offer a debenture or secured charge
over its assets as a security for any borrowing. This means that if a CIO wishes to
borrow money, the individual trustees may be called upon to give a personal
guarantee.
6.2 The 2011 Charities Act anticipated the possibility of an existing charitable company (i.e.
WACC-UK) applying for conversion to become a CIO. Since a charitable company is already a
corporate body, the process for conversion is relatively straightforward.

One of the first steps will be to develop a new constitution (for which the Charity
Commission has drawn up templates). A CIO constitution will either have a Foundation
format in which the trustees are the same as the members, or an Association format in
which the trustees and members may be different (and where there may be a much
larger body of members).
The regulations governing CIOs prescribe certain conditions (set out in two model
constitutions covering both the Foundation and the Association approach).
Before a charitable company can convert to becoming a CIO, it will normally need to
obtain the consent of its members. Depending on the charitable companys constitution
this may be done by holding an Annual General Meeting (AGM) or an Extraordinary
General Meeting (EGM) at which a resolution is considered by the members to convert
the charity. Alternatively, it could be done by way of a written resolution.
Once the charity has obtained any necessary approval from its members, the charity will
need to complete and file Charity Commission form CC5a Application for Registration
and form CC5c Trustee Declaration, together with a copy of the new constitution and
the resolution passed by the members that the company should be converted to a CIO.
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If the Charity Commission decides that the application for re-registration will be granted,
a provisional registration will be entered into the Register of Charities and the Registrar
of Companies will be notified of the decision.
As soon as the Registrar of Companies cancels the charitable companys registration,
the charity will cease to be a company and will simultaneously become an incorporated
CIO.
A CIO retains the original legal identity of the charity and the same charity number, but
ceases to have a company number.
There is no need to deal with the transfer of assets or liabilities from the charitable
company, as the new CIO will automatically inherit them (which simplifies the process of
conversion).

6.3 With regard to the loss of potential funding within the UK, the Department for International
Development confirmed that where the criteria for DFID funding includes being registered with
the UK Charities Commission, any organisation switching to CIO status and remaining a not for
profit organisation will still be eligible to apply for funding.
6.4 Although CIOs are a new type of legal entity, the tax rules that apply to them are the same as
apply to charities in general. For existing charitable companies limited by guarantee (i.e.
WACC), the process of converting to a CIO should be relatively straightforward. Conversion
should not result in any tax liability in respect of chargeable gains. However, it may be that the
new CIO will have to re-register for VAT.
6.5 All CIOs must submit annual accounts and reports to the Charity Commission. They are also
likely to have to account under a Financial Reporting Standard for Public Benefit Entities

7. Foundation or Association
7.1 The Charity Commission has produced two model constitutions for CIOs:

The Foundation model is for charities whose only voting members will be the charity
trustees;
The Association model is for charities that will have a wider membership, including
voting members other than the charity trustees.

In practice a CIO using the Foundation model will be like an incorporated charitable trust, run by
a small group of people (the charity trustees) who make all key decisions. Charity trustees may
be appointed for an unlimited time and they will probably appoint new charity trustees.
A CIO using the Association model will have a wider voting membership who must make certain
decisions (such as amending the constitution), will usually appoint some or all of the charity
trustees (who will serve for fixed terms), and may be involved in the work of the CIO.
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7.2 In 2006 the Board of WACC UK took the decision to transfer the General Secretariat to
Canada. In that process WACC was incorporating Canada and became a registered charity.
However, WACC continued to be governed by two Boards of Directors (WACC UK and WACC
Canada), which meant a dual process of decision-making and approval of strategic directions
and budgets.
7.3 On 1 October 2012 the Members of WACC UK were formally accepted as de facto Members
of WACC Canada. Under current legislation the Members of WACC Canada elect its Board of
Directors and its Officers. However, since no legal steps had been taken to ratify the situation in
the UK, the Board of Directors of WACC UK continued to be legally responsible for its actions.
7.4 To remedy this situation, and in order to align WACC UK with the policies and directions of
WACC Canada, it is the view of the Board of Directors of WACC UK that the interests of the
Association are best served by converting WACC UK into a Charitable Incorporated
Organisation whose trustees will be the Officers at any given time of WACC Canada. This will
enable WACC UK to maintain its current charitable status, its charitable purpose and to continue
to operate independently and as effectively as possible.

8. Steps to be taken
8.1 In the light of the above:
WACCs Corporate and Personal Members are invited to submit comments on this proposal in
the form of an e-mail or letter addressed to the Officers of WACC UK at KA@waccglobal.org
Pending the outcome of this process of consultation, Corporate and Personal Members will be
invited to approve a Resolution to the effect that:
Legal steps be taken to convert the Association into a Charitable Incorporated
Organisation as a Foundation without changing its current charitable purpose; and that
the Associations Officers be authorised to identify suitable persons to serve as the first
Trustees of the Association after conversion.