A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support − open events to show off the organisation’s work to members of the public − networking for local groups in the area − consultation or planning events, workshops and seminars to get feedback on development plans − community fun days − business launch events and celebrations of key successes, which can help to create valuable links with local authority representatives, fellow traders, business leaders and enterprise development staff etc. Recruiting directors: This is a perennial challenge for the sector as a whole. • Ongoing efforts: All the members of the board need to be perpetually on the lookout for potential new directors to strengthen the team. It can be a good idea to have board recruitment as a regular agenda item for meetings. • Skills audits: An informal skills audit among board members can help to illuminate strengths and weaknesses and focus more directly on the type of people you need to recruit. • User involvement: Enterprises which do not have a clear community focus may need to consider ongoing efforts to recruit directors who are users of their services (though Charity Commission rules that directors do not personally benefit financially must be adhered to). • A proper job: You will not retain directors if their role is to rubber stamp the decisions of the manager or the chair. • An understandable job: Third sector trading is a weird world for people who only know the worlds of conventional trading or charity work. Induction and support at the recruitment stage is crucial. • Making up losses: It is disheartening to lose directors, and some organisations tend to give up recruiting if directors keep leaving. But some level of turnover is inevitable, and trading for community benefit is not attractive to everyone. So it is always worth persevering. Community investments: Giving local residents a financial stake in the enterprise may occasionally produce stunning results. See section 5.4 on sales of shares and bonds. 228
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support 8.6 Constraints affecting charities and subsidiaries Charitable status is an advantage to most small-scale trading for community benefit. But some larger organisations with trading subsidiaries choose to avoid charity registration altogether because of the limitations it places on the directors and staff. The greater freedom of a Community Interest Company may suit them. Irritation is perhaps understandable where it is the technical implications of charity law rather than real concerns about protecting the charity’s assets which dictate the restrictions. This section describes the regulations which need to be followed. Responsibilities for monitoring trading subsidiaries Overseeing the trading company: The charity’s trustees must routinely monitor the operation of the trading company to make sure that the charity’s assets are used properly. • They should be prepared to assert the rights of the parent charity as shareholder. • If the trading company was set up to generate income for the charity, its success or otherwise should be watched by the trustees. This means that it is not acceptable to set a trading subsidiary in motion and ignore its performance. • It should take special care if all the charity trustees involved in the monitoring are also directors of the subsidiary. • If the monitoring only gets under way when the subsidiary is in financial difficulties it is already starting too late. The charity as shareholder: The directors of the trading subsidiary are responsible for its management. But the trustees of the charity represent the company’s shareholder, and they must take some other major decisions on behalf of the parent charity, including: • the appointment and/or removal of the directors of the trading subsidiary 229
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A guide to third sector trading - WCVA

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