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‘Model’ Memorandum and Articles of Association

developed for use in forming a ‘Community Body’ as defined by Part 2 of the Land Reform (Scotland) Act 2003 and prepared for Highlands and Islands Enterprise by Colin Liddell WS of J. & H. Mitchell, W.S. of Pitlochry
Click here to download Word (RTF) doc file of basic text for suggested Model Memorandum and Articles of Association ready for adaptation - if it does not download but shows on-screen, save the page to your disk and then open it with Word or other RTF editor/ Viewer.
NB PLEASE DOWNLOAD THE ABOVE FILE WHEN PREPARING ACTUAL DOCUMENTS
 

CONTENTS

page
 Warning1
1. Points to consider before using the Model2
2. What to do once the Model has been finalised3
3. Notes 6
4. Useful contacts 6
5. Section 34 and 35 of the Land Reform (Scotland) Act 20037
6. with explanatory notes8
(page numbers of original document are shortcuts)
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WARNING

  • Please read the Model carefully and adjust the template only where necessary to suit your own needs. Phrases which are underlined in the Model will require your input. Please remember that deletion of clauses may require consequential renumbering both of subsequent clauses and of textual references to clause numbers.
  • In this Note, the Land Reform (Scotland) Act 2003 is referred to as "the Land Reform Act". This can be viewed in full at:
    www.scotland-legislation.hmso.gov.uk/legislation/scotland/acts2003/20030002.htm
  • This Model has been prepared to assist in the formation of a community body under Part 2 of the Land Reform Act. There are significant differences in the way a crofting community body should be formed under Part 3 of the Act. A further model to suit crofting community bodies is being developed. Contact the Scottish Executive Environment and Rural Affairs Department (SEERAD) - address below - for further information and guidance.
  • The Model has been seen and approved in principle in its current form by:
    1. Highlands and Islands Enterprise Community Land Unit;
    2. the Scottish Executive Environment and Rural Affairs Department (with regard to Part 2 of the Land Reform (Scotland) Act 2003);
    3. the Registrar of Companies (with regard to the provisions of a guarantee company); and
    Approval by these organisations will not necessarily remain if you make changes to the Model.
  • Whilst HMRC Charities also approved the Model, with regard to recognition of a ‘Community Body’ as a Scottish charity, they ceased to be responsible for the recognition of Scottish charities with effect from 31 March 2006. Responsibility for the registration of new Scottish charities, and the reorganisation of existing Scottish charities now rests with the Office of the Scottish Charities Regulator (OSCR). As yet, OSCR has not had an opportunity to consider or approve the Model.
  • Whilst great care has been taken in preparing this Model, neither Highland and Islands Enterprise, nor SEERAD, nor J. & H. Mitchell W.S. accept any responsibility from consequences of any kind arising from its use. The Model is not intended as a substitute for legal advice, but it intended to make the legal process simpler for all concerned and therefore cheaper for you. You are strongly recommended to take expert legal advice by instructing a Scottish solicitor to assist you in using this Model to fast-track the setting up of your company.
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1. Points to consider before using the model

Before starting, you will find it very helpful (if not essential) to read and follow the Scottish Executive’s Guidance on the ‘Community Right To Buy’, available from SEERAD (address below) or online at . It is expected that your local community will play an active part in deciding upon and developing the Memorandum and Articles, using this model as a guide. The main points requiring input are:

1.1. The geographical definition of your community. For the purpose of the Land Reform Act, this should be defined by specific postcode unit(s), to insert in Clause 3 of the Memorandum. A postcode unit is "PH16 5BU" (as opposed to a postcode area which would be "PH16" or "PH16 5"). However, where all the units in a particular postcode area form part of the community boundary, it would be possible to define the area by stating "...comprising all of the postcode units in postcode area PH16".
1.2. The name of your company. This may be based on the community’s geographical, historic or generic name (to insert on the front cover and in Clause 1 of the Memorandum).
1.3. Whether your company is to be a charity. The Land Reform Act makes no stipulation on whether a community body should be a charity or not. If you consider that charitable status is advantageous and appropriate for your proposals you can apply to OSCR (see below) for your company to be registered as a Scottish charity. Further details can be obtained from fact sheets available at:
www.hmitchell.co.uk
oscr.org.uk
www.scvo.org.uk/information/law/organisations
1.4. That the objects in Clause 3 of the Memorandum reflect accurately what your company intends to do. The objects in the Model have been drafted to comply with Charity Law as applied up to 31 March 2006. The advent of the Charities and Trustee Investment (Scotland) Act 2005 (from 1 April 2006) means that consideration must now be given to the Charity Test within sections 7 and 8 of that Act. Clause 3 has been drafted prior to the Act’s coming into force and will in due course be re-drafted to take account of the new list of Charitable Purposes in section 7(2) of that Act.
1.5. That Clause 3 has therefore been drafted before the advent of the Charities and Trustee Investment (Scotland) Act 2005. Clause 3 will apply to all companies. If you wish to obtain charitable status, you should select the appropriate version of Clause 3.1 (i.e. type 1, type 2 or type 3) that is relevant to your company’s intended activities. If your company is to be involved in the rural regeneration activities under Clause 3.1 type 3, appropriate selections from activities (a) to (k) should be made. If your company will be involved in both environmental and recreational activities you can select Clause 3.1 type 1 and type 2. Clause 3.2 should not be used on its own without any of the Clause 3.1 options. If in doubt advice can be obtained either from your solicitor or from OSCR. If you do not wish to obtain charitable status, the objects clause as drafted may still be appropriate for your company, but could be made more flexible.
1.6 That your company, whether to be a charity or not, must meet the requirements of Section 34(4) of the Land Reform Act, which states that "the main purpose of the [community] body is consistent with furthering the achievement of sustainable development". One definition of ‘Sustainable Development’, acceptable to SEERAD and IR Charities (and hopefully to OSCR also), is that it means "development which meets the needs of the present without compromising the ability of future generations to meet their own needs." This is the definition used in Clause 3.1 of the model to meet this requirement of the Land Reform Act.
1.7. The members who are to be entitled to vote. It is necessary to bear in mind that Section 34(1)(d) of the Land Reform Act states that "the majority of the members of the company is to consist of members of the community" and that Section 34(1)(e) states that "the members of the company who consist of members of the community have control of the company". In the model only members of the community are eligible to become ordinary oembers (Article 7.1) and only ordinary members have voting rights at general meetings (Article 23). This ensures that members of the community are always in control of the company at general meetings of members. Associate members and junior members have the right to attend general meetings of members but have no vote and cannot outnumber ordinary members (Article 8.2). It is possible to extend voting rights to other members (who are not members of the community) but, if you wish to do this, additional provisions would need to be included to ensure that members of the community aged 18 and over are always in the majority and retain control of the company. You should therefore seek legal advice if you wish to extend voting rights in this way.
1.8. The quorum for members’ meetings (to confirm or change in Article 20).
1.9. The maximum number of directors to be elected by the ordinary members (to insert in Articles 31.1 and 32).
1.10. The number of directors (if any) to be appointed and by which outside body or bodies (to insert in Articles 31.2 and 33).
1.11. The maximum number of directors to be co-opted (to insert in Articles 31.3 and 34).
1.12. The maximum number of directors overall (to insert in Article 28).
1.13. The quorum for directors’ meetings (to confirm or change in Article 42).
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2. What to do once the Model has been finalised

2.1. Submit your draft Memorandum and Articles to SEERAD for their approval before submitting your application to Register an Interest in land, quoting Reference "HIE Model Community Body version 0105". This enables you to comply with Section 34(4) of the Land Reform Act by demonstrating that Scottish Ministers have given their confirmation. If you have made amendments to the Model you should point these out, or colour-highlight them or otherwise list them in your covering letter in order to assist SEERAD in dealing promptly with your application.
2.2. If you are intending to obtain charitable status for your company, submit your draft Memorandum and Articles to OSCR for their informal approval as soon as you can, stating that this is a new application based on the Model as agreed with IR Charities under Reference "CR58123 [MODEL]". If you have made amendments to the model you should point these out, or colour-highlight them or otherwise list them in your covering letter in order to assist OSCR in dealing promptly with your application.

You should look at the OSCR website for helpful guidance and details of how to obtain an Application Pack and what information needs to be included. Your application to OSCR should be accompanied by details of your proposed charity’s activities. This should include any literature that explains what its work will be and your business plan. IR Charities will wish to be satisfied not only that the Objects are charitable in law but also that the proposed activities relate solely to the stated Objects.

Although your company may be set up with the intention that it caters for a number of potential community projects, it is likely that some companies will be formed with the sole intention, initially, of registering an interest in land under the Land Reform Act. If so, it probably would not be appropriate for any such company to be registered as a charity from the outset, but only once it commences active operation. This is because charities under the Charities and Trustee Investment (Scotland) Act 2005 have to provide Public Benefit. The provision of Public benefit means that a charity must be carrying on activities which are charitable. It is likely that a charity which is set up solely to register an interest in land, but then does nothing else (unless or until it is able to consider purchasing the registered land) will not be carrying out sufficient activity to provide Public Benefit in the meantime (although it will doubtless be able to demonstrate this once it is given an opportunity to provceed with a purchase of registered land). It would still be prudent to set up the company so that it is capable of becoming registered as a charity at a later date. The draft Memorandum and Articles can still be sent to OSCR for informal approval clearly stating this is not an aplication for charitable status but that a formal request will follow at a later date. This should enable IR Charities to give informal approval subject to seeing supporting documentation and a business plan.

2.3. If you want your company to be registered as a charity (whether immediately or at a later date), you should not proceed to incorporate the company until you have heard from OSCR and they have given you their informal approval. If you are not seeking recognition for your company as a charity, you may proceed to incorporation once the draft Memorandum and Articles have been finalised.
2.4. Decide or elect who will be the first Directors to form the Interim Board (Article 29 refers).
2.5. Obtain the following personal information from each of the first Directors:
  1. title, full forenames and surname
  2. any previous forenames
  3. any previous surnames
  4. any degrees and honours
  5. current home postal address, including postcode
  6. date of birth
  7. nationality
  8. other current UK company directorships
  9. other UK company directorships held in the last 5 years but no longer current.
2.6. Select the Company Secretary and obtain the same personal information (as in 5 above) from him or her.
2.7. Decide where the Registered Office is to be (usually the address of the Company Secretary or the place from which your company intends to operate).
2.8. Decide which of the first directors will be the Subscribers (who sign - literally "subscribe"- the Incorporation Papers - see 9 below). Not all the first directors need to be Subscribers, but at least three of them do.
2.9. Prepare the Incorporation Papers. These comprise: (a) the final version of the Memorandum and Articles, once approved by IR Charities (where relevant) - with the names and addresses of the Subscribers added in the page following each of the Memorandum and the Articles - to be signed by the Subscribers on both those pages in the presence of a witness (anyone over 16) who also signs and includes the date of signing and his or her full names, occupation and address in the spaces provided; (b) Form 10, which details the Registered Office, the Company Secretary and the Subscribers - to be signed by the Company Secretary and the Subscribers; (c) Form 12, which confirms that the statutory requirements of setting up the company have been followed - to be signed by a Subscriber or by the solicitor acting for your company, in the presence of a Notary Public or Justice of the Peace; (d) Form 30(5)(a), which is necessary where the name of the company does not include the word "Limited" (which for a guarantee company it does not need to do) - to be signed by a Subscriber or by the solicitor acting for your company, in the presence of a Notary Public or Justice of the Peace.
2.10. Incorporate the company, by sending the Incorporation Papers to the Registrar of Companies with the incorporation fee (currently £20). The Registrar of Companies should issue a Certificate of Incorporation within approximately 7 days.
2.11. Where relevant, obtain formal registration as a Scottish charity, after incorporation, by sending the following to OSCR;
  1. a certified copy of the Memorandum and Articles;
  2. a photocopy of the Certificate of Incorporation; and
  3. the completed forms which OSCR supplied with their informal approval:
OSCR should confirm registration as a new charity and will issue various details relating to tax relief and the taxation of charities. You cannot call the company a charity until you hear formally from the OSCR.
2.12. Prepare your letterhead where relevant, (after the Lettercompany has been registered as a charity). In this respect please note the following:
  1. where charitable status has been obtained, on all stationery (letters, notices, cheques, invoices etc.) and on the website, you must state that the company is a Scottish charity and, optionally, include the Scottish Charity Number;
  2. on the main letterhead, you must state that your company is "a company limited by guarantee and without a share capital", quote the company number (which begins with the letters SC followed by a different set of six digits) and add the Registered Office address (if the Registered Office is separate from the business address of the charity, it is quite in order to include this in small print say at the bottom of the page, so as to avoid confusion);
  3. if the name of any Director is to be printed (for example the name of the Chairman), then it is a legal requirement that the names of all the Directors must be printed (so it is probably better to avoid naming any of them as they will be subject to change at least annually);
  4. if the company is registered for VAT, it is optional to include its VAT number on its stationery, although it must be stated on its estimates and invoices.
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3. Notes

3.1. If in doubt, please consult your own solicitor.
3.2. IR Charities is to be replaced by and incorporated into the Office of the Scottish Charity Regulator (OSCR) when the Charities and Trustee Investment (Scotland) Bill is enacted - anticipated to be by summer 2006 - when the Model and this Introduction will be updated.
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4. Useful Contacts

 Highlands and Islands Enterprise, Cowan House, Inverness Business Park, Inverness IV2 7GF, Tel: 01463 234 171.
 IR Charities, Meldrum House, 15 Drumsheugh Gardens, Edinburgh EH3 7UL, Helpline 0845 302 0203.
 Office of the Scottish Charity Regulator, Argyll House, Marketgait, Dundee DD1 1QP, Helpline 0131 777 4040.
 Registrar of Companies, Companies House, 37 Castle Terrace, Edinburgh EH1 2EB, Contact Centre 0870 333 3636.
 The Scottish Council for Voluntary Organisations, The Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB, Tel 0131-556 3882.
 Scottish Executive Environment and Rural Affairs Department, Land Reform Branch - Area 1D, Pentland House, 47 Robb’s Loan, Edinburgh EH14 1TY, Tel. 0131-244 6003.
 Scottish Land Fund, Taigh Fearna, Auchtertyre, Balmacara, Kyle IV40 8EG, Tel. 01520 722 988.
 J. & H. Mitchell W.S., 51 Atholl Road, Pitlochry, Perthshire PH16 5BU
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5. Section 34 and 35 of the Land Reform (Scotland) Act 2003

34

Community bodies

  1. A community body is, subject to subsection (4) below, a company limited by guarantee the memorandum and articles of association of which include the following-
    1. a definition of the community to which the company relates;
    2. provision enabling the company to exercise the right to buy land under this Part of this Act;
    3. provision that the company must have not fewer than 20 members;
    4. provision that the majority of the members of the company is to consist of members of the community;
    5. provision whereby the members of the company who consist of members of the community have control of the company;
    6. provision ensuring proper arrangements for the financial management of the company and the auditing of its accounts;
    7. provision that any surplus funds or assets of the company are to be applied for the benefit of the community; and
    8. provision that, on the winding up of the company and after satisfaction of its liabilities, its property (including any land acquired by it under this Part of this Act) passes-
      1. to such other community body or crofting community body as may be approved by Ministers; or
      2. if no other community body or crofting community body is so approved, to Ministers or to such charity as Ministers may direct.
  1. Ministers may, if they think it in the public interest to do so, disapply the requirement specified in subsection (1)(c) above in relation to any body they may specify.
  2. In subsection (1) above, "company limited by guarantee" has the same meaning as in section 1(2)(b) of the Companies Act 1985 (c.6).
  3. A body is not a community body unless Ministers have given it written confirmation that they are satisfied that the main purpose of the body is consistent with furthering the achievement of sustainable development.
  4. Unless Ministers otherwise direct, a community-
    1. shall be defined for the purposes of subsection (1)(a) above by reference to a postcode unit or postcode units; and
    2. shall comprise the persons from time to time-
      1. resident in that postcode unit or in one of those postcode units; and
      2. entitled to vote, at a local government election, in a polling district which includes that postcode unit or those postcode units (or part of it or them).
    3. In subsection (5) above, "postcode unit" means an area in relation to which a single postcode is used to facilitate the identification of postal service delivery points within the area.
    4. The memorandum and articles of a company which is a community body may, notwithstanding the generality of paragraph (h) of subsection (1) above, provide that its property may, in the circumstances mentioned in that paragraph, pass to another person only if that person is a charity.
    5. In this section, "charity" means a body which is entitled, by virtue of section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 (c.40), to describe itself as "a Scottish charity".

35

Provisions supplementary to Section 34

  1. A community body which has registered a community interest in or bought land under this Part of this Act shall not, for as long as-
    1. the interest remains registered; or, as the case may be,
    2. the land remains in its ownership,
    modify its memorandum or articles of association without Ministers' consent in writing.
  2. If Ministers are satisfied that a body which has registered a community interest is no longer a community body, they may direct the Keeper to delete that interest from the Register.
  3. If Ministers are satisfied that a body which has, under this Part of this Act, bought land would, had it not so bought that land, no longer be entitled to do so, they may acquire the land compulsorily.
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 Browse the 'Model' Memorandum and Articles

LATEST VERSIONS: Click here to download Word (RTF) doc file of Fact Sheet and annotated Model Memorandum and Articles of Association.   Click here to download Word (RTF) doc file of basic text for suggested Model Memorandum and Articles of Association ready for adaptation
NB PLEASE DOWNLOAD THE ABOVE FILES WHEN PREPARING ACTUAL DOCUMENTS
Prepared by Colin Liddell
Accredited by the Law Society of Scotland
as a specialist in Charity Law

Although carefully prepared, this Fact Sheet is a guide only. Specific and specialist legal advice should be requested on individual situations, including the precise content of any charitable constitution, Code of Conduct and Register of Interests.

2005/1 edition
J. & H. Mitchell, W.S.
51 Atholl Road Pitlochry PH16 5BU
 
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Copyright © 2004 J & H Mitchell