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Trust

Corporate status

Unincorporated. (Note that the unincorporated trust is a particular legal form but the word "trust" is also used in a wider context. Thus one may come across an organisation called "XYZ Development Trust" which is, in fact, a limited company and not structured as a trust. In particular, all charities are public trusts and may use the word "trust" in their name, whatever their structure.)

Terminology: governing document

Trust Deed or Deed of Trust

Terminology: governing body

"The trustees" or "the board of trustees".

Management/governance structure

A single-tier structure, with no members other than the trustees (who thus perform the dual roles of governing body and membership).

Membership

The only members are the trustees. Trustees must be individuals or corporate bodies, but in the voluntary and community sectors they are invariably individuals. Strictly there is no minimum membership size, but as most trusts will be registered as charities they will normally have to have at least three trustees to satisfy the Charity Commission.

How the trustees get to be appointed will be laid down in the trust deed. In some cases, trustees are effectively self-perpetuating, with future trustees appointed by the present ones. In other cases, the trust deed will specify organisations or agencies which are entitled to nominate one or more trustees, or detail some other procedure by which trustees are identified ands appointed.

Governing legislation

Not governed by a specific statute (Act of Parliament). There is a body of case law establishing defaults applying to trusts, and some statutes that affect trusts (e.g. the Trustee Act 2000), but the governing document (trust deed) is the main source of regulation.

Charitable status available?

May qualify as a registered charity if it meets the necessary criteria.

Profit distribution permitted?

No - one of the defining characteristics of a trust is that it cannot distribute profits.

Examples of use

The unincorporated trust is the traditional form for an endowed, grant-giving charitable trust. It can also be suitable where there is a specific task to achieve, for example a disaster relief fund that wishes to swiftly raise and disperse funds, and then wind up (such a short-life trust is unlikely to qualify for charitable status).

The trust is not generally recommended for use where there is a significant element of financial risk involved in the activity undertaken.

In the social enterprise sector the trust is not much used, as most social enterprises feature some sort of democratic membership structure. However it is not uncommon for a charitable trust to be appended to a non-charitable social enterprise to carry out charitable aspects of the enterprise's work. In this case the democratic membership participation takes place in the parent organisation, and not in the appended charitable trust.

The other potential use of a charitable trust is as a tax-effective method of distributing surplus profits for social gain.

Participation Issues

As the trust structure does not feature a participating membership, it is rarely the first choice for an organisation that wishes to encourage participation in its own affairs and governance.

Otherwise trusts are free to utilise most of the other common methods of encouraging participation, though not of course profit distribution.

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