Standards of Governance for Charities in Anguilla[1]
When
we are examining the rules for the governance of a charitable entity in Anguilla,
we look at two things.
The first is the legal rules that govern the
charitable entity. The second consists
of internationally recognised standards that are not found in any Act or law.
In Anguilla, charitable entities are usually
created in one of two ways. The first is
by registration as a not for profit company under the Companies Act. The second is by registration under the Friendly
Societies Act.
Registration under the Companies Act
may be briefly described as the rich man’s incorporation. Registration under the Friendly Societies
Act may be called as the poor man’s incorporation. They are both of ancient lineage. Companies go back hundreds of years. friendly societies are more modern, having
been made possible by a law in the Leeward Islands passed only in the 1920s.
The legal rules of a charitable institution may
be found in two places. The first is in
the company’s constitution or by-laws. The
second is in the enabling statute, eg, the Companies Act and Regulations
or the Friendly Societies Act and Regulations, whichever is
relevant.
1. Companies Act: The Act permits a not-for-profit company to be
incorporated either as a private or a public company. It is not necessary to go into all the law and
regulations that govern such a company, since the Board of directors of any
such company will ensure that it recruits an attorney at law, preferably on a pro-bono
basis, to sit attend board meetings and annual general meetings, and to advise
on compliance with the law and the regulations. This is important as the regulation and
governance of a company is not to be left to chance. There are many attorneys at law in Anguilla
who would welcome being invited to participate, as if there is one thing that
an attorney can contribute to any voluntary, charitable project, is his or her
learning and experience at the law.
Why would one want to incorporate a not for
profit company in Anguilla? In Europe or
in America, one of the principal reasons has to do with income tax. Companies in those countries pay income tax on
their income, and there may be other types of tax applicable. A registered charity, on the other hand, is
exempt from tax. Company tax can be
quite oppressive, and if a company is dedicated to charitable purposes, it
makes sense to incorporate as either a not for profit company or some other
recognised charitable corporation such as registration as a friendly society,
which is similarly exempt from income tax. This does not make any sense in Anguilla,
since no person or company pays tax of any kind on any income. The Anguilla government derives all its income
from duties, licences, and other forms of ‘indirect taxation’.
Another reason has to do with the advantages
of limited liability conferred by incorporation. A club that is not incorporated leaves its
members and officers open to legal action if the club does anything to cause
damage or injury to someone. Incorporation protects the members, officers
and donors to the entity. That is why
incorporation is one of the requirements of international funding agencies when
a charity solicits funding. An overseas
agency that gives money to an Anguillian charity will be concerned that if the
Anguillian charity commits a tort or wrong that causes the charity to be sued
by someone who has been damaged or injured, the claimant will want to add to
the claim any overseas agency that has funded the activity that gave rise to
the alleged damage. The members, directors
and funders of a company, friendly society, or other institution possessing
limited liability, are not responsible for the wrongs of the company of which
they are members. By injecting a limited
liability entity between the funding agency and the charitable company, a
degree of comfort and security is provided to the funding agency. One will frequently find that funding agencies
will not contribute to the programmes of charitable groups that they want to
support unless and until they incorporate themselves. Either a company or a
friendly society will do, although registration as a friendly society is not
strictly a form of incorporation.
Unlike in the UK and the USA, the regulation
of a charitable company is minimal, unless it is registered as a public
company. The Attorney-General is at
common law the ‘public trustee’ with oversight of registered charities, whether
companies or not. However, as there is
no income tax in Anguilla, there has never been any need nor any call for
charitable institutions to be registered with the Attorney-General, or with
anybody else for that matter. That means
that charities are essentially unregulated in Anguilla, which is not a good
thing, as it can lead to abuse that may not be discovered until several years
of wrongdoing have passed.
One of the reasons for the lax attitude of
the Companies Act and the authorities to the management of charitable
companies in Anguilla is the underlying philosophy of the Act. The Act places a heavy burden on “registered
agents” to ensure that the companies they represent comply with the law and the
regulations. If they are careless and
permit ‘their’ companies to act in breach of the law, they can incur heavy
penalties including loss of their registration as a ‘company agent”. Since there are no special regulations
governing charitable companies, company agents that are not an attorney at law
or a certified accountant, will not be able to assist a charitable company, or
friendly society for that matter, to comply with the general law and standards
with which charitable institutions are expected to comply.
The exception is the case of a charity
registered as a public company. In such a case, the charity is required, as
with all public companies, to have its accounts audited annually and filed at
with the Registrar of Companies.
2. Companies Regulations: Here are found the model by-laws and other
forms that are required for incorporating and reporting annually on a not for
profit company. The model by-laws are
generally followed, with minimal alteration to take account of any particular
characteristics of the charitable institution. The fees for incorporation and the annual fees
for maintaining the company ‘in good standing’ are set out in the Regulations. Only an attorney or other company formation
agent can file the forms that apply, no self-help is permitted for the creation
of a charitable company in Anguilla.
3. Friendly Societies Act: Friendly societies may be considered more
user-friendly than companies in Anguilla. Historically they were used as vehicles for
mutual association for insurance, pensions or savings, and loan-like purposes. They were initially created for people to come
together for ceremonial and friendship purposes, or for common financial or
social purposes. Before modern insurance
and the welfare state, friendly societies provided financial and social
services to individuals. Today, under
our Act, they serve a much wider charitable purpose. According to section 5(b) of the Act, a
friendly society may be formed for any benevolent or charitable purpose.
The requirements for establishing a friendly
society are quite simple and inexpensive in comparison to those that apply to
companies. They can be registered
without the intervention of a company formation agent. It is still important, as with a company, to
have an attorney at law be invited to serve pro bono on the board and to
attend general meetings to ensure that nothing is done to bring the Society
into conflict with the law. The
registration fee for a friendly society is EC$6.20 in comparison with the
registration fee of EC$1,500.00 and an annual fee of EC$1,500.00 if it is a
public company. If it is a private
company, registration costs are EC$800.00, and annual filing
costs are EC$750.00.
One further saving that can be made by using
a friendly society rather than a company is that in Anguilla every company is
required to make electronic filings through the agency of a company formation
agent. Each company is required to have
such a registered agent act as the registered office of the company, and there
maintain the corporate books and records. This service is usually provided at an annual
fee, though there are many attorneys at law and certified accountants who
willingly provide such services at no cost. A friendly society, by contrast, is permitted
by law to have its registered office at any address, which need not be at a
professional, cost-carrying agent.
Friendly societies are subject to better
monitoring in Anguilla than are other charities registered as private
companies. In the case of a friendly society,
the law requires that its accounts be audited by a person approved by the
Governor [in effect, by the Financial Services Commission], and the Auditor is
required to send the audited accounts to the Registrar of Friendly Societies [the
Financial Services Commission] within two months. There is no auditing requirement for private
companies, whether charitable or not.
In addition to the annual filing by the
Auditor, each friendly society is required to file with the Registrar a return
showing the number of members on its roll, the amount of money deposited in
banks, the amount of money invested in real security, and the amount of money
in the Treasurer’s hands.
Additionally, each year, between January and
March, each friendly society is required to send the Registrar an Annual Return
setting out certain financial information. Additionally, after any meeting at which there
have been elections resulting in changes to the officers, a list must be sent
to the Registrar.
One difference between a friendly society
and a company is that any real property held by a society is not registered in
the name of the society, but in the name of one or both of the society’s
Trustees, of whom there must be at most two. A society otherwise has its own assets and
liabilities, and the members are not liable for the debts of the society.
4. Friendly Societies Regulations: Here are found the various forms and list of
filing fees. It is not necessary for a company formation agent to act as agent
in filing them, they can be filed directly by a representative of the board.
5. Standards: In addition to the formal, legal requirements
of the Companies Act and the Friendly Societies Act, boards of directors and
members of charitable (or not for profit as they are now called) companies,
there are certain internationally recognised standards that are expected of
both the officers and members. Standards
can be divided into two general areas. The
first is standards expected of members and officers. The second is standards expected of the
institution itself.
Standards for officers:
The Board of Directors (or Executive
Committee) of a charity ensures member integrity and collective responsibility:
1a It promotes and
protects the organization’s mission, values and reputation and works to enhance
its public standing through all activities carried out by members on behalf of
the organization.
2a It acts and makes
decisions in the collective interest of the organization it governs and shares
group responsibility for these decisions. Its members do not act or make decisions
according to their own individual interests, or in the interests of any other
organization or cause they may be involved in or have an interest in.
3a. It has a code of
conduct that enables its members to identify and declare actual or potential
conflicts of interest and provides an agreed process for dealing with such
conflicts.
4a. It does not
allow members to derive any benefit from their position beyond what is allowed
by the law and the rules of the organization.
5a. It ensures that
members when elected by a particular constituency act for the collective
benefit of the whole not just for that individual constituency.
The Board/Executive Committee
determines the organization’s strategic direction and policies:
1a. It sets out the
organization’s strategic direction so as to deliver its mission, goals and
objectives. With the assistance of any staff, it makes certain that the
organization’s programmes, activities and services reflect its strategic
priorities.
2a. Where there is
an Executive Director/Manager, it concentrates on strategic thinking and does
not involve itself with day to day operational and management matters.
3a. It creates
policies and monitors the organization’s activities in all areas.
The Board/Executive Committee appoints
and supports the Executive Director/Manager:
1a. It is
responsible for the recruitment, support, professional development, appraisal
and remuneration of the Executive Director/Manager.
2a. It ensures,
primarily through the Chair/President, that the duties and responsibilities of
the Executive Director (which includes the right to appoint the organization’s
staff) are clearly set down, agreed and carried out.
3a. It acts in
partnership with the Executive Director/Manager to achieve the organization’s
mission.
The Board/Executive Committee monitors
and reviews the organization’s performance:
1a. It monitors and
reviews implementation of the annual programme and budget by receiving timely
and objective performance reports that concentrate on the strategic
implications of programme and budget outcomes.
2a. It ensures that
authority delegated to volunteers and staff is sufficient for purpose and
subject to appropriate budgetary and other limits; and that the use of such
delegated authority is monitored and reviewed.
3a. It periodically
reviews the organization’s governance structure and its costs to ensure its
continued relevance and effectiveness.
4a. It takes
whatever steps are necessary to maintain the organization as an effective
movement.
The Board/Executive Committee provides
effective oversight of the organization’s financial health:
1a. It ensures that
the organization is solvent and that its finances are managed ethically and
according to the letter of the law.
2a. It identifies
and regularly reviews the risks faced by the organization: it creates policies
and takes action to manage the risks identified.
3a. It ensures that
adequate insurance is provided to protect the organization against potential
liabilities.
4a. It establishes
the organization’s system of internal control and regularly reviews its
operation.
5a. It approves the
budget, monitors spending and ensures that the organization’s finances are
managed in its best interests. It is responsible for the appointment of
auditors and approves the audited annual accounts and financial statement.
The Board/Executive Committee is open,
responsive and accountable:
1a. It is open and
accountable for its governance of the organization.
2a. It encourages
and enables the engagement of service users and beneficiaries in the
organization’s planning and decision-making.
3a. It is
accountable for the performance of the organization; for ensuring that
financial obligations are met; for operating ethically and within the law and
other legal requirements. Accountability for these cannot be delegated by
Board/Executive Committee members but authority to achieve them can be
delegated.
4a. It is able to
show clearly how the organization contributes to the greater good of the
society it serves.
The Board/Executive Committee ensures
its own review and renewal:
1a. It organizes its
work to make the most effective and efficient use of the time, skills and
knowledge of its members, and ensures that their capabilities are enhanced
through development and training activities.
2a. It engages in
regular self-assessment of its own performance and that of individual Board/Executive
Committee members.
3a. It identifies
and develops potential members in order to maintain and increase the diverse
range of skills, experience and knowledge required.
Organisational
standards expected of a charitable institution:
Besides
the standards set by law, there are other standards generally expected of a
charitable organisation. These include:
Principles:
The Association/Company’s constitution, by-laws and/or regulations should not
contain any provisions that are inconsistent with the law.
The Association/Company’s constitution shall
state that it is a not-for-profit organisation which is not and shall not be
controlled by commercial interests and that all its income, commodities,
property and other assets shall be applied solely towards the promotion of its
objects.
Membership:
The members of the Association/Society/Company who shall have the right to vote
shall be clearly defined.
The terms of individual membership, such as
renewal and cessation of membership and resignation shall be defined.
A record of individual members shall be kept
and updated annually.
The elections of members as honorary
officers shall be held at intervals to be set out in the constitution.
There shall be a meeting, open to all
individual members, at least once a year.
A quorum and what constitutes a majority of
votes shall be defined for all meetings of the Association/Company.
Adequate notice shall be given for the
annual general meetings of the Association/Company and of the Board/Executive
Committee.
Of those individual members entitled to
vote, each shall have one vote only whether exercised in person or by proxy.
Individual members shall be prohibited from
deriving personal material gains by virtue of that status, either during the
existence of the Association/Company or after its dissolution.
Governance: The full membership entitled to vote shall be
involved in the process of electing members of the Board/Executive Committee.
Provision shall be made for the regular
rotation of its honorary officers and members of the Board/Executive Committee,
and the total cumulative years of service.
The elected Board/Executive Committee of the
Association/Company should be made up of at least 50% women.
Conflicts
of Interest: Other than reimbursement of expenses incurred,
members volunteering their services to the Association/Company shall not
receive any payment for those services. No individual member shall be granted a
loan from the funds of the Association/Company, irrespective of the source of
the funds.
The Association/Company shall adopt a policy
of prohibiting the appointment of spouses and relatives (grandparents and
parents, brothers and sisters, sons and daughters, grandsons and granddaughters
and in-laws) of members and staff to any position within the organisation or to
consultancies.
Each member of the Board/Executive Committee
and the most senior staff members of the Association/Committee shall sign an
annual conflict of interest declaration.
No volunteer or staff member shall use
her/his position with the Association/Company to further the manufacture, distribution,
promotion or sale of any materials, products or services in which the volunteer
or staff member, his or her spouse or relatives has either a direct or indirect
financial interest.
No member of staff shall be permitted to
vote.
Accountability: Provision shall be made for the accounts of
the Association/Company to be audited annually by a firm of external auditors
appointed by the members.
Provision shall be made that in the event of
the dissolution of the Association, any assets remaining after the settlement
of debts and liabilities shall pass to a body or bodies with substantially
similar objectives, or as local law requires.
Strategic
Planning: The Association/Company
shall have a current, written medium-term Strategic Plan that is derived from a
consultative process that involves staff and volunteers, that takes into
consideration an analysis of the country situation and is consistent with the
organisation’s aims and objectives.
Monitoring
and Evaluation: The
Association/Company shall regularly monitor and evaluate its programmes, and
use this information to improve the performance of those programmes.
Responsibilities
of the Board: The
Board/Executive Committee shall consider, review and approve the
Association/Company’s Annual Work Programme and Budget.
The Board/Executive Committee shall ensure
that the requirements of any donor agency are met in full.
The Board/Executive Committee shall ensure
that an appropriate control framework exists to protect the
Association/Company’s assets from loss of any kind arising from fraud and other
offences, waste, extravagance, inefficient administration, poor value for money
or other causes.
The Board/Executive Committee shall ensure
that generally accepted international accounting and auditing principles are
followed in the financial management of the Association/Company.
The Board/Executive Committee shall develop,
review and approve the Association/Company’s Strategic Plan.
The Board/Executive Committee shall develop
and put in place suitable policies to cover the Association/Company’s
objectives and the means by which they are to be achieved.
The Board/Executive Committee shall ensure
that the personnel policies, procedures and practices of the
Association/Company are consistent with and conform to applicable national laws
and incorporate best management practices.
The Board/Executive Committee shall
determine through by-laws or regulations the responsibilities of the Executive
Director/Manager, which shall include but shall not be limited to the
operational management of the Association/Company, the implementation of
polices, and the recruitment, employment, supervision and termination of staff.
The Board/Executive Committee shall recruit
and employ an Executive Director/Manager at an appropriate salary level,
respect his/her responsibilities as set out in the by-laws and any contract or
policy document, and appraise his/her performance annually and in writing.
Annual
General Meeting: The
Annual General Meeting shall select and appoint external auditors in accordance
with the law, the constitution, and when appropriate, in accordance with the
requirements of donor agencies.
The Annual General Meeting shall receive,
review, and accept the annual audit of the Association/Company.
The Annual General Meeting shall regularly
monitor and review implementation of the Strategic Plan and Annual Work
Programme and Budget.
The Annual General Meeting shall consider,
review and approve the Association/Company’s Annual Report.
The Annual General Meeting shall elect the
Board/Executive Committee in accordance with the constitution/by-laws.
Executive
Director: The Executive
Director/Manager shall actively participate in collaboration with the
Board/Executive Committee in developing the Strategic Plan; mobilising the
appropriate resources to support the Association/Company’s programme of work
and its financial sustainability; and promoting and advancing the
Association/Company’s mission and objectives.
The Executive Director/Manager shall manage
the implementation of the Annual Work Programme and Budget, and informs the
Board/Executive Committee of any executive actions that may have policy
implications.
The Executive Director/Manager shall devise
and implement appropriate systems and procedures to give effect to policies
approved by the Governing Body.
The Executive Director/Manager shall ensure
that the planning of the activities of the Association/Company is complete and
thorough and consistent with the strategic direction and policies approved by
the membership.
The Executive Director/Manager shall ensure
that the operational plans, work programmes and budgets and periodic reports
are prepared in accordance with the guidelines laid down by any donor agency.
The Executive Director/Manager shall ensure
that each of the Association/Company’s staff has clearly defined objectives,
goals and targets, and understands the Association/Company’s role and mission.
The Executive Director/Manager shall provide
effective and efficient management of the Association/Company in all respects,
including the maintenance of an effective internal control system.
The Executive Director/Manager shall be the
Association/Company’s accounting officer and as such shall ensure that the
necessary financial systems and procedures are put in place to account for all
income and expenditure and provide due evidence of their use on the purposes
for which intended.
The Executive Director/Manager shall appoint
and dismiss his/her staff and in doing so must at all times fully comply with
the law and with the Association/Company’s procedure on this as agreed by the
membership.
The Executive Director/Manager shall ensure
that formal evaluations of staff performance in relation to previously agreed
objectives and standards are carried out every year.
The Executive Director/Manager shall ensure
that staff and volunteers alike respect the agreed lines of authority and that
staff are free of harassment.
Omitted from this analysis are most of the
organisational and management rules that govern companies and friendly societies
generally. This paper is not intended to
be an exhaustive study of the functional roles of presidents, secretaries, or
treasurers of companies and friendly societies. Emphasis has rather been placed on standards
of behaviour expected of the membership and boards of directors of charitable
companies and societies. It will be for
the attorney serving as pro bono adviser of each charitable entity to
ensure, eg, compliance with any applicable statutory rules and requirements,
and the laws governing meetings generally.
Prepared for the use and guidance of the
Board and Members of the Anguilla Retired Persons’ Association at the time of
its registration as a friendly society
[1] Adapted from: (i) the International Planned Parenthood Federation
Code of Good Governance, which itself was compiled from a variety of
sources including: Code for the Voluntary and Community Sector, Governance
Hub (an independent partnership of seven prominent organizations working to
improve the quality of governance in the UK voluntary sector); (ii) The
Good Governance Action Plan for Voluntary Organizations and Developing Trustee
Boards, National Council for Voluntary Organizations (NCVO); (iii) The Complete Guide to Good Governance in Organizations and
Companies, Doug Matheson, Profile Books, 2004, Auckland, New Zealand.
