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Many arts organisations are also registered charities.
The principal advantages are the tax breaks, rate relief and access to funding. The disadvantage is the need to comply with charity law. The legal structure of arts charities can be at odds with what happens in practice and can give rise to problems. The usual arrangement for an arts charity is for a company limited by guarantee to be set up which has members (or ?guarantors?) who are also the directors of the company. A company having exclusively charitable purposes and turnover of more than £1,000 will need to apply to register as a charity and as a result the directors will automatically be charity trustees.

The significance of being a trustee is that you are subject to charity law which imposes stringent obligations on the making of decisions and on how the charity is managed. Trustees cannot be paid for their work as trustees though if the constitution (i.e. the memorandum and articles of association of a limited company) so provides, expenses can be paid. It can also provide that where an individual trustee provides professional services he/she can be paid for those services.

The net result is that arts charities need to recruit and maintain a board of trustees who wield the legal powers of the company when in practice the artistic director?s vision may be the reason for the company?s existence. Anyone who has worked for arts companies can appreciate that often this will be absurd - the artistic director will propose a programme of work and will, together with the administrator or executive director, have secured necessary funding for the work but cannot undertake the work without the approval of the Board.

A modest proposal

It would make much more sense for a number of arts charities for the artistic director to have the executive authority and to make use of wise counsel through an advisory board rather than through trustees. The legal structure of a non-profit distributing company could be used for these sorts of arts companies. The reason for these companies being a charity is to access funding, mainly funding from government or quasi-governmental sources. Though being a charity is usually no prerequisite for these sorts of funding there is a heavy preference from funders for such organisations being charities. If this preference were reversed artistic directors could own and run those companies subject to fulfilling funding conditions. Though this would mean the funder would not have the comfort of a set of trustees being on the hook I feel that this is a justifiable trade-off as a means of enabling artists to create their best work.

This proposal is most suitable for companies that do not generate a revenue or organisations with a substantial turnover where ?ownership? is not so much of an issue.

Sean Egan is head of Bates Wells and Braithwaite?s Arts and Media department t: 020 7551 7796; e: s.egan@bateswells.co.uk