OG49 Pooling schemes and pool charities

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OG49 Pooling schemes and pool charities

OG49 A1 WHAT ARE POOLING SCHEMES AND POOL CHARITIES AND WHAT ARE THEIR MAIN FEATURES? 14 March 2012

 

1. What are pooling Schemes and why are they needed?

 

1.1 What is a pooling Scheme?

 

A pooling Scheme is a Scheme to establish a particular type of common investment fund whose main characteristic is common trusteeship – referred to in this guidance as a ‘pool charity’, see section 3.1.

 

Common investment funds may also be commercial investment vehicles – ‘CIFs’, see section 3.2, or ‘hybrid pool charities’ where the participating charities are connected in some way but not by common trusteeship, see section 3.4.

 

1.2 The law

 

S.96 of the 2011 Act gives us the power to establish common investment funds (see 3.2) by Scheme

 

S.100 of the 2011 Act gives us the power to establish common deposit funds (see section 6) by Scheme.

 

Under section 97(2) and section 104 of the 2011 Act, where the scheme permits it, both CIFs and CDFs may now accept investments from ‘appropriate bodies’ i.e. bodies established as charitable under the law of Scotland or Northern Ireland which are eligible for UK tax relief. Hitherto, only charities established in England and Wales had been able to invest.

 

Both common investment funds and common deposit funds are charities in their own right (and if the Scheme setting them up admits only exempt charities, they too are exempt charities). Only charities may invest in them.

 

(In practice, common deposit funds are extremely rare – see section 6.)

 

1.3 The purpose of a pooling Scheme

 

The purpose of a pooling Scheme is to allow trustees who administer more than one charity to combine funds from any or all of those charities for investment purposes. (Some or all of the participating charities may be special trusts.)

 

1.4 Why is a Scheme necessary?

 

Trust law generally requires trustees who administer two or more trusts to keep the investment portfolio of each of those trusts separate unless the governing documents of all the charities authorise them to do otherwise. Each trust must have an exclusive interest in its own investments: trustees cannot simply amalgamate the investment portfolios of the separate funds they administer and treat each fund as having a percentage interest in the portfolio as a whole.

 

The basis for the requirement of exclusive ownership is that the trustees’ ability to take decisions with respect to a trust investment should not be constrained by their relationship with a co-owner whose interests are different. Trustees thus need to be able to identify the actual investments (shares, property, etc) of the trust, and the income from, and costs of, those investments at all times.

 

However, trustees must have regard for the need for a diversified portfolio in so far as appropriate to the circumstances of the trust. A single investment, or too narrow a range of investments, may pose an unacceptable risk. Diversification can be achieved by making individual investments in respect of each trust but this may be difficult and expensive if each has only relatively small amounts to invest. Diversification might also be achieved by investing in commercial CIFs which provide this at a reasonable cost. However, one effective solution for smaller charities is the creation by Scheme of a pool charity in which an individual trust will, instead of having an exclusive interest in a limited range of investments, have a percentage interest in the wider range of investments held by the pool charity.

 

But see section 2 about the effect of the Trustee Act 2000.

 

2. The Trustee Act 2000

 

2.1 Wider statutory power of investment

 

The Act provides for trustees to be granted a new, wider statutory power of investment to replace the limited power given under the Trustee Investments Act 1961 (the TIA). Trustees are able to invest in the same range of investments as an absolute owner (although the legislation does not override any express powers or restrictions in a trust's governing document – these will remain in force unless the governing document itself is amended). Trustees are under a statutory duty of care in relation to the exercise of the new powers or to equivalent functions under the governing document, see OG 86.

 

2.2 ‘Shared-control’ investments and the continuing need for pooling schemes

 

One of the effects of the Trustee Act 2000 is that charity trustees to whom the new power applies will be able to make ‘shared-control’ investments (that is, investments in which two or more charities are joint owners).  Previously, common law rules prohibited this unless the trustees had explicit authority to enter into such an arrangement – Webb v Jonas (1888) 39 Ch Div 660, Re Royal Society’s Charitable Trusts (1956) Ch 87.

 

Although the Act may reduce the need to make pooling Schemes, they are still likely to be attractive. There will almost certainly be circumstances in which trustees will prefer to pool investments under the authority of a pooling Scheme rather than under the proposed general power. For example:

 

  • Sections 4 and 5 of the Trustee Act impose certain standard investment duties on trustees. Trustees must ensure that investments are suitable to their trust and that the need to diversify is taken into account. Proper advice must be taken and each investment must be reviewed from time to time to ensure that it is still suitable. See section 5.3 of OG86 B1.

 

Where the pool is a pool charity established by a pooling Scheme, these duties must be exercised by the trustees:

 

  • as trustees of each participating charity in respect of each contribution it makes to the pool; and
  • as trustees of the pool charity in respect of the investments which the pool charity makes.

 

Where the new statutory power of investment is relied upon to make shared control investments, it appears that the standard investment duties must be exercised:

 

  • as trustees of each participating charity in respect of each contribution it makes to the jointly held investment fund; and
  • as trustees of the jointly held investment fund in respect of each investment made by the fund;

 

and

 

  • as trustees of each participating charity in respect of each investment made by the fund.
  • Pooling Schemes include (or provide for the creation of) specific machinery for ensuring equitable treatment between the charities contributing funds to the pool. This guidance would not be available to trustees who simply relied on the statutory power of investment. They would need to take particular care that the systems they put in place instead were suitable and adequate.
  • There may be circumstances when trustees find it administratively more convenient for the investments to be held in a separate charity (or charities).

 

lawyer_referSeek legal advice if you are unsure whether the trustees should apply for a Scheme or not.

 

2.3 Charitable companies

 

Generally, the directors of a charitable company will be affected by the Act only in respect of any property they hold on trust (for example permanent endowment or ‘special trust’ property). The corporate property of the company will be affected only if the company’s memorandum of association contains an investment power which refers to the TIA.

 

3. What are pool charities and how do they differ from other types of common investment fund?

 

3.1 Pool charities

 

The feature which distinguishes a ‘pool charity’ from other common investment funds is that all charities eligible to participate must, at the time when any particular contribution is made to the pool, be administered by exactly the same body of trustees which the pooling scheme appoints as the charity trustee(s) of the pool charity. If a charity which has contributed to the pool subsequently comes to be administered by a separate body of trustees, it does not have to withdraw those funds from the pool but it cannot make any further contributions.

 

Some or all of the participating charities may be special trusts.

 

A pool charity which is set up in this way is a ‘pooling scheme fund’ for the purposes of the Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001). When making a Scheme ensure that contributions can only be made by participating charities which are administered by the same body of trustees as administer the pool charity. (See section 3.4 if you come across an established Scheme, or a new one is proposed (or is being written), which does not meet the necessary requirement.)

 

Unlike other common investment funds, trustees of pooling scheme funds are exempt from the general prohibition on unauthorised persons carrying out any activity regulated by the Financial Services and Markets Act 2000 - see OG 49 B7.

 

See OG 49 B3 where a participating charity is a charitable company: a pool consisting of a charitable company and charities under its trusteeship would be a pool charity and not a hybrid even though, technically, the trusteeship arrangements are different.

 

3.2 Common investment funds which are NOT pool charities

(see also section 3.4)

 

Some common investment funds are open to all charities (or to a particular class or classes of charity) to invest in. They are run professionally by their operators - like unit trusts - and are usually (but not always) commercial investment products. (Examples are COIF, Charinco, and Charishare.) These are not ‘pool charities’, and they are not covered in this guidance.

 

Unlike the trustees of pool charities, CIF trustees are not exempt from authorisation by the Financial Services Authority to carry out regulated activities – see OG 49 B7.

 

3.3 Difference reflected in legislation

 

No distinction is made between pool charities and CIFs in the 2011 Act but the difference is reflected in the Charities (Accounts and Reports) Regulations 2008, the Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001), and the Trustee Act 2000. The general power of investment referred to in section 2 above will apply to pool charities, but will not apply to CIFs.

 

See OG 49 B7 which explains the provisions and effect of the 2001 Order.

 

3.4 Hybrid pool charities

 

Some s.96 schemes have been made in the past which (although made as pooling schemes) fail to meet the conditions in section 3.1 - the trusts establishing the investment fund charities do not require that contributions can only be made by participating charities which are administered by the same body of trustees as administer the investment fund charities. (The investment fund charities are, however, like pool charities - and unlike the CIFs referred to in section 3.2 - in that the charities permitted to participate will all be connected in some way). The charities created by such schemes are technically not pool charities, and are in principle subject to the same regulatory and accounting obligations as the ‘commercial’ CIFs referred to in section 3.3.

 

The general power of investment conferred by the Trustee Act 2000 will not apply to hybrid pool charities and the effect of the Act will be that they will have no default power of investment.

 

It is essential that the trustees of these charities are made aware of their position - see section 2.3 of OG 49 B7 - but staff in other operational divisions should check with an accountant before giving advice or taking any other action involving a hybrid pool charity. (See also section 7 – some universities and colleges have a statutory power to pool certain funds.)

 

If a Scheme is being drafted for an existing hybrid pool charity, you should not complete the process until the trustees have supplied evidence that the fund trustees are ‘authorised persons’ for the purposes of the FS& MA 2000, or that they do not have to be authorised persons - see OG 49 B7. Because they will have no default power of investment, the Scheme must include an explicit power of investment.

 

lawyer_referLegal advice should be obtained in the case of any proposal to establish a new hybrid pool charity.

 

 

4. The advantages of setting up a pool charity

 

For charities which are managed by the same body of trustees, pooling their funds for investment purposes will usually have clear benefits. Allowing individual charities to have a joint interest in all the investments in a pool, rather than the exclusive interest in a smaller portfolio of investments, for example may:

 

  • enable the trustees to reduce the overall cost of their share-dealing; there may also be savings in costs of investment advice and in the administration of many individual investments;
  • enable each individual charity to obtain a more diversified portfolio of investments. This will reduce overall investment risk;
  • mean that the use of professional fund management becomes more cost effective.

 

However, when contributing to a pool charity, the trustees of participating charities must consider the standard investment criteria (section 4(3) of the Trustee Act). See OG 86 B1. This is no different from any other form of investment and is why, where trustees have both ‘capital’ and ‘spending’ funds available for investment, two (or more) separate pool charities may need to be established - see OG 49 B2.

 

(The trustees do not have to pool the investments of the participating charities simply because they have the power to do so - they have discretion as to the assets they contribute to the pool.)

 

5. The main features of a pooling Scheme

A pooling Scheme:

  • authorises the trustees to:
  • pool the investments belonging to the participating charities (any or all of which may be special trusts);
  • invest any other funds belonging to those charities in the pool;
  • add to the pool investments belonging to any other charities they may subsequently come to administer (unless the trusts of that charity expressly prohibit investment pooling);
  • should, if the trustees request, create separate pools for funds which require different investment aims - that is, for permanent endowment and income funds. (Expendable endowment may be combined with either permanent endowment or income funds, depending on the conditions attached to it and the intentions of the trustees – (see OG 49 B2);
  • creates at least one new charity which needs to be registered - either under its own number or under the number of its reporting charity (see OG 49 B5);
  • where appropriate, may include a linking direction under s.12(2) of the 2011 Act enabling the pool charity and the participating charities to be linked for the purposes of registration and accounting (see OG 555, Linking Charities).

6. Common deposit funds

 

Under s.100 of the 2011 Act we are able to establish common deposit funds by Scheme.

 

The difference between a common investment fund and a common deposit fund is that:

 

  • an investment fund invests the property contributed by the participating charities in a range of suitable investments, eg, stocks and shares, gilts, land, etc. Each participating charity owns a percentage share of the capital and is entitled to a percentage share of the income of the fund based on the value of the property it has contributed and the total value of the fund (see OG 49 C1 for a detailed explanation of how such a fund operates); 
  • a deposit fund deposits money contributed by the participating charities in suitable income yielding accounts. Each participating charity is entitled to repayment of the sums it has deposited plus interest.

 

The trustees of common deposit funds are subject to the special accounting regime referred to in article 6 of the Charities (Accounts and Reports) Regulations 2008.

 

Common deposit funds do not have the general power of investment set out in the Trustee Act.

 

lawyer_referApplications for a pooling Scheme to set up a common deposit fund under s.100 are likely to be extremely rare but, if you do receive one, you should refer it for legal advice.

 

7. Other legislation enabling charities to pool funds

 

The Universities and Colleges (Trusts) Act 1943 permits certain institutions to establish by Order in Council regulations for pooling:

 

  • funds under the trusteeship of the college; and
  • funds established for the purposes of the college which are under different trustee arrangements.

 

Such Schemes must be laid before Parliament and approved by Order in Council.

 

These funds could not be pooled in a pool charity because they do not have identical trustee bodies. Any pool set up by pooling scheme would be a hybrid pool (see section 3.4). If any of the institutions listed asks us to make a pooling Scheme in respect of funds covered by the 1943 Act, you should suggest that they use their own powers instead (unless, of course, the particular funds they had in mind were all administered by the same trustee body and we could establish a pool charity in the normal way).

 

8. How a pool charity operates

 

OG 49 C1 explains briefly how a pool charity operates.

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OG 49 B1 HOW TO ESTABLISH WHETHER A POOLING SCHEME IS APPROPRIATE 14 March 2012

1. When may a pooling Scheme be made?

 

A pooling Scheme may be made when:

 

  • two or more charities administered by the same body of trustees, make an application; and
  • actual amalgamation of the charities concerned (either by Scheme under s.69 of the 2011 Act, or by the use of s.268 of the Act, or in some other way) is not feasible, or is not considered appropriate by the trustees.

 

(The charities concerned may be, or include, special trusts.)

 

Section 1.4 of OG 49 A1 explains why a Scheme is necessary.

 

The Trustee Act 2000 may reduce applications for pooling Schemes although trustees may well still prefer to apply for a pooling Scheme rather than participate in the acquisition of an investment with ‘shared control’. Trustees should always be clear about their reasons for wishing to have a pooling Scheme, but we need not press them to explain why they prefer a pooling Scheme to arrangements involving ‘shared control’ of investments. See section 2.1 of OG 49 A1.

 

2. Application of funds causing difficulty

 

The purpose of a pooling Scheme is to rationalise the investment, rather than the application of charity funds. It is important to bear this in mind when considering whether or not a pooling Scheme is needed. If the charities concerned are finding it difficult to apply their funds, the solution may be to rationalise the charities themselves rather than to make a pooling Scheme to rationalise their investments.

 

If there appears to be a difficulty in applying the funds in question, then the following possibilities might be considered:

 

  • a transfer of property between the charities in furtherance of one of the charity’s objects;
  • amending the objects of the charities to enable such a transfer to be made;
  • the use of s.268 or s.281 of the 2011 Act (the small charities provisions) – see OG 519;

 

or, if these provisions cannot be used, and the circumstances fall within s.62(1)(c) of the 2011 Act or one of the other cy-près occasions set out in s.62(1):

 

  • inviting an application for a Scheme under s.69 to amalgamate the charities. (A failure of the original trust purposes would in any case require the trustees to apply for such a Scheme by virtue of s.61.)

 

3.Typical cases

 

Some typical cases in which a pooling Scheme might be made are, where:

 

  • a national charity also administers a number of linked charities;
  • an independent school administers a large number of prize and/or scholarship funds;
  • an HSB administers numerous charities for the benefit of one or more hospitals.

 

4. Situations when a pooling Scheme is likely to be unnecessary or inappropriate

 

4.1 Temporary situations

 

There is little point in setting up a pool charity to cover a temporary situation. For example, restrictions placed on income by a donor might create a special trust. The trustees might not be able to spend all the money immediately and, might, therefore, need to invest it for a short time. Unless the special trust and the original charity both had a general power of investment, this money could not be pooled with the general funds of the charity except through a pool charity. It would probably not be worthwhile to create a pool simply to deal with this temporary situation. The advantages of being able to pool the money for a short period would probably not justify the time and effort involved (although this would, of course, be for the trustees to judge). (If an appropriate pool already existed the special trust funds could, of course, be added to the pool if the trustees felt this was expedient.)

 

4.2 Designated funds only involved

 

Designated funds are not separate trusts but merely part of another fund (usually the unrestricted general fund). They have simply been set aside by the trustees for a particular purpose. Because of this, it is not necessary to create a pool charity to deal with them. (Of course, the fund of which the designated fund is a part may need to be pooled in its own right.)

 

4.3 Funds to be held on deposit

 

A pooled fund to hold sums on deposit would be set up by a s.100 Scheme rather than a s.96 Scheme – see section 6 of OG 49 A1.

 

4.4 Trustees of proposed participating charities connected but trusteeship not identical

 

lawyer_referIf the trustee body of all the participating charities and the proposed pool charity are connected in some way but not identical, any pooled fund set up would be a hybrid pool charity – see section 3.4 of OG 49 A1. Legal advice should be sought at the outset.

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OG 49 B2 WHEN TO ESTABLISH A SINGLE POOL CHARITY AND WHEN TO ESTABLISH TWO POOL CHARITIES 26 October 2001

 

1. Why two pool charities may be needed

 

When both contributing to a pool charity and investing the funds contributed, trustees should consider the standard investment criteria set out in section 4(3) of the Trustee Act 2000. The investments chosen by the pool charity should be suitable and appropriately diverse.

 

If a charity has both capital and income funds to invest, it may wish to pursue a different investment strategy for each. What is a suitable investment for a capital fund may not be suitable for a spending fund and vice versa. It is therefore likely that two pool charities will be required. For example, a charity may have:

 

(a) permanent endowment and/or expendable endowment, which it has the power to spend, but which it intends to retain for the foreseeable future (in effect treating it as if it were permanent endowment); and

 

(b) surplus income funds which it wants to put away for a short period and/or expendable endowment which it plans to spend.

 

In example (a), investment policy will not need to recognise any particular need for investments to be sold quickly in order to fund spending plans. This may reasonably lead to the creation of an investment portfolio which contains assets that may be difficult to dispose of quickly (eg, land and buildings) but which will grow in value or generate a regular income.

 

In example (b), the funds do not need to generate a regular income but they do need to be available – either in whole or in part – to spend at short notice. The investment portfolio will therefore need to contain assets that are easily sold for their full value (eg, quoted investments). Land and buildings would not normally be appropriate for this sort of fund.

 

Because there are fundamental differences between these two possible investment strategies, it is important to know which one is appropriate to the funds to be pooled. Mixing the two strategies in a single pool is not normally practical, so if the funds to be invested in a pool include both capital and income, trustees are likely to ask that two distinct pool charities should be established. (See section 2 below if they do not.) Conceivably, where the trustees are responsible for a large number of charities with substantial funds, the pooling Scheme may need to create more than two pool charities to accommodate the need for a wider range of different investment strategies.

 

accountant_referAny caseworker who is unsure how this guidance applies to a particular case, should seek accountancy advice.

 

 

2. Mixed pool proposed by trustees

 

If the trustees propose to invest both long-term endowment (that is permanent endowment, and expendable endowment which they intend to hold indefinitely) and short-term expendable funds in a single pool, they should be advised of the reasons why we consider that it is unwise to create a mixed pool along these lines. But if they persist in their request for the creation of a mixed pool, then we should create a single pool charity by our Scheme.

 

3. Unofficially pooled funds

 

An unofficial (or ‘informal’) pool is one that is not being operated under the authority of a Scheme of the Court or of the Commission.

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OG 49 B3 HOW TO DEAL WITH APPLICATIONS 14 March 2012 

 

1. Trustee bodies must be identified

 

Before taking any other action, you should check the trusteeship of the participating charities to ensure that the trustee body is identical in each case to the intended trusteeship of the pool charity. In most cases this will be obvious – eg, the charities are all administered by a particular NHS body, or by the governors of a particular school. But you will need to consider:

 

  • how each charity’s trustee body is constituted;
  • whether the trustee bodies are simply closely connected rather than identical – eg, this might be the case where a residential care home is conducted by the trustees of a charitable trust and the matron of the home is the trustee of a number of residents' welfare funds – but see {section 4 below~a4} where a charitable company manages trust funds;
  • if the trustee bodies appear to be identical, whether this will necessarily continue or whether it is coincidental. This is particularly important where the trustee body includes named individuals. For example:
  • are they in the case of each charity trustees by virtue of their office or position – such as the matron of a nursing home or the headmaster of a school; and, if so,
  • is this by virtue of the same office or position or does the same person simply happen to occupy both with no certainty of continuity – eg, one charity provides for the headmaster of a particular school to be a trustee and another provides for the chair of the parish council to be a trustee but the same person coincidentally occupies both positions at the time the application is made.

If the trustee bodies are not the same, the charity established by the Scheme will be a CIF or a hybrid pool charity not a pool charity. (See sections 3.2 and 3.4 of OG 49 A1.)

 

2. Who should make the application?

 

The application should be made by the body that is to be appointed trustee of the pool charity on behalf of at least two of the participating charities (which may be, or include, special trusts). The application does not, however, need to be made in respect of all charities which will participate when the pool charity is set up: section 5(2) of the model Schemes at D1 and D2 (section 4(2) of those at D3 and D4) makes provision for other charities of which the pool trustees are trustees to contribute to the pool.

 

3. Is rationalisation of charities themselves appropriate?

 

Before agreeing to make a pooling Scheme, you should examine the objects and general circumstances of the participating charities to ensure that they are not experiencing problems in applying the funds of the charities. It may be that the trustees are not aware of the various options open to them - see OG 49 B1.

 

However, in some cases, even if the trustees were to agree to rationalisation, it would not provide a complete solution, and a pooling Scheme would still be appropriate to permit the funds of the remaining charities to be pooled. You should bear this possibility in mind, and put it to the trustees if appropriate.

 

4. Trust funds managed by charitable company

 

Where a charitable company manages trust funds (for example, restricted income funds or endowments), the company's own corporate property (as well as the trust funds it administers) may be treated as eligible for inclusion in the pool charity of which it is the trustee. We consider that this flexibility is authorised by the interpretation provisions of s.287 of the 2011 Act even though in strict law the company is not a trustee of its own corporate property.

 

5. What type of pool charity is appropriate?

 

See OG 49 B2 which explains when a single pool charity is likely to be appropriate and when two pool charities are likely to be more appropriate.

 

Model Schemes are provided - see:

 

  • OG 49 D1 for a single pool charity with multiple trustees;
  • OG 49 D2 for a single pool charity with a sole trustee;
  • OG 49 D3 for two pool charities with multiple trustees
  • OG 49 D4 for two pool charities with a sole trustee.

These should be used without modification and agreed with the promoters in the usual way.

 

6. Powers of investment, delegation of investment management, and the appointment of a nominee or custodian

 

The Trustee Act 2000 gives the trustees the general power of investment in addition to any power given in their governing document.  See OG 86 B1.

 

lawyer_referIf a charity presses for some modification of the ‘standard package’ of powers now available under statute, you should obtain advice from Legal Services.

 

In addition, trustees have the power to delegate investment management and appoint nominees and custodians.

 

If the trustees choose to exercise these powers, they will have a duty of care in selecting such people to act for them, in settling the terms on which they will act, and in overseeing the arrangements.

 

7. Option to invest outside the pool

 

A pooling Scheme does not deprive the trustees of any participating charity of the choice between contributing funds to the pool charity, and investing outside the pool.

 

The fact that in rare cases the pool charity might have narrower investment powers than those of a participating charity with wider powers does not restrict the latter’s overall powers of investment.

 

(This applies whether or not, any of the participating charities are special trusts.)

 

8. Establishing registration details prior to Scheme

 

You should tell the trustees whether the pool charity will need to be separately registered or whether it can be linked to a reporting charity and registered under an existing number. See OG 49 B5.

 

9. Inclusion of linking direction in Scheme

 

Where, following a request from the trustees, a direction is to be made under s.12(1) or 12(2) of the 2011 Act, the direction should be given in the Scheme, rather than separately in writing. The form of wording to be used is set out in sub-clause (4) of clause 2 of the model schemes at OGs 49 D1 and D2 and sub-clause (6) of clause 2 of the models at OGs 49 D3 and D4.

 

10. Levels of authority

 

Authorised Officers may make standard pooling Schemes in accordance with our Authorised Officer policy.

 

lawyer_referNon-standard Schemes may be made only on the advice of Legal Services.

 

The Trustee Act 2000 may reduce the need for pooling Schemes - see section 2.1 of OG 49 A1. Trustees may still apply for a Scheme but should be clear about their reasons for still requiring one despite the new legislation, although we need not press them to explain why they prefer a pooling Scheme.

 

See also OG 49 B4.

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OG 49 B4 PUBLICITY AND FINAL PROCEDURE 14 March 2012 

 

1. Scheme publicity

 

The requirements for notice set out in s.88 of the 2011 Act do not apply to pooling Schemes but we have power under s.337(3) of the 2011 Act to require publicity by public notice.

 

Publicity for pooling Schemes need not be given unless it is felt to be in the public interest. For example, a case might be particularly sensitive or have a high public profile, or concern may already have been expressed over the proposed arrangements. In some cases, the trustees themselves may consider publicity to be advantageous - for example where the Scheme addresses publicly voiced criticism of the charities' previous investment strategy.

 

Where notice is considered appropriate, the form and procedure to be followed should be the same as that used for other Schemes.

 

Unless it is felt that publicity is required, therefore, the Scheme can be authorised once its terms have been agreed with the trustees

 

2. Name of pool charity to be checked

 

Before a Scheme is authorised, you should check Register Plus to ensure that the name of the pool charity created is not the same as, or too like, that of an existing charity (see OG 330).

 

3. Reference to Registration

 

When the Scheme has been authorised the file should be sent to Registration to register the charity in accordance with their usual procedure.

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OG 49 B5 REGISTRATION OF POOL CHARITIES 14 March 2012 

 

1. Legal position

 

S.99(3) of the 2011 Act provides that a common investment fund shall be deemed for all purposes to be a charity; and if the Scheme creating it admits only exempt charities, that it shall be an exempt charity.

 

It follows that, as a pool charity is a particular type of common investment fund, it is liable for registration unless the Scheme establishing it restricts participation to exempt charities. If a Scheme creates more than one pool charity, each of them needs to be registered.

 

2. Under what number should a pool charity be registered?

 

2.1 All participating registered charities registered under same number

 

If all the participating registered charities are registered under the same number, then the pool charity should also be registered under that number.

 

2.2 Some participating charities registered separately

 

If any of the participating charities is registered separately, then the pool charity should itself be registered separately under the name given to it by the pooling Scheme. (Where more than one pool charity is established by the pooling Scheme, both can be registered under the same number.)

 

2.3 Some participating charities unregistered

 

Where:

 

  • a number of the participating charities are registered under the same number; and
  • a number are unregistered charities,

the pool charity can be registered under the same number as the registered charities, provided that all the participating charities are accounted for by the same reporting charity. That is to say:

 

  • either a suitable direction has been made under s.12 of the 2011 Act; or
  • the trustees are satisfied that the unregistered charities are special trusts of one or other of the registered charities.

Usually, trustees who administer more than one charity and apply for a pooling Scheme, will wish to link those charities for both accounting and registration purposes, as this is administratively more convenient.

 

2.4 HSBs

 

We recommend that HSBs seek to register under an ‘umbrella arrangement’ (see Glossary definition of reporting charity).

 

The pool charity would then be registered under the same number (that is, it would be linked to the ‘umbrella charity’).

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OG 49 B6 ACCOUNTING FOR POOL CHARITIES 14 March 2012 

1. Proper accounting records

 

All pool charities must keep proper accounting records in accordance with section 130 of the 2011 Act. 

 

2. Pool charities may be internal or external

 

Pool charities may be internal or external.

 

Internal pools are formed where:

 

  • all the participating charities are registered under the same number;

or

  • some of the participating charities are registered under the same number and the rest are unregistered charities; and
  • all the charities are reported on by the same reporting charity;

or

  • in the case of an HSB, all the participating charities are registered under an umbrella arrangement.

An internal pool will be registered under the same number as its participating registered charities under the name given to it by the pooling Scheme which created it.

External pools are formed where the participating charities (although having the same trustees):

  • are registered under different numbers;

or

  • if unregistered, are not reported on by the same reporting charity.

An external pool will be registered under its own number under the name given to it by the pooling Scheme which created it. 

 

3. Linking direction may be needed

Where trustees wish us to make a linking direction to enable charities to be linked for both accounting and registration purposes, the direction will be given under s.12 of the 2011 Act - see OG 555.  (Where charities are linked for registration purposes, we recommend that they should also be linked for accounting purposes.  This avoids unnecessary administrative costs, duplication of annual returns and accounts, etc.)

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OG49 B7 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) ORDER 2001 14 March 2012

 

1. The Order

 

The Financial Services and Markets Act 2000 (Exemption) Order 2001 SI No.1201 came into effect on 1 December 2001. The Order makes clear that trustees of pooling schemes funds are exempt from the general prohibition on unauthorised persons carrying our any regulated activity imposed by the Financial Services and Markets Act 2000.

 

Trustees and managers of other types of common investment fund are not exempt and have to be qualified to act as manager or trustee of an authorised unit trust scheme. This generally requires them to be authorised by the Financial Services Authority (FSA) to carry out regulated activities.

 

lawyer_referSeek legal advice if you are unsure whether a trustee needs authorisation from the FSA or not.

 

The full text of the Order is available on the Legislation website.

 

2. Implications for trustees

 

2.1 CIFs

 

Trustees and managers of CIFs which are not pooling scheme funds are not exempt under the 2001 Order and have to be qualified to act as a manager or trustee of an authorised unit trust scheme. This generally requires them to be authorised by the FSA.

 

2.2 Pool charities

 

The 2001 Order retains the exemption from any possible need for FSA authorisation for trustees of ‘pooling scheme funds’. A pooling scheme fund is defined as:

 

‘a fund established by a common investment scheme the trusts of which provide that property is not to be transferred to the fund except by or on behalf of a charity the charity trustees of which are the trustees appointed to manage the fund.’

 

A pool charity which conforms with the definition in section 3.1 of OG 49 A1 is a pooling scheme fund for the purposes of the Order and the trustees of such charities remain exempt from having to obtain authorisation to conduct investment business. The trustees need take no action as a result of the 2001 Order.

 

2.3 Hybrid pool charities

 

Hybrid pool charities do not fall within the 2001 Order definition of a pooling scheme fund even though their characteristics may be similar to those of a pool charity. The trustees of such charities are recommended to seek FSA authorisation to conduct investment business or confirmation in writing from the FSA that authorisation is not needed.

 

The trustees of existing hybrid pool charities may not be aware that both the 2001 Order and the Charities (Account and Reports) Regulations 2008 apply to them. It is important therefore that any member of staff coming across such a Scheme should alert the trustees to the position. Apart from needing to be aware of their obligations, we would recommend that the trustees consider whether to ask us to change the trusts of the Scheme in order to avoid this burden in future years. Amending Schemes may be necessary for the charities involved.

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OG 49 C1 HOW A POOL CHARITY OPERATES 26 October 2012 

1. Valuation

 

1.1 Initial valuations

 

Once the assets of each participating charity have been identified, the date on which the pool is to start operating must be decided. The value of each participating charity's assets (including those of any participating special trusts) must be calculated as at that date. The value taken may be the offer or bid price (that is, the price at which shares or securities can be purchased or sold in the market) or the mid market price at that date. Whichever unit valuation is chosen, it must be the same for all participating charities (including any special trusts) and must be consistently applied at each subsequent valuation. This will give the participant's contribution value (PCV). (Historic or book costs should not be used.)

 

The sum of the PCVs should equal the total contribution value (TCV) of the pool.

 

1.2 Aliquot portions

 

This is the term used to mean that the share in the pool allocated to each participant - the participant's asset value (PAV) - is directly proportionate to that participant's contribution to the whole. It is simpler to think of it as a percentage share.

 

To determine the proportion of any participant, use the calculation (PCV  TCV) x 100 = % share.¸

 

For example, if Charities A, B and C were contributing the following sums to a pool with a TCV of £800,000 the percentage shares would be:

 

Participating charities* PCVs  % share
Charity A  £250,000 31.25 % (ie, (250,000  800,000) x 100)
Charity B  £100,000 12.50 % (ie, (100,000  800,000) x 100)¸
Charity C  £40,000 5.00 % (ie, (40,000 ¸ 800,000) x 100)
Other charities    £410,000 51.25 %  (ie, (410,000  800,000)¸ x 100)
Total (TCV) £800,000 100 %

 

*all of which, at the time when any particular contribution is made to the pool must be administered by exactly the same body of trustees which the pooling scheme appoints as the charity trustee(s) of the pool charity.

 

Some adjustment of percentages to allow for decimal rounding may be needed. (Two places is usually sufficient, but more can be used if needed.)

 

1.3 Subsequent valuations

 

The PAV for each participant' from time to time will depend on the market value of the assets in the pool. To determine the PAV of each participating charity at any time use the calculation (% share x total market value of the pool (TMV)) = PAV.

 

For instance, in the case of the pool charity described in the previous section, if, at a subsequent valuation date, the TMV of the pool was calculated as £1,200,000 and none of the charities had made any further contributions, each charity's PAV would be:

Participating charities* % share x TMV   PAVs
Charity A  31.25 % x £1,200,000 £375,000
Charity B  12.50 % x £1,200,000 £150,000
Charity C  5.00 % x £1,200,000  £60,000
Other charities  51.25 % x £1,200,000 £615,000
Total (TMV)  £1,200,000

 

*all of which, at the time when any particular contribution is made to the pool, must be administered by exactly the same body of trustees which the pooling scheme appoints as the charity trustee(s) of the pool charity.

 

1.4 Additions to the pool

 

When a new participant makes its first contribution to a pool its PCV must be calculated and the percentage shares of all the participating charities must be recalculated.

 

1. The TMV of the pool on an agreed valuation date must be calculated (that is, before the new participant makes any contribution)

 

2. The PAV of all the existing participants must be calculated - % share x TMV = PAV.

 

3. The PCV of the new participant must be added to the TMV. This will produce a revised TMV

 

4. The percentage share of each existing participant must now be recalculated using the PAVs as calculated in (2) and the revised TMV as calculated in (3) - (PAV  revised TMV) x 100 = % share.

 

5. The percentage share of the new participant must be calculated - (PCV  revised TMV) x 100 = ¸ % share).

 

For instance, in the case of the charity illustrated in the previous sections, if a new charity contributed £50,000 when the TMV was £1,200,000, the calculations would be:

New TMV -  £1,250,000
Participating charities* PCV of new charity, and PAVs of existing charities  % share    
New charity   £50,000  4 %  (ie, (50,000  1,250,000) x 100)¸
Charity A   £375,000  30 % (ie, (375,000 ¸ 1,250,000) x 100)
Charity B     £150,000   12 %  (ie, (150,000 ¸ 1,250,000) x 100)
Charity C   £60,000  4.8 % (ie, (60,000 ¸ 1,250,000) x 100)
Other charities £615,000 49.2 % (ie, (615,000 ¸ 1,250,000)x 100)
Total (TMV)  £1,250,000 100 %

  

*all of which, at the time when any particular contribution is made to the pool, be administered by exactly the same body of trustees which the pooling scheme appoints as the charity trustee(s) of the pool charity.

 

Similarly, new money contributed for investment by an existing participant will require valuation of the entire pool and adjustment of percentages. Withdrawal of money for expenditure by a participant will also require valuation of the entire pool and adjustment of percentages. Thus on an addition (or withdrawal):

 

  • TMV x % share = PAV for all participants (calculate the PAV for all participants before the transaction);
  • carry out transaction;
  • add (or subtract) transaction value to (or from) the TMV of the pool charity and the PAV of the relevant charity;
  • recalculate the percentage share of all participants (PAV  revised¸ TMV) x 100 = % share.

 

1.5 Valuation dates

 

Because it can be expensive in cost and time to value the % shares, it is generally advisable to add or withdraw funds on certain dates only, possibly to coincide with the regular portfolio valuations of the pool. This might indicate that even in the case of a pool which consists of expendable funds only, funds which are withdrawn or added to frequently, such as CMFs (Cyclical Maintenance Funds), should not be contributed to the pool but should be invested in a suitable medium by the charity to which it belongs. The charity trustees of a participating charity have discretion as to the assets they contribute to the pool.

 

Our model Scheme allows for the creation of reserve funds to regulate the distribution of income, and to meet current or anticipated expenses (see clause 9(1) of the models at OG 49 D1 and D2 and clause 8(1) of the models at OG 49 D3 and D4).

 

1.6 Routine dealing

 

Sale and reinvestment of securities within the pool does not require re-valuations. Costs of transactions are included in the contract price and are therefore directly accounted for in the TMV.

 

2. Meeting administration costs

 

The model schemes at D1 to D4 give the trustees the power to make rules relating to the charging of expenses. These are not required to be subject to our approval but they should, of course, be reasonable and, having made them, the trustees must conform to them. It is impossible to be dogmatic about what this involves. For example:

 

  • the costs of share-dealing in the ordinary course of administering a pool charity might fairly be assignable pro rata between all the participating charities. But where a dealing takes place in order to provide liquid funds to finance a withdrawal by a particular participating charity, it might be fair to load those dealing expenses onto that charity;
  • in calculating the proportion of management fees each charity should pay, or in the amount of income it should receive, some account may need to be taken of the date a particular charity started to participate in the pool.

 

accountant_referlawyer_referThese, and other similar questions connected with the administration of the pool charity, are matters for consideration by the trustees and their professional advisers. Caseworkers should not offer detailed advice but should seek legal or accountancy advice if they suspect that a pool is being operated unfairly.

 

Where a Scheme is silent on the way in which the administration costs of the pool should be met, section 31 of the Trustee Act will apply. This allows trustees to reimburse themselves (or pay) out of trust funds, expenses properly incurred in carrying out their duties in connection with the trust.

 

The pool charity itself has no source of income for activities of its own, since its only purpose is to invest money contributed by the participant charities. The main point to bear in mind when assigning expenses between the participating charities is that this should be done in a fair way in accordance with trustees’ normal duty of even-handedness.

 

Costs such as that of employing investment advisers (as distinct from contract costs), nominee services, a clerk, office accommodation, etc, may be met in a number of different ways. For example:

 

  • they may be deducted from dividends and interest earned on the investments in the pool prior to distribution;
  • they may be reclaimed from participants in the same percentages as their share in the pool;
  • when first participating, a charity may pay some income to an account to meet pool costs and then top this up as necessary. (This method cannot be used for ‘internal’ pools which are registered under the same number as a reporting charity because, in these cases, all net income and gains arising in the year must be fully allocated among the participating charities in order to be able to account properly under schedule 1 to the Charities (Accounts and Reports) Regulations 1995.)

 

accountant_referlawyer_referIt needs to be remembered that expenses incurred in the administration, protection or enhancement of an endowment fund should be charged against the capital of the investments in the fund. Only where the trusts of the charity provide to the contrary or there are insufficient funds in the endowment to meet such costs can they be charged against the other funds held by the charity. Legal and/or accountancy advice should be sought if you are asked for advice in a case where this causes difficulties.

 

3. Income distribution

 

Dividends and interest payments are made to the pool charity on the due date. They should be allocated to the participants in the percentage shares that applied on that date. Therefore allocations should be made prior to any recalculation of PAVs made necessary by a receipt or repayment of capital to or from the pool by a participating charity.

 

Pool charity trustees will generally reclaim all recoverable tax (and related payments) on income earned on the pool investments before distributing it (that is paying it out) to participating charities.

 

Income can be either:

 

  • distributed by being paid to each participant as and when it arises; or
  • retained by the pool charity and distributed periodically.

 

Alternatively, the pool charity can keep a book record of income entitlement for each participant which can be drawn against as required.

 

The option chosen will be dictated to some extent by the nature of the participating charity and its own administrative arrangements. If the income is aggregated pending distribution or expenditure it will earn a higher rate of interest which will also form part of the income distribution. (Clause 9(1) of the model schemes at OG 49 D1 and D2 (clause 8(1) of the models at OG 49 D3 and D4) provides for the establishment of reserve funds in order to manage and regulate investment income.)

 

4. Investment assignment

 

Pool trustees occasionally think that it is necessary to assign investments to participants. This is not the case. Each participant has its aliquot portion which goes up or down in value according to the performance of the entire pool portfolio. The fact that Charity A provided the money to enable a high-performing share to be purchased is irrelevant.

 

5. Stock situations

 

This term covers rights, bonuses, take-overs, mergers, de-mergers etc. Bonus shares would automatically accrue to the pool and increase its value. The cost of taking up rights issues would normally be met by sale of other investments within the pool or from capital cash held uninvested within the pool. Similarly, any cash arising from take-overs would go into the pool for investment.

 

Occasionally, pool trustees may call on participants to provide cash to take up a rights issue. As a short-term expedient, undistributed dividends and interest could be used to take up such an issue but the additional equity investment would have to be regarded as income. (For instance, the trustees might consider it desirable to take up a rights issue but, at the time of the offer, the capital part of the fund might have insufficient cash available to take advantage of the situation.) In this situation, both the investment and any gains on its sale would have to be held available for distribution. If the trustees wished to retain the investments then they could be sold to the capital part of the fund. Additional contributions of capital or the sale of some of the investments in the capital part of the fund might be needed to generate the necessary cash for the purchase. In an endowment pool charity, care would need to be taken not to convert income to capital.

 

6. Accounts

 

OG 15 explains how pool charities should account.

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OG 49 C2 UNIVERSITIES AND COLLEGES TO WHICH THE UNIVERSITIES AND COLLEGES (TRUSTS) ACT 1943 APPLIES 14 March 2012

 

The universities and colleges to which the Universities and Colleges (Trusts) Act 1943 applies are:  

  • the Universities of Oxford and Cambridge and the colleges in those universities; and
  • the College of St Mary of Winchester, near Winchester.

For the purposes of the 1943 Act:

 

  • the Cathedral or House of Christ Church; and
  • St Peter's Hall,

are both deemed to be colleges at Oxford.

 

(See section 7 of OG 49 A1 for the context of this legislation.)

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OG 49 D1 MODEL SCHEME – SINGLE POOL CHARITY WITH MULTIPLE TRUSTEES 14 March 2012 

 

1. Definitions

 

In this Scheme:

 

‘the participating charities’ means the charities identified [at the beginning of this Scheme] [in the schedule to this Scheme];

 

‘the pool charity’ means the charity created by clause 2 of this Scheme;

 

‘the trustees’ means the trustees of the pool charity.

 

2. Administration

 

[See OG 49 B2 which explains why two separate pool charities may be needed.]

 

1) The trustees may combine the investments and moneys belonging to the participating charities [ in permanent endowment funds] [in permanent or expendable endowment funds] [in expendable endowment or income reserve funds][in income reserve funds] [in any funds] into one pooled fund.

 

2) The pooled fund will:

 

a) constitute a charity (the pool charity); and

 

b) be a common investment fund within the meaning of section 96 of the Charities Act 2011 and a pooling scheme fund within the meaning of The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001).

 

3) This Scheme is a common investment scheme within the meaning of the Charities Act 2011.

[Add the following sub-clause where a linking direction is required:]

 

4) Under the power provided by section 12 of the Charities Act 2011, and subject to any further direction, the Commission directs that all the charities administered by the [name of trustee] as at the date of this Scheme, including the common investment fund established by this Scheme, will be treated as a single charity for the purposes of Part 4 (registration) and Part 8 (accounting) of the Charities Act 2011.

 

3. Name of the pool charity

 

1) The name of the pool charity will be the [Insert name] Common Investment Fund.

 

2) The trustees may by resolution amend the name of the pool charity with the prior written approval of the Commission. The trustees must promptly send to the Commission a copy of any amendment made.

4. Trustees

 

[Insert name(s) of trustee body/trustees] are the trustees of the pool charity.

 

5. Additions to assets of the pool charity

 

The trustees may add to the assets of the pool charity:

 

1) any additional investments and moneys of the participating charities held in the funds referred to in clause 2(1);

 

2) any investments and moneys held in equivalent funds to those referred to in clause 2(1) and belonging to any other charity of which the trustees are trustees (unless such addition is expressly precluded by or would be inconsistent with the trusts of the charity concerned).

 

6. Share in the assets of the pool charity

 

Subject to the provisions of this Scheme, each of the participating charities having investments or moneys in the pool charity will be entitled to the capital and income of the pool charity in proportions determined by reference to:

 

1) the amount or value of the assets transferred to the pool charity by or on behalf of each participating charity; and

 

2) the value of the assets of the pool charity at the time of the transfers.

 

7. Calculations

 

The trustees may obtain such valuations, and carry out and revise such calculations, as may from time to time be necessary for the purpose of settling, adjusting and regulating the respective interests of the participating charities in the pool charity.

 

8. Rules

 

The trustees may make rules and regulations consistent with this Scheme for:

 

1) the administration and management of the pool charity; and

 

2) the charging of the costs of administering the pool charity to the participating charities.

 

9. Reserve funds

 

1) The trustees may establish and maintain reserve funds for the following purposes:

 

a) avoiding fluctuations in the amounts of income distributed and generally for regulating the distribution of income;

 

b) meeting current or anticipated expenses properly payable out of income.

 

2) The trustees may from time to time withhold from distribution such amounts of income as they think fit and credit them to the reserve funds.

 

3) Any sum which is subsequently applied from the reserve funds must be treated as if it had accrued as income at the time the application is made.

 

10. Questions relating to the Scheme

 

The Commission may decide any question put to them concerning:

 

1) the interpretation of this Scheme; or

 

2) the propriety or validity of anything done or intended to be done under it.

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OG 49 D2 MODEL SCHEME – SINGLE POOL CHARITY WITH SOLE TRUSTEE 14 March 2012 

 

1. Definitions

 

In this Scheme:

 

‘the participating charities’ means the charities identified [at the beginning of this Scheme] [in the schedule to this Scheme];

 

‘the pool charity’ means the charity created by clause 2 of this Scheme;

 

‘the trustee’ means the trustee of the pool charity.

 

2. Administration

 

[See OG 49 B2 which explains why two separate pool charities may be needed.]

 

1) The trustee may combine the investments and moneys belonging to the participating charities [in permanent endowment funds] [in permanent or expendable endowment funds] [in expendable endowment or income reserve funds] [in income reserve funds] [in any funds] into one pooled fund.

 

2) The pooled fund will:

 

a) constitute a charity (the pool charity); and

 

b) be a common investment fund within the meaning of section 96 of the Charities Act 2011 and a pooling scheme fund within the meaning of The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001).

 

3) This Scheme is a common investment scheme within the meaning of the Charities Act 2011.

[Add the following sub-clause where a linking direction is required:]

 

4) Under the power provided by section 12 of the Charities Act 2011, and subject to any further direction, the Commission directs that all the charities administered by the [insert name of trustee] as at the date of this Scheme, including the common investment fund established by this scheme, will be treated as a single charity for the purposes of Part 4 (registration) and Part 8 (accounting) of the Charities Act 2011.

 

3. Name of the pool charity

 

1) The name of the pool charity will be the [Insert name] Common Investment Fund.

 

2) The trustee may by resolution amend the name of the pool charity with the prior written approval of the Commission. The trustee must promptly send to the Commission a copy of any amendment made.

 

4. Trustee

 

[Insert name of body corporate or other trustee body] is the trustee of the pool charity.

 

5. Additions to assets of the pool charity

 

The trustee may add to the assets of the pool charity:

 

1) any additional investments and moneys of the participating charities held in the funds referred to in clause 2(1);

 

2) any investments and moneys held in equivalent funds to those referred to in clause 2(1) and belonging to any other charity of which the trustee is trustee (unless such addition is expressly precluded by or would be inconsistent with the trusts of the charity concerned).

 

6. Share in the assets of the pool charity

 

Subject to the provisions of this scheme, each of the participating charities having investments or moneys in the pool charity will be entitled to the capital and income of the pool charity in proportions determined by reference to:

 

1) the amount or value of the assets transferred to the pool charity by or on behalf of each participating charity; and

 

2) the value of the assets of the pool charity at the time of the transfers.

 

7. Calculations

 

The trustee may obtain such valuations, and carry out and revise such calculations, as may from time to time be necessary for the purpose of settling, adjusting and regulating the respective interests of the participating charities in the pool charity.

 

8. Rules

 

The trustee may make rules and regulations consistent with this Scheme for:

1) the administration and management of the pool charity; and

 

2) the charging of the costs of administering the pool charity to the participating charities.

 

9. Reserve funds

 

1) The trustee may establish and maintain reserve funds for the following purposes:

 

a) avoiding fluctuations in the amounts of income distributed and generally for regulating the distribution of income;

 

b) meeting current or anticipated expenses properly payable out of income.

 

2) The trustee may from time to time withhold from distribution such amounts of income as it thinks fit and credit them to the reserve funds.

 

3) Any sum which is subsequently applied from the reserve funds must be treated as if it had accrued as income at the time the application is made.

 

10. Questions relating to the Scheme

 

The Commission may decide any question put to them concerning:

 

1) the interpretation of this Scheme; or

 

2) the propriety or validity of anything done or intended to be done under it.

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OG 49 D3 MODEL SCHEME – TWO POOL CHARITIES WITH MULTIPLE TRUSTEES 14 March 2012

 

1. Definitions

 

In this Scheme:

 

‘the participating charities’ means the charities identified [at the beginning of this Scheme] [in the schedule to this Scheme];

 

‘the pool charities’ means the charities created by clause 2 of this Scheme;

 

‘the trustees’ means the trustees of the pool charities.

 

2. Administration

 

[See OG 49 B2 which explains why two separate pool charities may be needed.]

 

1) The trustees may combine the investments and moneys belonging to the participating charities [in permanent endowment funds] [in permanent or expendable endowment funds] [in expendable endowment or income reserve funds] [in income reserve funds] [in any funds] into one pooled fund. The name of the pooled fund will be the [Insert name] Capital Common Investment Fund.

 

2) The trustee may combine the investments and moneys belonging to the participating charities [in income reserve funds] [in expendable endowment or income reserve funds] [in expendable endowment funds] [in any funds] into one pooled fund. The name of the pooled fund will be the [Insert name] Income Common Investment Fund.

 

3) The trustee may by resolution amend the name of the pooled funds with the prior written approval of the Commission. The trustees must promptly send to the Commission a copy of any amendment made.

 

4) Each pooled fund will:

 

a) constitute a charity (the pool charities); and

 

b) be a common investment fund within the meaning of section 96 of the Charities Act 2011 and a pooling scheme fund within the meaning of The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001).

 

5) This Scheme is a common investment scheme within the meaning of the Charities Act 2011.

[Add the following sub-clause where a linking direction is required:]

 

6) Under the power provided by section 12 of the Charities Act 2011, and subject to any further direction, the Commission directs that all the charities administered by the [insert name of trustees] as at the date of this Scheme, including the common investment funds established by this Scheme, will be treated as a single charity for the purposes of Part 4 (registration) and Part 8 (accounting) of the Charities Act 2011.

 

3. Trustees

 

[Insert name(s) of trustee body/trustees *!*] are the trustees of the pool charities.

 

4. Additions to assets of the pool charities

 

The trustees may add to the appropriate pool charity:

 

1) any additional investments and moneys of the participating charities held in the funds referred to in clause 2(1) or clause 2(2);

 

2) any investments and moneys held in equivalent funds to those referred to in clause 2(1) and clause 2(2) and belonging to any other charity of which the trustees are trustees (unless such addition is expressly precluded by or would be inconsistent with the trusts of the charity concerned).

 

5. Share in the assets of the pool charities

 

Subject to the provisions of this scheme, each of the participating charities having investments or moneys in either pool charity will be entitled to the capital and income of that pool charity in proportions determined by reference to:

 

1) the amount or value of the assets transferred to the pool charity by or on behalf of each participating charity; and

 

(2) the value of the assets of the pool charity at the time of the transfers.

 

6. Calculations

 

The trustees may obtain such valuations, and carry out and revise such calculations, as may from time to time be necessary for the purpose of settling, adjusting and regulating the respective interests of the participating charities in the pool charities.

 

7. Rules

 

The trustees may make rules and regulations consistent with this Scheme for

 

(1) the administration and management of the pool charities; and

 

(2) the charging of the costs of administering the pool charities to the participating charities.

 

8. Reserve funds

 

(1) The trustees may establish and maintain reserve funds for the following purposes:

 

(a) avoiding fluctuations in the amounts of income distributed and generally for regulating the distribution of income;

 

(b) meeting current or anticipated expenses properly payable out of income.

 

(2) The trustees may from time to time withhold from distribution such amounts of income as they think fit and credit them to the reserve funds.

 

(3) Any sum which is subsequently applied from the reserve funds must be treated as if it had accrued as income at the time the application is made.

 

9. Questions relating to the Scheme

 

The Commission may decide any question put to them concerning:

(1) the interpretation of this Scheme; or

 

(2) the propriety or validity of anything done or intended to be done under it.

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OG 49 D4 MODEL SCHEME – TWO POOL CHARITIES WITH SOLE TRUSTEES 14 March 2012 

1. Definitions

 

In this Scheme:

 

‘the participating charities’ means the charities identified [at the beginning of this Scheme] [in the schedule to this Scheme];

 

‘the pool charities’ means the charities created by clause 2 of this Scheme;

 

‘the trustee’ means the trustee of the pool charities.

 

2. Administration

 

[See OG 49 B2 which explains why two separate pool charities may be needed.]

 

(1) The trustee may combine the investments and moneys belonging to the participating charities [in permanent endowment funds] [in permanent or expendable endowment funds] [in expendable endowment or income reserve funds] [in income reserve funds] [in any funds] into one pooled fund. The name of the pooled fund will be the [Insert name] Capital Common Investment Fund.

 

(2) The trustee may combine the investments and moneys belonging to the participating charities [in income reserve funds] [in expendable endowment or income reserve funds] [in expendable endowment funds] [in any funds] into one pooled fund. The name of the pooled fund will be the [Insert name] Income Common Investment Fund.

 

(3) The trustee may by resolution amend the name of the pooled funds with the prior written approval of the Commission. The trustee must promptly send to the Commission a copy of any amendment made.

 

(4) Each pooled fund will:

 

(a) constitute a charity (the pool charities); and

 

(b) be a common investment fund within the meaning of section 96 of the Charities Act 2011 and a pooling scheme fund within the meaning of The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001).

 

(5) This Scheme is a common investment scheme within the meaning of the Charities Act 2011.

[Add the following sub-clause where a linking direction is required:]

 

(6) Under the power provided by section 12 of the Charities Act 2011, and subject to any further direction, the Commission directs that all the charities administered by [insert name of trustee] as at the date of this Scheme, including the common investment funds established by this scheme, will be treated as a single charity for the purposes of Part 4 (registration) and Part 8 (accounting) of the Charities Act 2011.

 

3. Trustee

 

[Insert name of body corporate or other trustee body] is the trustee of the pool charities.

 

4. Additions to the assets of the pool charities

 

The trustee may add to the assets of the appropriate pool charity:

 

(1) any additional investments and moneys of the participating charities held in the funds referred to in clause 2(1) or clause 2(2);

 

(2) any investments and moneys held in equivalent funds to those referred to in clause 2(1) and 2(2) and belonging to any other charity of which the trustee is trustee (unless such addition is expressly precluded by or would be inconsistent with the trusts of the charity concerned).

 

5. Share in the assets of the pool charities

 

Subject to the provisions of this scheme, each of the participating charities having investments or moneys in either pool charity will be entitled to the capital and income of that pool charity in proportions determined by reference to:

 

(1) the amount or value of the assets transferred to the pool charity by or on behalf of each participating charity; and

 

(2) the value of the assets of the pool charity at the time of the transfers.

 

6. Calculations

 

The trustee may obtain such valuations, and carry out and revise such calculations, as may from time to time be necessary for the purpose of settling, adjusting and regulating the respective interests of the participating charities in the pool charities.

 

7. Rules

 

The trustee may make rules and regulations consistent with this scheme for:

 

(1) the administration and management of the pool charities; and

 

(2) the charging of the costs of administering the pool charities to the participating charities.

 

8. Reserve funds

 

(1) The trustee may establish and maintain reserve funds for the following purposes:

 

(a) avoiding fluctuations in the amounts of income distributed and generally for regulating the distribution of income;

 

(b) meeting current or anticipated expenses properly payable out of income.

 

(2) The trustee may from time to time withhold from distribution such amounts of income as it thinks fit and credit them to the reserve funds.

 

(3) Any sum which is subsequently applied from the reserve funds must be treated as if it had accrued as income at the time the application is made.

 

9.Questions relating to the Scheme

 

The Commission may decide any question put to them concerning:

 

(1) the interpretation of this Scheme; or

 

(2) the propriety or validity of anything done or intended to be done under it.

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OG 49 G1 GLOSSARY OF TERMS FOR SERIES 49 ONLY 2 October 2003

 

2001 Order

The 2001 Order means the Financial Services and Markets Act 2000 (Exemption) Order 2001 SI No.1201.

Participating charities

Participating charities are the charities which are eligible to contribute funds to a pool charity. Some or all of them may be special trusts. The trustee bodies of all the participating charities must be identical (see section 3.1 of OG 49 A1).

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OG 49 X1 CHECKLIST – MAIN POINTS TO CONSIDER 14 March 2011

 

There are a number of fundamental points which have to be considered before making a pooling Scheme. The following is a brief reminder of these. They link to the OGs which explain why they are important and provide more detail.

 

Check that charities are all administered by same body of trustees and that that body is proposed as the trustee of the pool charity – see section 3.1 of OG 49 A1. (Section 3.4 of OG 49 A1 explains the consequences of failing to do this – that is, the danger of inadvertently setting up a hybrid pool charity.)

If the trustees are not the same, could the charities take advantage of the provisions of the Universities and Colleges (Trusts) Act 1943 - see section 7 of OG 49 A1.

 

Consider rationalisation by amalgamating Scheme, or use of small charities provisions, as an alternative, or as a preliminary step, to a pooling Scheme (see section 2 of OG 49 B1).

 

Confirm that trustees are clear why they would prefer to pool under the authority of a pooling scheme rather than under the general statutory powers given by the Trustee Act 2000– see section 2.1 of OG 49 A1.

 

Clarify whether endowed funds, or expendable funds, or both, are to be pooled.

 

Clarify whether a single pool charity or two pool charities is/are required.

 

See OG 49 B2 on these two points.

 

accountant_referObtain accountancy advice if you are in any doubt as to how the guidance about mixed pools applies in any particular case. See OG 49 B2.

 

lawyer_referAre the trustees prepared to accept one of our model Schemes without modification? If not, you will need to seek legal advice - see section 6 of OG 49 B3.

 

lawyer_referIs it proposed that the pool charity will accept cash deposits for placing in a deposit account? If so, this may indicate that the trustees wish to establish a common deposit fund and you will need to seek legal advice – see section 6 of OG 49 A1.

 

Check on Register Plus that the proposed name(s) of the pool charity (or charities) is (are) not too similar to any existing charity (see OG 330).

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