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Is Your School Thinking of Establishing a Charitable Foundation?

Why set up a charitable foundation?

The education sector is under greater financial pressure and political scrutiny than ever before, and some schools are considering establishing a foundation as a means of managing risk.

Advantages of having a foundation include (i) if anything happens to the school the foundation is structured separately (and should therefore be protected from creditors), and (ii) that the foundation will have a separate board, enabling appointment of board members with specifi c interest, skills, and expertise in investing and distributing funds, including those who may not wish to be a governor of the school.

What could you use a foundation for?

A foundation can be used, for example, to focus on fundraising, for supporting bursaries, or for contributing funds towards capital projects for a particular school. It can also be established to provide a focussed means of fundraising for a group of schools.

What are some issues to consider?

Careful consideration must be given to the foundation’s objects, including whether the objects advance education by reference to a named school or schools, and/or whether they might advance education more broadly, for the public benefit (and for other schools).

Will the foundation be funded by the school, by a large investment, or might it actively fundraise? If you are looking to raise funds for particular projects, will the school raise those funds or will it be the foundation? That can determine who holds the funds and who gets to decide where those funds go.

You will need to ensure you have measures to resolve any disputes or differences that can arise and to help manage conflicts of interest.

Finance and data protection are areas of risk that will also need to be carefully managed. You will need a separate bank account, investment strategy, and data protection policies and procedures.

A note of caution – independent schools have used bursary funds to help evidence that they deliver public benefit. Accordingly, public benefit may diminish if bursary funding activities are transferred to a foundation. We can help navigate the complexities.

How long will it take to set up?

If you set the foundation up as a charitable trust or a charitable company it can ‘exist’ very quickly as a legal structure either by establishing a trust deed or by registering the new charitable company at Companies House. In these cases, you can start to use the foundation almost immediately. It will then need to be registered with the Charity Commission once it has income of over £5,000. If you chose instead to establish a CIO it will only come into existence once it is registered by the Charity Commission, and there is no income threshold for registration.

Whilst some charities are registered within a week, it is more likely it will take five or more months to obtain registered charitable status, so this must be planned for. Once registered with the Charity Commission, the foundation will need to be registered with HMRC.

For further information please follow the link to our Is Your School Thinking of Establishing a Charitable Foundation brochure. 

Contact Joanna Blackman, or call 0113 204 1114, to discuss how Wrigleys can help
Joanna Blackman View Biography

Joanna Blackman

Direct Line: 0113 204 1114

Associate
Leeds

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