Fwd: Re: Memorandum of association - Wikimediauk-l

20 Dec 2005

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Here, as promised, is Diane Cabell's comments and advice about our draft
MoA and AoA.
Diane Cabell wrote about the MoA:
...
James,
Here are some initial thoughts on the memorandum.

Unlike commercial corporations, charities do not have to include the

term "Limited" in their name, but it does require a special approval
process which might take longer. I would suggest you insert the full name
as "Wiki Educational Resources Ltd." if time is of the essence.

The objects you describe in Sec. 3 are not "exclusively charitable"

and could be rejected.  In other words, a commercial enterprise might
adopt these same objects.  You need to include some language that shows
how you operate on a charitable basis. See
http://www.charity-commission.gov.uk/registration/exobjintro.asp
Also, "campaign" is a loaded term and could be interpreted to include
impermissible political activities.  Generally, charities can't
support political candidates although they are often permitted to engage
in legislative work, so one needs to be cautious about this.
Here are the objects that I would suggest for Sec. 3:
"to advance the education of the general public worldwide by
(a) publishing a free, publicly-accessible encyclopedia and other
    information resources via the internet and in other media;
(b) publishing other informational and educational materials at no cost
    or at no profit; and
(c) encouraging the adoption of practices and policies that reduce the
    cost of education by utilizing volunteer public participation in
    the creation, dissemination and expansion of informational material."
I can't assure you that this language will be approved either, but it is
less likely to raise red flags.  One is allowed great leeway in
conducting activities that promote one's objects, so it isn't necessary
to get too detailed here.

Sec. 4(a)(x) should be amended to read as below.  The last clause

should qualify A, B and C; your version uses it only to qualify C.
"(x) to:
(A) deposit or invest funds;
(B) employ a professional fund-manager; and
(C) arrange for the investments or other property of the Charity to be
held in the name of a nominee;
in the same manner and subject to the same conditions as the trustees of
a trust are permitted to do by the Trustee Act 2000."

One doesn't cite to a "Sub-sub-clause;" one merely cites to a

"sub-clause".

If you are going to add references to overseas organizations in some

clauses [as you do in Sec. 4(a)(vi)], you should add it to all similar
references throughout the document; otherwise, the law would presume you
intended to restrict those other clauses to UK domestic activity.  See
Sec. 8 for example, which determines where the assets may be distributed
if the company is dissolved.
I'll send another email about the Articles.  If you have any questions at
all, don't hesitate to ask.
... and this about the AoA:
...

Sec. 9(b) -- needs editing as it repeats itself on the succeeding

page.
This should be a simple either/or choice between two options: either
X% of the membership or Y members, whichever is greater (or lesser, as
you prefer).
75% is a very high quorum.  The members must meet annually and are
required to take certain mandatory actions.  If the membership is
large, failure to meet the 75% minimum attendance could keep you from
holding the meeting even after 74% of the members have made the effort
to show up.   This can actually become a tool to disrupt the company.
 Generally a simple majority or less is sufficient for a quorum.  If
the membership is very small, say fewer than 10, then 75% may be
totally appropriate, but in this day and age it may be hard to get
even that small a number together for a meeting.
I'd suggest the following:
  "A quorum is:
    . a majority of the members entitled to vote upon the business to
      be conducted at the meeting; or
    . one tenth of the total membership at the time
   whichever is the greater."
You may, as a separate matter, require the vote of a supermajority to
pass any resolution at the meeting.  A simple majority vote is
required for votes at meetings of the directors [See Sec. 33(e)].  You
may wish to add a mirror of 33(e) to Sec. 16.  You can adjust Sec.
16's voting requirement to 75% but bear in mind that a supermajority
requirement can often result in a frozen corporation unable to muster
enough votes to take action.  While you may want broad support for
some types of votes, you certainly don't want to be held up on more
mundane activities.

Sec. 9(d) and (e)

It is generally risky to condition the corporation's activities on the
presence of any single individual.  A dissatisfied (or ailing)
Treasurer could simply fail to appear and hold up all the proceedings,
even those that don't affect the budget (such as election of officers,
appointment of additional directors, amendment of bylaws, etc.).  The
directors have all the rights and obligations of a treasurer.  They
may delegate these to an officer, if they choose.  Generally, it is
accomplished by enacting a set of bye laws for the corporation that
specifies the titles of the officers and their duties and empowers
each as appropriate.  The members of the corporation, on the other
hand, are not generally responsible for the day-to-day operations of
the company and you don't want to hold up those activities until the
membership (often a very large class of individuals) holds its
meeting.
Instead of requiring the physical presence of a Treasurer, or allowing
one individual to hold up the proceedings of the corporation, it might
be more appropriate to enact a bye law that sets objective standards
for voting on budgetary items.  For example, requiring that any vote
having a direct effect on expenditures should, _where possible_, be
reviewed and reported on by the Treasurer in advance.  See Sec. 38(b)
as an example of objective language. The law requires the Directors to
take certain actions by certain dates (including filing annual reports
with Companies House and the Charity Commission and, of course, filing
tax returns), so it would be risky to make that review mandatory.
Otherwise the company might be in violation of the law because a
disgruntled Treasurer doesn't want to cooperate.  Sec. 34(a) and (d)
present the same problem.
Note: If you intend to open a UK bank account, the directors will need
to delegate the authority to do so to some specific individual.  The
bank may require that the resolution contain particular language and
name the specific individual.  Check with your bank first.

10(a)

The final clause should not be merged into sub-section (ii).  It
should qualify both (i) and (ii), so insert a line space after the
word "present;":

11(a) doesn't make sense to me.

The Charity Commission template uses the simple statement "General
meetings shall be chaired by the person who has been appointed to
chair meetings of the Directors."
Note: Directors are not necessarily members of the company unless you
require this elsewhere in the document.  The UK concept of a charity
is that the directors are the trustees who act to direct a operations
that, in turn, benefit the membership.  An example is a bunch of fat
cats who decide that the world needs another soup kitchen for the
deserving poor.  The fat cats are generally the directors/trustees and
the deserving poor are generally the members.  The rights of the
members of a charity are more limited than those of a commercial
share-holder organization.The reason is that the directors are
responsible for funding the operation and may decide, if they see fit,
to change the beneficiaries of their operations (perhaps turn it into
a library if they decide that the deserving poor are getting too fat).
Even for shareholder organizations, the members generally have very
few powers over daily operations.

Sec. 15 permits membership votes without a face-to-face meeting as

does Sec. 37 for meetings of directors.  Very handy.  You may wish to
add (either in this section or in a new clause at the end of the
document) that electronic and facsimile signatures shall be considered
as valid signatures wherever signatures are required by the Articles.
This would allow you to get faxed copies when you want to take a vote
without holding a general meeting.  The downside is that the
signatures are easier to forge, so it may be a tough choice.  Where
the membership and directors are few and well-known to each other,
electronic sigs are pretty safe.

Sec. 34(a) and (d) - see earlier comments about the Treasurer.

The Articles require signatures.  See page 24 of the template at

http://www.charity-commission.gov.uk/
    Library/publications/pdfs/gd1text.pdf.
As always, I'm happy to answer any questions or clarify obtuse
comments. Let me know if you'd like to chat about it.
Obviously, there are some changes suggested here that we may not agree
with (the change in spirit of them, etc., perhaps), but I thought that,
rather that try to work out all of them on my own, I'd put them here so
that we can all try to deal with the necessary changes together.
Yours sincerely,
- --
James D. Forrester
Wikimedia : [[W:en:User:Jdforrester|James F.]]
E-Mail    : james@jdforrester.org
IM (MSN)  : jamesdforrester@hotmail.com
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