Making More Of The London 2012 Legacy
13th November 2012 James Maloney, Farrer & Co
Sport as a charitable purpose and the role family businesses can play in helping deliver the London 2012 legacy.
The London 2012 Olympics and Paralympics promised to "inspire a generation" and so, with a glorious summer of sport now behind us, the focus shifts to translating the hugely successful games into a lasting legacy. James Maloney looks at how entrepreneurs can support sports legacy programmes, focusing on establishing your own charity.
Sport as a charitable purpose
The legal relationship between charity and sport has not always been straightforward. Prior to the implementation of the Charities Act 2006, the promotion of sport was not, in itself, a charitable purpose, meaning that an organisation set up to promote sport would not, generally, be charitable. Sport could be a means to achieving another charitable purpose; for example, as part of the education of young people or for people with a disability.
Under the Charities Act 2006 (now consolidated in the Charities Act 2011), the "advancement of amateur sport" is now a description of a charitable purpose in its own right. Guidance from the Charity Commission on precisely what advancing amateur sport encompasses is still awaited. But, while the scope of this purpose remains unclear, it does seem to offer new opportunities for funders wishing to support community and grassroots sports programmes.
Funders looking to support work of this kind may be aware that there are a range of existing charities already involved in harnessing sport for development. Some are focused on the UK while others work internationally.
In the UK, the Youth Sport Trust aims to help all young people (from 18 months to 18 years old) achieve their full potential in life by delivering high quality physical education and sport opportunities. The Trust's Chief Executive, John Steele, has recently been urging fresh cross-party determination to deliver the promised legacy to the Games.
An example of a charity involved working with sport for development projects internationally is the Laureus Sport for Good Foundation. It provides funding, training and strategic advice to sports projects across the world and is currently supporting 104 projects in 34 countries.
Some would-be philanthropists may prefer to establish their own charity to support sports legacy projects – either by running their own programmes or by making grants to existing programmes or to the charities that support them. For example, sported. is a national charity that provides financial assistance and business resources to over 2,000 community sport organisations that work with young people in disadvantaged areas of the UK.
Sported was established by entrepreneur Sir Keith Mills to ensure a real legacy from London 2012 is achieved and is now seeking partners from the private and public sector who share their passion to inspire young people through sport.
Establishing a new charity
Charities can be established using a variety of legal structures although the two most popular are trusts and companies limited by guarantee.
Historically the trust was the legal structure of choice for charities. In recent years, however, an increasing number of charities have chosen to be established as companies limited by guarantee, primarily to limit the potential personal liabilities of their trustees.
Because of this potential liability, we usually recommend that promoters of a new charity choose a trust only if the charity is to focus on grant-making. This is because the trustees are unlikely to be exposed to the risk of liability if they are simply making grants.
If a charity is to employ staff, own or manage land or carry out any activities of its own beyond simply making grants (or if it is possible that it may wish to do any of these things in the future), it is generally more appropriate for it to be established as a charitable company limited by guarantee.
It is hoped that a new corporate structure – the charitable incorporated organisation (or CIO) – will available before the end of 2012. CIOs will provide the benefits of limited liability status, but with reduced administration as (unlike companies limited by guarantee) they will not need to register with and report to multiple regulators.
Key issues and stages
Once you have decided on the structure, a key question is to decide what it is you want your charity to do. Every charity has objects which set out the purposes for which the charity is established. These must be defined carefully in a way that is exclusively charitable.
You will also need to find a group of at least three people to act as the charity's initial trustees. Trustees are the people who control and manage the administration of a charity. They oversee the direction of the charity and have the power to make most decisions affecting the charity's day to day operations. As you would expect, they are subject to a range of duties and responsibilities.
Charities that are set up as companies limited by guarantee have a two-tier governance structure. As well as trustees, they also have members who are responsible for decisions affecting the structure of the company (e.g. changes to the Articles of Association or a proposal to merge with another charity).
Once you have decided on the charity's structure, objects and the first trustees (and, if applicable, the first members), you would need to agree a constitution and establish the charity formally (at Companies House if a company structure is used).
Regardless of which structure is used, you would then apply for registration with the Charity Commission (the regulator of charities in England and Wales).
This is not the end of the process, however, as the new charity also needs to be registered with HMRC.
This is important for philanthropists who wish to make tax-efficient gifts to their charity, as only then will it be possible to claim charitable tax reliefs (including Gift Aid on donations).
If you require further information on anything covered in this briefing please contact James Maloney (firstname.lastname@example.org) or your usual contact at Farrer & Co.