JUDITH HILL
The Company Structure
JL h e p u r p o s e of this p a p e r is t o c o n s i d e r t h e c o n s t i t u t i o n of
a c o m p a n y as a p o s s i b l e a p p r o p r i a t e s t r u c t u r e f o r t h e p r i v a t e
porate b o d y equivalent t o the c o m p a n y which has b r o a d l y
p r o t e c t i o n a n d m a i n t e n a n c e of m o n u m e n t s . T h e e x a m i n a t i o n will b e c a r r i e d o u t b y r e f e r e n c e t o E n g l i s h l a w b u t it
s i m i l a r c h a r a c t e r i s t i c s . T h e s e are:
s e p a r a t e legal p e r s o n a l i t y ;
t h e l i m i t a t i o n of liability f o r t h e d e b t s of t h e c o m p a n y t o
w o u l d a p p e a r t h a t t h e salient f e a t u r e s of E n g l i s h l a w a r e
l a r g e l y paralleled in o t h e r legal s y s t e m s .
t h e c o m p a n y ' s assets;
t h e c o n c e p t of f r a g m e n t e d o w n e r s h i p w i t h t h e i n d i v i d u a l
T h e r e is a v e r y g o o d r e a s o n f o r c a r r y i n g o u t t h i s e x a m i n a t i o n b y r e f e r e n c e t o E n g l i s h law. T h e E n g l i s h legal s y s t e m
e n t i t l e m e n t of s e p a r a t e o w n e r s b e i n g r e p r e s e n t e d b y s h a r e s
in t h e c o m p a n y ;
d o e s n o t y e t h a v e a special k i n d of i n c o r p o r a t e d b o d y d e s i g n e d p u r e l y f o r n o t - f o r - p r o f i t activities. T h u s , as a m a t t e r
a s i m i l a r s t r u c t u r e of g o v e r n m e n t , h a v i n g t h e m e m b e r s of
t h e c o m p a n y m e e t i n g in r e g u l a r g e n e r a l m e e t i n g s w i t h t h e
of p r a c t i c e , t h e E n g l i s h legal s y s t e m d o e s c u r r e n t l y u s e t h e
s t r u c t u r e of a c o m p a n y as a v e h i c l e f o r t h e p r o t e c t i o n of t h e
m a n a g e m e n t of t h e c o m p a n y d e l e g a t e d t o a m a n a g e m e n t
board.
h e r i t a g e . T h i s m e a n s t h a t t h e r e a r e p r a c t i c a l e x a m p l e s available s u p p l y i n g conclusions t o be d r a w n which can p r o v e o r
d i s p r o v e a n y t h e o r y d e r i v e d f r o m legal c o n c e p t s .
T h e f i r s t q u e s t i o n t o a d d r e s s is w h a t is m e a n t b y a c o m p a n y in this c o n t e x t . I n its m o s t b a s i c f o r m , a c o m p a n y is c r e a t ed w h e n a g r o u p of p e o p l e , o p e r a t i n g t o g e t h e r , e m p l o y s o m e
legal m e c h a n i s m w h e r e b y t h e y c r e a t e , o u t of t h a t c o - o p e r a t i o n , a legal e n t i t y w h i c h h a s a s e p a r a t e legal i d e n t i t y d i s t i n c t
f r o m t h o s e of t h e i n d i v i d u a l s i n v o l v e d .
All legal s y s t e m s h a v e a n u m b e r of m e c h a n i s m s f o r a c h i e v -
T h e r e is o n e d i s t i n c t i o n h e r e b e t w e e n t h e d i f f e r e n t j u r i s d i c t i o n s , in t h a t m a n y j u r i s d i c t i o n s r e q u i r e a c o m p a n y t o
have a f u r t h e r supervisory board to oversee the m a n a g e m e n t
b o a r d , b u t t h a t is p e r h a p s a p o i n t of d e t a i l . M o s t j u r i s d i c tions also distinguish b e t w e e n public c o m p a n i e s w h e r e the
s h a r e s a r e f r e e l y a v a i l a b l e t o m e m b e r s of t h e p u b l i c a n d can
be b o u g h t and sold o n the Stock Exchange, and private c o m p a n i e s w h e r e t h e o w n e r s h i p a n d t r a n s f e r of t h e s h a r e s is
m o r e r e s t r i c t e d a n d t h e s h a r e s a r e n o t q u o t e d and p u r c h a s a ble t h r o u g h t h e m a r k e t .
ing i n c o r p o r a t i o n . U n d e r E n g l i s h l a w a b o d y c a n b e i n c o r -
A c c o r d i n g l y , it s e e m s s a f e t o a s s u m e t h a t f o r t h e p u r p o s e s
of e x a m i n i n g t h e c o m p a n y as a s u i t a b l e v e h i c l e f o r m a i n t e -
p o r a t e d b y R o y a l C h a r t e r ; b y its o w n i n d i v i d u a l s t a t u t e ; u n d e r t h e I n d u s t r i a l a n d P r o v i d e n t S o c i e t i e s A c t s ; as a F r i e n d -
n a n c e of t h e h e r i t a g e , E n g l i s h l a w is s u f f i c i e n t l y s i m i l a r t o
t h a t of o t h e r j u r i s d i c t i o n s , t o j u s t i f y c o n f i n i n g t h e e x a m i n a -
ly Society, as well as u n d e r t h e C o m p a n i e s A c t s . T h e r e is
e v e n m a c h i n e r y ( c u r r e n t l y u n d e r t h e C h a r i t i e s A c t 1993)
t i o n t o c o n s i d e r a t i o n of t h e f o r m s u n d e r E n g l i s h law.
T h e r e a r e t w o t y p e s of c o m p a n i e s i n c o r p o r a t e d u n d e r t h e
w h e r e b y t h e t r u s t e e s of a t r u s t can i n c o r p o r a t e t h e t r u s t e e
b o d y a l o n e , leaving t h e t r u s t and t h e i r r o l e as t r u s t e e s i n t a c t .
C o m p a n i e s Acts: a c o m p a n y limited by shares o n the o n e
h a n d a n d a c o m p a n y l i m i t e d b y g u a r a n t e e o n t h e o t h e r . In a
If o n e e x a m i n e s v e r y b r i e f l y t h e c h a r a c t e r i s t i c s of t h e s e
d i f f e r e n t t y p e s of i n c o r p o r a t e d b o d y , m o s t can s w i f t l y b e
d i s c o u n t e d f o r t h e p u r p o s e s of this e x e r c i s e . B o d i e s i n c o r p o rated b y t h e i r o w n p a r t i c u l a r s t a t u t e t e n d in t h e E n g l i s h s y s -
c o m p a n y l i m i t e d b y s h a r e s t h e liability of t h e s h a r e h o l d e r s
t o m e e t t h e d e b t s of t h e c o m p a n y is l i m i t e d t o t h e a m o u n t
p a i d f o r t h e s h a r e s at t h e o u t s e t . O n c e t h e s h a r e s h a v e b e e n
a l l o t t e d t o an i n d i v i d u a l at a p a r t i c u l a r f i g u r e and t h a t f i g u r e
t e m t o b e q u a s i p u b l i c b o d i e s , s u c h as n a t i o n a l m u s e u m s , a n d
has been fully paid up, w h e t h e r by the original o w n e r o r a
s u b s e q u e n t o w n e r , t h e n t h e s h a r e h o l d e r of t h e i n d i v i d u a l
a r e t h u s o u t s i d e t h e r e m i t of this d i s c u s s i o n . Similarly, b o d ies i n c o r p o r a t e d b y R o y a l C h a r i e r h a v e e i t h e r b e e n e s t a b -
s h a r e s will n o t b e liable f o r a n y f u r t h e r s u m s in r e s p e c t of
d e b t s i n c u r r e d b y t h e c o m p a n y . In t h e case of a c o m p a n y
lished for a very long time, o r are being established t o f u r t h e r
g o v e r n m e n t policy. T h e y t e n d , t h e r e f o r e , t o b e s c h o o l s , u n i -
l i m i t e d b y g u a r a n t e e t h e s i t u a t i o n is p r e c i s e l y t h e o p p o s i t e .
versities, h o s p i t a l s a n d i n s t i t u t i o n s of t h a t n a t u r e . A n I n d u s trial a n d P r o v i d e n t S o c i e t y ' s c o n s t i t u t i o n m u s t b y l a w f o l -
A m e m b e r of s u c h a c o m p a n y d o e s n o t a c t u a l l y s u b s c r i b e
a n y m o n e y at all u n l e s s a n d u n t i l t h e c o m p a n y r e a c h e s a sit-
l o w a v e r y rigid f o r m a t , w h i c h is n o t easily a d a p t e d t o t h e
u a t i o n w h e r e it is u n a b l e t o p a y its d e b t s . I n s t e a d t h e m e m ber, w h e n h e b e c o m e s a m e m b e r , w h e n e v e r t h a t m i g h t be,
p r e s e r v a t i o n of t h e h e r i t a g e . T h u s t h e t y p e s of c o r p o r a t e
b o d y t o b e c o n s i d e r e d f o r t h e p u r p o s e s of this d i s c u s s i o n a r e
a g r e e s t o g u a r a n t e e t h e c o m p a n y ' s d e b t s u p to a c e r t a i n s u m .
S h o u l d t h e t i m e e v e r c o m e w h e n t h e c o m p a n y n e e d s t o call
t h o s e i n c o r p o r a t e d u n d e r t h e C o m p a n i e s A c t 1985.
u p o n t h e g u a r a n t e e , it is t h e n t h a t t h e m e m b e r m u s t p r o v i d e
Legal s y s t e m s o t h e r t h a n t h e U K s i m i l a r l y all h a v e a n u m b e r of d i f f e r e n t t y p e s of i n c o r p o r a t i o n , t h o u g h in S w e d e n
t h e r e is o n l y o n e t y p e t h a t a f f o r d s t h e b e n e f i t of l i m i t e d liability. F r a n c e , i n d e e d , t o a casual o b s e r v e r a p p e a r s t o h a v e a
d i f f e r e n t k i n d of i n c o r p o r a t e d b o d y f o r e v e r y c o n c e i v a b l e
t y p e of a c t i v i t y ! Be t h a t as it m a y , all j u r i s d i c t i o n s h a v e a c o r -
t h e s u m in q u e s t i o n . T h i s is u s u a l l y s o m e w h e r e b e t w e e n £ 1
a n d £ 10 s o t h e g u a r a n t e e is s c a r c e l y an o n e r o u s o n e .
T h e t w o t y p e s of c o m p a n i e s t e n d t o b e u s e d f o r t o t a l l y d i f f e r e n t p u r p o s e s . A c o m p a n y l i m i t e d b y s h a r e s is a vehicle f o r
i n v e s t m e n t . S h a r e h o l d e r s b u y d i f f e r i n g n u m b e r s of s h a r e s
a n d receive a c o r r e s p o n d i n g p r o p o r t i o n of t h e i n c o m e of t h e
c o m p a n y a n d its a s s e t s o n d i s s o l u t i o n . It is u s e d f o r n o r m a l
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c o m m e r c i a l v e n t u r e s . A c o m p a n y limited b y g u a r a n t e e o n
t h e o t h e r h a n d d o e s n o t a l l o w f o r any d i s t i n c t i o n b e t w e e n
t h e financial i n v o l v e m e n t of t h e v a r i o u s m e m b e r s of t h e
c o m p a n y . T h u s t h e m e m b e r s all g u a r a n t e e t h e s a m e s u m and
all s h a r e equally in any d i s s o l u t i o n . It is this t y p e of c o m p a n y w h i c h in E n g l a n d w o u l d be used f o r t h e p r e s e r v a t i o n of
t h e heritage, and it is p r o b a b l y o n l y its equivalent in o t h e r
j u r i s d i c t i o n s that w o u l d similarly be a p p r o p r i a t e f o r this
purpose.
In fact, in E n g l a n d , u n l i k e m a n y o t h e r j u r i s d i c t i o n s t h e
p r e s e r v a t i o n of t h e heritage is capable of q u a l i f y i n g as a c h a r itable p u r p o s e . P r o v i d e d t h e c o m p a n y limited b y g u a r a n t e e
has a m e m o r a n d u m w h i c h p r o h i b i t s t h e d i s t r i b u t i o n of t h e
assets t o t h e m e m b e r s o n any w i n d i n g u p and r e q u i r e s i n stead t h a t t h e assets b e passed o v e r t o a similar charitable
b o d y , t h e c o m p a n y will a l m o s t certainly q u a l i f y as a charity.
It will a c c o r d i n g l y have t o register w i t h t h e C h a r i t y C o m mission. W h i l s t this m a y add a slight c o m p l i c a t i o n t o t h e
lives of those r u n n i n g t h e c o m p a n y , since it w o u l d i n t r o d u c e
a n o t h e r level of regulation b y t h e C h a r i t y C o m m i s s i o n in
a d d i t i o n t o t h e regulations i m p o s e d b y v i r t u e of t h e C o m p a nies Acts, m o s t c o m p a n i e s w o u l d regard this as m o r e t h a n
o u t w e i g h e d b y t h e b e n e f i t s of charitable status w h i c h it
b r i n g s , n o t least t h e relief f r o m certain taxes. A c c o r d i n g l y , in
m o s t cases t h o s e establishing c o m p a n i e s d e s i g n e d t o p r e serve a heritage asset will take steps necessary t o e n s u r e t h a t
registration as a c h a r i t y is possible. T h i s will m e a n , f o r e x a m ple, i n c l u d i n g in t h e m e m o r a n d u m a p r o h i b i t i o n against t h e
r e m u n e r a t i o n of t h e d i r e c t o r s a n d e n s u r i n g t h a t t h e
c o m p a n y ' s activities d o n o t involve political activism.
All of w h a t has been said s o f a r is really b y w a y of i n t r o d u c t i o n t o explain w h y , in c o n s i d e r i n g h o w a p p r o p r i a t e a v e hicle t h e c o m p a n y is f o r t h e p r o t e c t i o n of t h e heritage, this
p a p e r will d o so b y r e f e r e n c e t o t h e charitable c o m p a n y l i m ited b y g u a r a n t e e . Its suitability f o r this task will be e x a m ined u n d e r five heads as f o l l o w s : L i m i t e d Liability; C o n f l i c t
of D u t i e s ; A n s w e r a b i l i t y ; Flexibility a n d G e n e r a l C o n c e p t .
1. L i m i t e d L i a b i l i t y
As has been said above, it is a c o m m o n characteristic of a
c o m p a n y that it has s e p a r a t e legal personality. It is also a
c o m m o n characteristic t h a t this is carried t h r o u g h t o its logical c o n c l u s i o n , n a m e l y t h a t t h e activities of t h e c o m p a n y are
not t h o s e of its s h a r e h o l d e r s , and vice versa. T h u s , c r e d i t o r s
of t h e c o m p a n y are u n a b l e , s h o u l d t h e assets of t h e c o m p a ny be insufficient, to look t o the shareholders t o make good
t h e s h o r t f a l l . T h i s clearly m a k e s it a very attractive vehicle
f o r use in t h e p r e s e r v a t i o n of t h e heritage. O w n e r s h i p of
stately h o m e s o r even of m o n u m e n t s can be a r a t h e r r i s k y
e n d e a v o u r since t h e y t e n d t o cost a g o o d deal t o m a i n t a i n . In
a d d i t i o n a large n u m b e r of visitors t o such a m o n u m e n t
m e a n s a large n u m b e r of o p p o r t u n i t i e s f o r such visitors t o
h a r m t h e m s e l v e s in s o m e way, p a r t i c u l a r l y w h e r e t h e heavy
costs of m a i n t e n a n c e have m e a n t t h a t such m a i n t e n a n c e is
p e r h a p s n o t carried o u t as t h o r o u g h l y as it m i g h t b e . Visitors
w h o have s u f f e r e d h a r m as a result t e n d t o l o o k t o t h e o w n er f o r c o m p e n s a t i o n . It w o u l d , t h e r e f o r e , be very d i f f i c u l t t o
find p e o p l e ready t o t a k e o n r e s p o n s i b i l t y f o r t h e m a i n t e n a n c e of such a m o n u m e n t if their p e r s o n a l assets w o u l d b e
at risk as a result.
If this limited liability is g o o d f o r t h o s e r u n n i n g t h e o r g a n -
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isation, h o w e v e r , it is n o t necessarily g o o d f o r t h e m o n u m e n t o r h e r i t a g e asset itself. In 1993 t h e c o m p a n y w h i c h ran
the Chatterly Whitfield Mining M u s e u m went into liquidat i o n and t h e m u s e u m ' s collection w a s sold f o r t h e b e n e f i t of
t h e c r e d i t o r s . T h i s e v e n t sent s h o c k w a v e s t h r o u g h t h e m u s e u m c o m m u n i t y in t h e U n i t e d K i n g d o m . A s a result m u s e u m s w h i c h a r e c u r r e n t l y b e i n g set u p as c o r p o r a t e b o d i e s
t e n d t o e n s u r e t h a t t h e o w n e r s h i p of t h e c o l l e c t i o n is in a
s e p a r a t e c o m p a n y ( o r p e r h a p s even a t r u s t ) . T h i s m e a n s t h a t
s h o u l d t h e c o m p a n y r u n n i n g t h e m u s e u m get i n t o financial
difficulties t h e c o l l e c t i o n s w o u l d n o t b e available t o m e e t t h e
o p e r a t i n g d e f i c i t . T h i s , of c o u r s e , b r i n g s a n u m b e r of d i f f i culties of its o w n w h i c h are o u t s i d e t h e s c o p e of this discuss i o n . T h e p o i n t serves, h o w e v e r , t o i n d i c a t e t h e l i m i t a t i o n s of
t h e c o m p a n y s t r u c t u r e in this regard.
2. C o n f l i c t of D u t i e s
T h e r e are f u n d a m e n t a l c o n f l i c t s b e t w e e n t h e f i d u c i a r y d u t i e s
of a c o m p a n y d i r e c t o r and t h e f i d u c i a r y d u t i e s of a t r u s t e e of
a c h a r i t y w h o s e o b j e c t s are t h e p r e s e r v a t i o n of t h e heritage.
Such a t r u s t e e is u n d e r a d u t y t o care f o r t h e item of heritage e n t r u s t e d t o h i m and t o d o s o in a w a y t h a t b e n e f i t s t h e
p u b l i c . T h i s will u s u a l l y involve a d e g r e e of p u b l i c access.
T h e f i d u c i a r y d u t i e s of a c o m p a n y d i r e c t o r o n t h e o t h e r
h a n d a r e p r i m a r i l y t o act in t h e i n t e r e s t of t h e c o m p a n y . H e
m u s t in p r i n c i p l e c o n s i d e r first t h e i n t e r e s t s of t h e
c o m p a n y ' s c r e d i t o r s , at least u p t o t h e e x t e n t of t h e
c o m p a n y ' s i n d e b t e d n e s s t o t h e m . S e c o n d l y he o w e s a d u t y
t o t h e m e m b e r s of t h e c o m p a n y f o r t h e c o n t i n u e d business
of t h e c o m p a n y f o r their b e n e f i t . T h i r d l y he m u s t b e c o n c e r n e d w i t h t h e interests of t h e c o m p a n y ' s e m p l o y e e s .
W h i l s t t h e c a r r y i n g o u t of his heritage o b j e c t s m i g h t b e said
t o fall w i t h i n t h e s e c o n d of these d u t i e s , n o n e t h e l e s s it is
clear t h a t , as a c o m p a n y d i r e c t o r , his c o n c e r n s a n d f i d u c i a r y
d u t i e s are m u c h w i d e r t h a n t h e m o r e f o c u s e d r e q u i r e m e n t s
of s i m p l y p r o t e c t i n g a n d m a i n t a i n i n g t h e h e r i t a g e .
U n d e r E n g l i s h law this h a s r e c e n t l y been p r o v e d b e y o n d
p e r a d v e n t u r e w h e n in t h e r e c e n t case of R e A R M S ( M u l t i p l e
Sclerosis R e s e a r c h L i m i t e d ; ' T h e T i m e s ' , 29 N o v e m b e r 1996)
t h e c o u r t held t h a t a legacy left u n d e r a will t o a c o r p o r a t e
c h a r i t y w h i c h had since g o n e i n t o l i q u i d a t i o n ( t h o u g h was
n o t y e t d i s s o l v e d ) s h o u l d p a s s t o t h e c r e d i t o r s of t h e c o m p a n y r a t h e r t h a n b e a p p l i e d e l s e w h e r e in t h e f u r t h e r i n g of o b jects similar t o t h o s e of t h e charity. T h i s clearly w a s n o t in
a n y w a y t h e i n t e n t i o n of t h e testator.
3. A n s w e r a b i l i t y
T h e r e a r e t w o aspects t o this: first a n s w e r a b i l i t y t o an external r e g u l a t o r , a n d s e c o n d l y a n s w e r a b i l i t y t o an internal
m e m b e r s h i p . G i v e n t h a t a n c i e n t m o n u m e n t s are p a r t of t h e
h e r i t a g e a n d given t h a t in E n g l a n d a c o m p a n y p r o t e c t i n g
t h e m will n o r m a l l y h a v e t h e b e n e f i t of tax relief, it is clearly
in t h e interests of t h e p u b l i c t h a t t h o s e r u n n i n g s u c h c o m p a nies s h o u l d b e a n s w e r a b l e t o p u b l i c r e g u l a t o r s . T h e p r o b l e m
w i t h a c h a r i t a b l e c o m p a n y , of c o u r s e , is t h a t it is a n s w e r a b l e
t o t w o such r e g u l a t o r s . A s a c o m p a n y , t h e d i r e c t o r s m u s t
p r o d u c e their a c c o u n t s in a certain f o r m a t a n d s e n d t h e m in
each y e a r t o t h e R e g i s t r a r of C o m p a n i e s , t o g e t h e r w i t h an
a n n u a l r e t u r n , s p e c i f y i n g details relating t o m e m b e r s h i p and
t h e b o a r d of d i r e c t o r s . T h i s i n f o r m a t i o n is available t o t h e
public at large. A s a charity, however, similar i n f o r m a t i o n ,
b u t p r e p a r e d in a d i f f e r e n t f o r m a t , m u s t also b e sent t o t h e
C h a r i t y C o m m i s s i o n w h e r e it will again b e available t o t h e
public t o inspect. W h i l s t this can be irritating, t h e i n f o r m a tion r e q u i r e d b y b o t h r e g u l a t o r s is n o t vastly dissimilar and
t h e d u p l i c a t i o n of e f f o r t is not of m a j o r c o n c e r n t o those
w h o h a v e t o o p e r a t e in this way.
n o t have t h e t i m e t o d e v o t e t h e m s e l v e s t o r u n n i n g t h e c h a r ity, t h e y may, n o n e t h e l e s s , wish t o m a k e s u r e that it goes
along t h e t r a c k t h a t t h e y h a v e envisaged in establishing it. In
such c i r c u m s t a n c e s , t h e y m i g h t b e c o m e t h e m e m b e r s of t h e
c o m p a n y a n d , p e r h a p s , b e given e n h a n c e d p o w e r s of s a c k i n g
o r a p p o i n t i n g d i r e c t o r s . In this w a y t h e original p r o m o t e r s
can effectively k e e p overall c o n t r o l of w h a t h a p p e n s .
T h e s a m e can b y n o m e a n s a l w a y s b e said of a n s w e r a b i l i t y t o t h e m e m b e r s h i p , if " m e m b e r s h i p " m e a n s m e m b e r s h i p
f o r t h e p u r p o s e of t h e C o m p a n i e s A c t s . M a n y charitable
c o m p a n i e s will wish t o have a large m e m b e r s h i p . T h i s gives
t h e m a b o d y of individuals w h o a r e c o m m i t t e d t o t h e a i m s
of t h e o r g a n i s a t i o n and w h o are likely t o d o n a t e f u n d s t o it.
T h e y m a y even b e r e q u i r e d t o pay an annual s u b s c r i p t i o n
w h i c h is a u s e f u l m e a n s of s e c u r i n g regular c o r e f u n d i n g .
T h o s e c o m p a n i e s w h o are well advised, however, will e n s u r e
t h a t such " m e m b e r s h i p " is n o t t h e s a m e t h i n g as m e m b e r s h i p f o r t h e p u r p o s e of t h e C o m p a n i e s A c t s . T h i s can b e
achieved b y r e f e r r i n g t o such individuals as " S u p p o r t e r s " o r
" F r i e n d s " o r even " A s s o c i a t e M e m b e r s " . T o d o o t h e r w i s e
m e a n s t h a t any individual w h o has an interest in t h e p a r t i c ular m o n u m e n t being m a i n t a i n e d b y t h e c o m p a n y a n d w h o
is p r e p a r e d t o g u a r a n t e e £1 in s u p p o r t of t h e c o m p a n y ' s u l timate d e b t s can b e c o m e a m e m b e r of t h e c o m p a n y w i t h
full c o n s t i t u t i o n a l rights. T h i s gives s u c h an individual v o t ing rights at t h e annual general m e e t i n g and a role in a p p o i n t i n g t h e d i r e c t o r s of t h e c o m p a n y . It also m e a n s t h a t n o
general meeting, either a n n u a l o r special, can b e held, and
n o business passed at t h a t meeting, unless a p p r o p r i a t e notice
has been given in w r i t i n g t o each m e m b e r . A n y changes,
t h e r e f o r e , t o t h e c o n s t i t u t i o n of t h e c o m p a n y , h o w e v e r
m i n o r and h o w e v e r necessary in t h e interests of s m o o t h
a d m i n i s t r a t i o n , b e c o m e a m a j o r exercise w h i c h will cost t h e
c o m p a n y significant s u m s in p o s t a g e alone. W o r s e still, it exp o s e s t h e c o m p a n y t o e x p l o i t a t i o n . It is usually o n l y a v o c i f e r o u s c o m m i t t e d m i n o r i t y w h o will b o t h e r t o t u r n u p t o
an annual general m e e t i n g , w h i l s t t h o s e w h o a r e c o n t e n t
w i t h t h e w a y things are g o i n g tend n o t t o exert themselves.
It is t h u s b y n o m e a n s u n u s u a l t o see a c o r p o r a t e c h a r i t y being taken o v e r by a small f a c t i o n of t h e m e m b e r s h i p , w h o
m a y n o t b e m o t i v a t e d b y a l t o g e t h e r altruistic c o n c e r n s .
W h i l s t t h e principles of d e m o c r a c y c a n n o t b e q u e s t i o n e d ,
it is very d u b i o u s w h e t h e r t h e y are t h e ideal principles
b y w h i c h t o run a b o d y dedicated t o t h e p r e s e r v a t i o n of historic monuments.
5. G e n e r a l C o n c e p t
4. Flexibility
F r o m t h e p o i n t of view of flexibility, h o w e v e r , t h e c o m p a n y
s t r u c t u r e d o e s have a great deal t o o f f e r t h o s e seeking t o p r o tect t h e heritage. W i t h i n t h e c o r p o r a t e s t r u c t u r e , it is possib l e t o give d i f f e r i n g p o w e r s and v o t i n g rights t o d i f f e r e n t
classes of m e m b e r . Similarly, because t h e m e m b e r s u l t i m a t e ly c o n t r o l t h e a p p o i n t m e n t of d i r e c t o r s and also c o n t r o l
c h a n g e s t o t h e m e m o r a n d u m and articles of association this
fact can be used t o s u p p l y c h e c k s and balances t o t h e p o w e r s
of t h e d i r e c t o r s in r u n n i n g t h e charity. B y s t r u c t u r i n g , f o r
example, t h e m e m b e r s h i p o r t h e criteria f o r d i r e c t o r s h i p o n e
w a y o r a n o t h e r , subtle v a r i a t i o n s of c o n t r o l can b e p u t in
place. W h e r e , f o r example, a c o m p a n y is established t o p r o tect a p a r t i c u l a r m o n u m e n t and t h e original p r o m o t e r s d o
T h e c o m p a n y is p r i m a r i l y a c r e a t u r e of c o m m e r c e . Its u n d e r l y i n g p r i n c i p l e s are t h o s e of o w n e r s h i p and p r o f i t . T h e s e
conflict d i r e c t l y w i t h t h e p u b l i c - s p i r i t e d and d i s i n t e r e s t e d
j o b of caring f o r t h e heritage. T w o q u i t e separate b o d i e s of
l a w g o v e r n a c h a r i t a b l e c o m p a n y and t h e t w o are likely m o r e
o f t e n t h a n n o t t o be in c o n f l i c t . F o r e x a m p l e , t h e s t a n d a r d of
care r e q u i r e d of a c h a r i t y t r u s t e e is based o n trust law and req u i r e s a t r u s t e e , in c a r r y i n g o u t t h e c h a r i t y ' s affairs, t o exercise t h e s a m e d e g r e e of care as an o r d i n a r y b u s i n e s s m a n
w o u l d w h e n c a r r y i n g o u t his o w n . T h e s t a n d a r d of care req u i r e d of a c o m p a n y d i r e c t o r is based o n c o m m e r c i a l reality
and is less s t r i n g e n t . It r e m a i n s very u n c l e a r h o w far t h e o b ligations of trust law are i m p o r t e d i n t o c o m p a n y law w h e n
assessing t h e s t a n d a r d of care r e q u i r e d of a d i r e c t o r of a c h a r itable c o m p a n y . Similarly, a c o m p a n y d i r e c t o r can use t h e
c o m p a n y ' s f u n d s t o i n s u r e himself against t h e results of his
o w n negligence. A c h a r i t y t r u s t e e c a n n o t . T h e r e is c o n t i n u e d
d i s a g r e e m e n t b e t w e e n t h e C h a r i t y C o m m i s s i o n and c h a r i t y
l a w y e r s as t o w h i c h of t h e s e rules applies t o t h e d i r e c t o r of a
charitable company.
T h u s , a n y p e r s o n r u n n i n g a c o m p a n y w h o s e p u r p o s e is
t h e p r e s e r v a t i o n of t h e h e r i t a g e m u s t c o n s t a n t l y be b a l a n c i n g
t h e r e q u i r e m e n t s of c o m p a n y law o n t h e o n e h a n d , w h i c h is
designed for commercial organisations whose shareholders
have invested m o n e y in t h e business and w h o a r e l o o k i n g t o
m a k e a p r o f i t f r o m it, a n d t h e r e q u i r e m e n t s of c h a r i t y law o n
t h e o t h e r , w h i c h is d e s i g n e d t o g o v e r n n o n - p r o f i t d i s t r i b u t ing entities c a r r y i n g o u t w o r k s f o r t h e b e n e f i t of t h e p u b l i c
w h o s e m e m b e r s have n o financial s t a k e in t h e o r g a n i s a t i o n .
It is n o t t o be w o n d e r e d at if s o m e t i m e s t h e s c h i z o p h r e n i a
t h a t this a p p r o a c h e n g e n d e r s leads t o s o m e rather a n o m a l o u s
results.
T h i s p a p e r began b y m a k i n g t h e p o i n t that English law has
n o t yet d e v e l o p e d a specific t y p e of i n c o r p o r a t e d b o d y d e signed f o r n o t - f o r - p r o f i t o r g a n i s a t i o n s . It will end o n t h e
same theme. Some t w o or three years ago a w o r k i n g party
w a s established t o c o n s i d e r t h e p r o b l e m s that charities w e r e
e n c o u n t e r i n g because t h e c o n s t i t u t i o n a l f o r m s available t o a
c h a r i t y w e r e all p r i m a r i l y d e s i g n e d f o r s o m e o t h e r p u r p o s e .
A s u r v e y of 1,500 charities w a s carried o u t and a r e s p o n s e
rate o b t a i n e d of a p p r o x i m a t e l y 4 0 % . T h e replies indicated
that m a n y charities had had c o n s i d e r a b l e difficulties as a r e sult of their c o n s t i t u t i o n a l s t r u c t u r e . Research w a s also c o m m i s s i o n e d i n t o t h e practices of o t h e r j u r i s d i c t i o n s in this reg a r d . T h e w o r k i n g p a r t y c o n c l u d e d that there is a d e m o n strable need f o r t h e r e t o be a n e w f o r m of legal s t r u c t u r e
available t o charities w h i c h will be an i n c o r p o r a t e d b o d y o f fering limited liability b u t will not b e a c o m p a n y . T h e p r o posals f o r this n e w s t r u c t u r e a r e at a fairly a d v a n c e d stage
and are largely based o n s t r u c t u r e s established in o t h e r jurisd i c t i o n s f o r n o t - f o r - p r o f i t activity. T h e C h a r i t y C o m m i s -
15
s i o n is v e r y m u c h in f a v o u r of t h e p r o p o s a l a n d t h e G o v e r n m e n t also s e e m s i n c l i n e d t o s u p p o r t it.
All of this w o u l d s e e m t o b e p r o o f , if p r o o f w e r e n e e d e d ,
t h a t t h o s e w h o p r a c t i c e t h i s t y p e of l a w in E n g l a n d a r e s a t i s fied t h a t t h e c o m p a n y , e v e n t h e c h a r i t a b l e c o m p a n y l i m i t e d
b y g u a r a n t e e , is n o t , in t h e final a n a l y s i s , a n a p p r o p r i a t e
f o r m of s t r u c t u r e f o r t h e c a r r y i n g o u t of n o t f o r - p r o f i t activities w h i c h include the p r o t e c t i o n a n d m a i n t e n a n c e of t h e h e r i t a g e . U n t i l
s u c h t i m e as t h e n e w s t r u c t u r e h a s b e e n d e v e l o p e d , h o w e v e r , it r e m a i n s t h e m o s t a p p r o p r i ate a l t e r n a t i v e .
FRITS W. H O N D I U S
Foundations
A
/ I t t h e a p p r o a c h of t h e y e a r 2 0 0 0 it is i n t e r e s t i n g t o e x a m i n e w h a t e x p e c t a t i o n s p e o p l e had s o m e t i m e a g o a b o u t f o u n d a t i o n s at t h a t f a t e f u l p o i n t in t i m e .
A b o u t t h i r t y y e a r s a g o , A l a n Pifer, P r e s i d e n t of t h e C a r n e gie C o r p o r a t i o n of N e w Y o r k , p r o n o u n c e d in K a n s a s C i t y
a n a d d r e s s e n t i t l e d " T h e F o u n d a t i o n in t h e Year 2 0 0 0 " ' ; I
m y s e l f p r e s e n t e d ten y e a r s a g o in T h e H a g u e a s t u d y t a k i n g
s t o c k of f o u n d a t i o n l a w s w o r l d w i d e .
M r P i f e r f o l l o w e d a s e e m i n g l y s a f e m e t h o d of p r e d i c t i n g
t h e f u t u r e . O n t h e basis of available s t a t i s t i c s o n t h e n u m b e r
of U S f o u n d a t i o n s a n d t h e i r a n n u a l e x p e n d i t u r e in 1968, as
c o m p a r e d t o t h e s i t u a t i o n t h i r t y y e a r s earlier, h e e x t r a p o l a t ed t h a t t h e r e w o u l d b e a vast n u m b e r of f o u n d a t i o n s in 2000,
b u t a d e c l i n e in a v e r a g e r e s o u r c e s . B y p u r e m a t h e m a t i c a l c a l c u l a t i o n , h e a r r i v e d at t h e a s t r o n o m i c a l f i g u r e of 1,400,000
U S f o u n d a t i o n s w i t h a t o t a l s u m of $ 48 b i l l i o n t o s p e n d . T h e
annual grant-making per f o u n d a t i o n w o u l d decline h o w e v e r f r o m $ 117 t h o u s a n d in 1936 t o $ 34 t h o u s a n d in t h e y e a r
2 0 0 0 , all t h i s w i t h o u t t a k i n g i n t o a c c o u n t t h e d e v a l u a t i o n of
t h e d o l l a r o v e r sixty y e a r s . So, m a n y m o r e a p p l i c a t i o n s f o r
f o u n d a t i o n grants w o u l d have to be t u r n e d d o w n , but o n e
could advise each applicant : " t h e r e are m o r e t h a n a million
o t h e r f o u n d a t i o n s w i t h w h o m y o u can t r y y o u r l u c k " .
M r P i f e r ' s s c e n a r i o , like t h a t of M a l t h u s , will n o t c o m e
t r u e . W h i l e b e t w e e n 1936 a n d 1968, t h e n u m b e r of f o u n d a t i o n s h a d i n c r e a s e d 7 0 - f o l d , it h a s just d o u b l e d o v e r t h e 3 0
y e a r s t h a t f o l l o w e d . T h e C o u n c i l o n F o u n d a t i o n s in W a s h i n g t o n " e s t i m a t e s t h a t b y t h e y e a r 2000, t h e r e will b e 4 3 , 0 0 0
t o m e n t i o n o n e n e w c a u s e w h i c h is v e r y p o p u l a r i n e x - C o m m u n i s t c o u n t r i e s a n d h a s a l r e a d y c o n s u m e d v a s t s u m s of
m o n e y : it is l o o s e l y called 'civil s o c i e t y ' , i. e. activities in s u p p o r t of c i t i z e n s ' v o l u n t a r y a c t i o n f o r t h e b e n e f i t of s o c i e t y .
T h i s r e c e i v e s s u p p o r t f r o m n e w f u n d e r s , s u c h as t h e S o r o s
foundations. A n interesting question which a reporter might
w i s h t o p u t t o M r S o r o s is t h i s o n e : " I f y o u h a d n o t i n v e n t ed t h e " o p e n s o c i e t y " , w o u l d y o u h a v e c o n s i d e r e d g i v i n g
y o u r m o n e y f o r heritage conservation?" W h i l e n e w causes
m a y o p e n u p n e w f o u n t a i n s of s u p p o r t it is a l s o t h e case t h a t
s o m e f u n d e r s simply shift f r o m time t o time their grantm a k i n g p o l i c i e s . S i n c e h e r i t a g e , a l m o s t p e r d e f i n i t i o n , h a s alw a y s b e e n a r o u n d , t h e r e is a risk t h a t its c o n t i n u e d p r e s e n c e
is a l s o t a k e n t o o m u c h f o r g r a n t e d a n d n o t g i v e n a s u f f i c i e n t ly h i g h p r i o r i t y , e x c e p t a f t e r m a j o r c a l a m i t i e s s u c h as f l o o d s ,
e a r t h q u a k e s , fire o r w a r .
W h e n t h e f i r s t d r a f t of m y o w n s t u d y o n f o u n d a t i o n s ,
w r i t t e n t o g e t h e r w i t h P r o f e s s o r van d e r Ploeg (Free U n i v e r sity, A m s t e r d a m ) f o r u l t i m a t e p u b l i c a t i o n in t h e I n t e r n a t i o n al E n c y c l o p e d i a of C o m p a r a t i v e L a w , w a s f i n a l i s e d in 1987,
w e i n d i c a t e d t h a t t h e r e w e r e t h e n in C e n t r a l a n d E a s t e r n E u r o p e h a r d l y a n y f o u n d a t i o n s . O n l y a f e w y e a r s later, w e h a v e
had to s w a l l o w those w o r d s and t h o r o u g h l y revise o u r
study. In C e n t r a l a n d Eastern E u r o p e there are t o d a y t h o u s a n d s of f o u n d a t i o n s a n d m a n y f o u n d a t i o n l a w s o r d r a f t
laws.
I n a m o r e r e c e n t s t u d y , s u b m i t t e d in 1994 t o t h e V i e n n a
S y m p o s i u m o n Legal A s p e c t s of I n t e r n a t i o n a l T r a d e in A r t ,
U S f o u n d a t i o n s h a v i n g a p p r o x i m a t e l y U S $ 2 3 5 billion ( d e p e n d i n g o n the stock market), t o spend a m o n g t h e m (i.e.
I h a v e called t h e f o u n d a t i o n a " t i m e h o n o u r e d m o d e l f o r
$ 546 t h o u s a n d p e r f o u n d a t i o n ) .
f u n c t i o n s with regard to heritage conservation. First and
Yet, M r P i f e r ' s n o t e of w a r n i n g w a s u s e f u l . H e r e m i n d e d
u s t h a t i n c r e a s i n g t h e n u m b e r of f o u n d a t i o n s d o e s n o t n e c -
f o r e m o s t , t h e p r o p e r t y of h e r i t a g e o b j e c t s c a n b e e n t r u s t e d
t o f o u n d a t i o n s . T h e p u r p o s e c l a u s e in a f o u n d a t i o n ' s c o n s t i -
e s s a r i l y m e a n i n c r e a s i n g t h e a m o u n t of f o u n d a t i o n m o n e y
t u t i o n can h e l p e n s u r e t h a t t h e b u i l d i n g o r site will o n l y b e
a v a i l a b l e f o r n o b l e c a u s e s , s u c h as h e r i t a g e c o n s e r v a t i o n . W e
w e r e r e c e n t l y i n f o r m e d of t h e e x c e l l e n t i n i t i a t i v e of t h e
T h i s is an a d v a n t a g e o v e r s t a t e o w n e r s h i p o r p r i v a t e o w n e r -
F r e n c h M i n i s t e r of C u l t u r e t o set u p a F o n d a t i o n p o u r le P a t r i m o i n e 1 . B u t will this n e w f o u n d a t i o n g e n e r a t e n e w f u n d s
f o r h e r i t a g e ? O r will it s i m p l y b e a n e w c o m p e t i t o r f o r e x i s t ing f u n d s ?
T h e n u m b e r of c h a r i t a b l e c a u s e s is o n t h e i n c r e a s e w h i c h
h e r i t a g e c o n s e r v a t i o n " 4 . F o u n d a t i o n s fulfil a w i d e a r r a y of
u s e d f o r t h e s p e c i f i e d p u r p o s e (e. g. m u s e u m , c o n c e r t hall).
s h i p w h i c h d o e s n o t n e c e s s a r i l y g u a r a n t e e u s e of t h e b u i l d ing in k e e p i n g w i t h its h i s t o r i c a l i m p o r t a n c e . S e c o n d l y ,
f o u n d a t i o n s can c h a n n e l s u p p o r t f o r a m o n u m e n t o r site.
A p a r t f r o m g r a n t - m a k i n g (as e n v i s a g e d b y t h e F r e n c h F o n d a t i o n d u P a t r i m o i n e ) a f o u n d a t i o n can h a n d l e a f u n d - r a i s -
m e a n s t h a t m o r e and m o r e c a u s e s c o m p e t e f o r s u p p o r t f r o m
ing c a m p a i g n . T h i r d l y , f o u n d a t i o n s can act as o r g a n i z e r s of
t h e s a m e f i n i t e p o o l of c h a r i t a b l e f u n d s a n d d o n a t i o n s . J u s t
activities t a k i n g place w i t h i n a m o n u m e n t (e.g. concerts)
L6