Skip to content
Back to sections

Getting organised and fit for purpose

Any organisation looking to take on a Community Asset Transfer needs to ensure it is structured appropriately to take on the responsibilities and financial liabilities of an asset.

It’s vitally important that an organisation is structured correctly, to safeguard it and the individuals responsible for its running should things go wrong, but also to ensure that individuals don’t personally benefit from the asset transfer.

The right structure will also give the local authority, funders, and other partners confidence that they can invest their time and money into the transfer.

It's very unlikely a local authority would transfer an asset to an unincorporated association (an organisation without a formal legal identity).

While your organisation doesn’t need to be an incorporated organisation to begin negotiating for a Community Asset Transfer, you will need to be a constituted group, with a governing document (often referred to as a constitution) which outlines the functions and the rules under which your organisation operates.
 

  • Things to consider

    Understanding your existing legal structure and what changes you may need to make, to take on an asset, is important and should be reviewed early in the process, as changes can take time. Things you will need to consider include:
    • Becoming incorporated. This process creates a separate legal identity for your organisation and limits the liability and risk for individuals involved in running it.
    • Changing your legal structure of your organisation. Asset transfers cannot benefit individuals, so you may need to set up a separate not for profit subsidiary of your organisation, such as a community interest company, cooperative or community benefit society or charitable organisation.
    • Amending your governing documents. You’ll need to ensure your governing document includes the power to sign leases or employ staff as well as ensuring the objectives you want to achieve as part of the asset transfer are outlined.
    • Establishing a new organisation. If you’re not part of an existing club or group, this may require setting up a new organisation to take on the asset transfer. 

    You should consider the advantages and disadvantages of each type of legal structure to ensure you have the appropriate structure in place for the asset you want to take on.

    The structure you choose cannot be changed easily once it has been set up and could last many years, so consider what levels of flexibility you might need now and, in the future, and take legal advice to ensure you have considered everything. 

    Changing your legal structure or governing documents will need to be agreed by your members through a formal process such as an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM).

    Your constitution will set out the process, required notice period and proportion of votes (often referred to as a quorum) from members required to make any changes.

     Hide

  • Asset locks

    Whatever structure is chosen, your governing document must state that your organisation, or a subsidiary of it, is not for private profit and there’s an ‘asset lock’ condition included within it. 

    An asset lock is a legal mechanism which prevents community organisations disposing, through the sale or re-development of an asset for the benefit of private individuals.

    This includes ensuring that all profits are reinvested into the organisation running the asset, and in the event of a sale or dissolution (should the organisation stop operating), any funds (or transferable assets such as equipment) are given to an organisation with similar charitable objectives.

    If taking on the asset on a freehold basis (see section 3D for more information), it’s important to note that an asset lock may impact your organisation’s ability to take out a loan or mortgage, so it’s important to check this at the earliest stage.

    Should the ownership and management of the community asset be transferred via a lease agreement (see section 3D for more information), leases will often include an asset lock clause.

    This clause is likely to state that the asset will be returned to the control of the freeholder, often the local authority, should the community organisation breach the terms of the lease or go out of business.

     Hide
Previous section: 2c Next section: Continue to 2e