Charitable Company is Trustee of Assets
The court was asked as to the distribution of surplus assets of a charitable company which was in winding up, and the question whether or not s 257 et seq. Companies Act 1948 applied, including s 265 which made provision for the distribution of surplus assets to members.
Held: The position of a charitable company in relation to its assets had ‘at all times been analogous to that of a trustee for charitable purposes’ and that that ‘suffices to give rise to the jurisdiction of the court to order a cy-pres scheme’. Slade J ordered a cy-pres scheme on the basis that the jurisdiction to do that was not limited to a case where there was a strict trust, and applied on the facts because the association’s constitution obliged the assets to be held for charitable purposes.
Slade J said: ‘The expressions ‘trust’ and ‘trust property’ may be, and indeed have been, used by the court in rather different senses in different contexts. Examples of cases where the court has used the expression otherwise than in their strict traditional sense are to be found in Lord Diplock’s review of certain earlier authorities in Ayerst v C. and K. (Construction) Ltd. [1976] AC 167, 179-180[7]. In a broad sense a corporate body may no doubt aptly be said to hold its assets as a ‘trustee’ for charitable purposes in any case where the terms of its constitution place a legally binding restriction upon it which obliges it to apply its assets for exclusively charitable purposes. In a broad sense it may even be said, in such a case, that the company is not the ‘beneficial owner’ of its assets. In my judgment, however, none of the authorities on which Mr Mummery has relied, including the decision in Construction Industry Training Board v Attorney-General [1973] Ch 173 , establish that a company formed under the Companies Act 1948 for charitable purposes is a trustee in the strict sense of its corporate assets, so that on a winding up these assets do not fall to be dealt with in accordance with the provisions of section 257 et seq. of that Act. They do, in my opinion, clearly establish that such a company is in a position analogous to that of a trustee in relation to its corporate assets, such as ordinarily to give rise to the jurisdiction of the court to intervene in its affairs; but that is quite a different matter.’
Slade J
[1981] Ch 193, [1981] 1 All ER 994, [1981] 2 LR 379, (1980) 125 SJ 79
Companies Act 1948 257 265
England and Wales
Citing:
Applied – Von Ernst and Cie SA v Inland Revenue Commissioners CA 1979
The assets of a corporate charity were held on charitable trusts: ‘We were referred to certain authorities which give support to the view that a company incorporated for exclusively charitable purposes is in the position of a trustee of its funds or . .
Cited by:
Cited – Hope Community Church (Wymondham) v Phelan and Others ChD 22-May-2020
The Church, a private company limited by guarantee, sought a declaration that it had the right to enfranchise its church premises under the 1920 Act. . .
Cited – The Children’s Investment Fund Foundation (UK) v Attorney General and Others ChD 9-Jun-2017
The court considered the propriety of a payment made by a charitable company to a director for her loss of office. The charity was to transfer a substantial sum to a new charity headed by the departing director.
Held: The court approved the . .
Cited – Lehtimaki v The Children’s Investment Fund Foundation (UK) and Others CA 6-Jul-2018
A charity established by H and W wanted to transfer part of its fund to a new charity headed by W in return for her resignation from the first charity on the breakdown of the marriage. Court approval was sought for a transfer, but the remaining . .
Cited – Lehtimaki and Others v Cooper SC 29-Jul-2020
Charitable Company- Directors’ Status and Duties
A married couple set up a charitable foundation to assist children in developing countries. When the marriage failed an attempt was made to establish a second foundation with funds from the first, as part of W leaving the Trust. Court approval was . .
Lists of cited by and citing cases may be incomplete.
Charity, Company
Leading Case
Updated: 10 November 2021; Ref: scu.652836