The Governance Code for Community, Voluntary and Charitable Organisations

The Governance Code which is a code of practice for good governance of community, voluntary and charitable organisations in Ireland was launched by Phil Hogan T.D., Minister for Environment, Community and Local Government on 28^th June 2012.  

In his speech the Minster said “The Code is the result of many months of hard work by a Working Group (which comprised 8 community and voluntary organisations and 3 other groups) who took on board views from the sector and extensive feedback from public consultation. An important aspect of the Code is that it has been developed by the sector for the sector with the key principle of enabling the community and voluntary sector to achieve the highest standards of governance in the running of their organisations. It has been designed to make it user-friendly for all organisations no matter what their size or stage of development.”

The Governance Code is for board members/trustees, managers, staff and volunteers of community, voluntary and charitable organisations and will be an invaluable tool to help these organisations perform to the highest standards possible.  

To coincide with the launch a booklet was issued entitled “Your Guide to the Governance Code for Community, Voluntary & Charitable Organisations.”  

Good governance means that policies and procedures are in place to ensure an organisation is run well. But good governance is not about rules. It is an attitude of mind. It is about the ethical culture of the organisation and the behaviour of the people on the governing body.

The Governance Code is based on five main principles:

Principle 1: Leading the organisation

1. Agreeing vision, purpose and values and making sure that they remain relevant
2. Developing, resourcing, monitoring and evaluating a plan to make sure the organisation achieves its stated purpose
3. Managing, supporting and holding to account staff, volunteers and all who act on behalf of the organisation

Principle 2: Exercising control over the organisation

1. Identifying and complying with all relevant legal and regulatory requirements
2. Making sure that there are appropriate internal financial and management controls
3. Identifying major risks for the organisation and deciding ways of managing the risks

Principle 3: Being transparent and accountable

1. Identifying those who have a legitimate interest in the work of the organisation (stakeholders), and making sure that there is regular and effective communication with them about the organisation
2. Responding to stakeholders' questions or views about the work of the organisation and how it is run
3. Encouraging and enabling the engagement of those who benefit from the organisation in planning and decision-making

Principle 4: Working effectively

1. Making sure that the governing body, individual board members, committees, staff and volunteers understand their roles, legal duties, and delegated responsibilities for decision-making
2. Making sure that the board exercises its collective responsibility through board meetings that are efficient and effective
3. Making sure that there are suitable board recruitment, development and retirement processes in place

Principle 5: Behaving with integrity

1. Being honest, fair and independent
2. Understanding, declaring and managing conflicts of interest and conflicts of loyalties
3. Protecting and promoting the organisation's reputation

Types of Organisations by Size

The Code recognises that the process for achieving these five principals will vary depending on the size and nature of the organisation.  It includes recommended guidelines and actions to help organisations fully adopt the Code.

In order to be relevant, and to be proportionately applicable, to all organisations regardless of size, structure or stage of development, the Code defines three categories of organisation (Type A, B or C) based on how governance is conducted.

Type A

1. The board members’ role is comprehensive, including governance, management and operations.
2. The organisation is run by one or more volunteers, who may or may not be board members.
3. The organisation does not employ staff.

Type B

1. The board members’ role is primarily governance, but with some management and operational responsibilities as well.  
2. The organisation employs one or more full-time / part-time staff members.

Type C

1. The board members’ role is solely governance, with a clear division between the governance role of the board and the management and operations role of staff.
2. The organisation may have any number of full-time / part-time staff, all reporting to a Chief Executive / Manager / Director

It is suggested that a Type B organisation that enters into service level agreements with Government departments or statutory agencies should comply with the Governance Code actions and recommendations of the Type C organisation.

In practice many community, voluntary and charitable organisations are most likely complying in with many aspects of The Governance Code but without having their practices and procedures documented in a Code.  

For community, voluntary and charitable organisations wishing to adopt The Governance Code it is suggested that:

1. Read the guidelines and actions for your organisation type and complete the appropriate checklist for your organisation.
2. Identify the actions you think your organisation needs to take to comply with each principle. Rank the actions and complete them within a reasonable timeframe.
3. Once you have completed these actions, you should state in your public materials that you comply with 'The Governance Code for the Community, Voluntary and Charity Sector in Ireland'. The Governance Code Principles Statement should then be signed and displayed publicly
4. Each year after the board has renewed its commitment to The Governance Code, you should notify The Government Code organisation who retain a list of organisations that have  adopted The Governance Code in a particular year

Self Assessment Checklists

Click here for Checklist for Organisation Type A

Click here for Checklist for Organisation Type B

Click here for Checklist for Organisation Type C

Further information on the Governance Code can be obtained from www.governancecode.ie website

PERSONAL INSOLVENCY BILL
PUBLISHED 29TH JUNE 2012 (Still at Committee Stage)

Stated Aims:

To amend the Bankruptcy Act 1988 and to provide for the establishment of The Insolvency Service of Ireland in the interest of the common good in order to

(a) Ameliorate the difficulties experienced by debtors in discharging their indebtedness due to insolvency and thereby lessen the consequences for economic activity in the State.

(b) To enable creditors to recover debts due to them by insolvent debtors to the extent that the means of those debtors reasonably permits in an orderly and rational manner and 

(c) Enable insolvent persons to resolve their indebtedness (including by determining that debts stand discharged in certain circumstances) in an orderly and rational manner without recourse to bankruptcy and to therefore facilitate the active participation of such persons in the economic activities in the State and to provide for additional mechanisms and arrangements relating to insolvency to facilitate the achievement of those objectives and to provide for connected matters.

Main Features:

(a) The period for automatic discharge from bankruptcy is to be reduced from 12 to 3 years

(b) Bankruptcy will only be available where debtor liabilities exceed €20,000

(c) An independent body known as the Insolvency Service of Ireland is to be established which will oversee three new debt settlement mechanisms contained in the bill.

1. Debt relief notice
2. Debt settlement arrangements
3. Personal insolvency arrangements

The reduction in the bankruptcy period from 12 years to 3 years is a significant change.  However, the fact that the relevant Court has discretion to order the making of payments to creditors from a discharged bankrupt’s income for a further period of up to 5 years from the date of discharge, lessens the attraction of this proposal somewhat.

Alternatives to Bankruptcy

The bill proposes three settlement options as follows:

1.  Debt Relief Notice (DRN)

Applies to insolvent individuals with unsecured debts of €20,000 or less, disposable income of €60 or less a month and assets of €400 or less with no likelihood of becoming solvent within five years.

If the Insolvency Service is satisfied that the application is in order and the Circuit Court are satisfied that the criteria have been met, a Debt Relief Notice (DRN) will issue. 

This notice gives protection for a period of 3 years during which the debtor can’t be pursued in respect of debts specified in the DRN.  The debt is written off at the end of the three year period.

2.  Debt Settlement Arrangement (DSA)

A Debt Settlement Arrangement is proposed to enable an insolvent individual with unsecured debts to make settlement proposals through a Personal Insolvency Practitioner (PIP) to one or more creditors for repayment of debt over 5 years.

If the proposal is approved by at least 65% in value of the creditors voting at a creditors meeting and subsequently approved by the appropriate Court, it will become binding on all creditors and will be registered by the Insolvency Service.

3.  Personal Insolvency Arrangement (PIA)

This applies in situations where the aggregate secured debts do not exceed €3m and at least one creditor involved is a secured creditor.  A PIA must be approved at a creditors meeting by at least 65% in value of actual votes cast at the meeting (whether secured or unsecured creditors) and by more than 50% of secured creditors and more than 50% of unsecured creditors.  The proposals must be subsequently approved at the appropriate court on notification by the PIA before it will become binding on all creditors.

A PIP acting on behalf of a debtor, whilst in the process of preparing an application for a DSA or a PIA, may apply to the Insolvency Service for a “Protective Certificate” to cover a period up to 70 days protection during which time enforcement or bankruptcy proceeding may not be anticipated or continued against the debtor or his or her property except with the leave of the Court.  Failure by a debtor or a PIP acting on their behalf to agree a suitable non judicial debt settlement with the creditors, leaves the debtor open to full bankruptcy proceedings. 

As the PIA is likely to apply to the more serious situations there are some important features that need to be noted.

• Only a PIA has the potential to deal with secured debt and the principal owed to a secured creditor cannot be written down to less than the value of the security.  
• Certain protections are included in the Bill for secured creditors including a “claw back” in the event of a subsequent sale of a mortgaged property where the mortgage is written down.  
• It is also worth noting that a PIA cannot include a requirement that a debtor cease to occupy or dispose of his or her principal private residence unless the debtor agrees to such a proposal or if the PIP, having discussed the issue with the debtor, forms the opinion that the costs of the debtor continuing to reside there are disproportionately large bearing in mind his/her financial circumstances.

Conclusion

The new settlement options are likely to be beneficial mechanisms for dealing with personal insolvency outside of the bankruptcy process and gives scope for allowing qualifying insolvent individuals to deal with their debts in a structured manner. However, it is important to note that the Bill as currently drafted, makes it unlikely that secured creditors will in many circumstances be compelled to accept a write down on their debt but it does offer a formal process through which debtors may apply

The Revenue Commissioners informed the Department of Education that with effect from 1 January 2012 schools will have to operate Value Added Tax (“VAT”) and Relevant Contracts Tax (“RCT”) on construction works.  The purpose of a Joint Managerial Body “JMB” seminar held on the 21 June 2012 with speakers from Revenue was to clarify the types of transactions covered by the new requirements for VAT and RCT.

At this seminar the speaker from the Revenue Commissioners confirmed that all schools funded by the Department of Education (Oireachtas) must now register for VAT and RCT. They also stated that there would not be any dilution in the operation of RCT for schools and emphasised that all repairs must be included within the RCT payment system. Whilst many present at the conference felt that these requirements are extremely onerous in relation to small repairs, the Revenue Commissioner’s speaker emphasised that these works fell within the operation of these taxes.  The only concession offered by the Revenue Commissioners was to state that although this scheme should have been operational from 1 January 2012, that they would look sympathetically at any interest or penalties arising for the year to date.

If any school fails to deduct RCT, they are still liable to pay RCT to the Revenue Commissioners together with interest and penalties.  As the RCT can be 35% of the amount due to the Contractor, failure to deduct any RCT could be very costly.  

The Revenue Commissioners did give a commitment that they would give further clarification on the types of transactions that fall within the RCT regime and they issued further guidance notes which can be accessed here.

The position at the moment is that Schools are required to register for VAT in relation to Relevant Contracts. Schools will no longer pay VAT to the contractor on their invoices but instead, this VAT will be paid directly to Revenue.

It is a requirement that all VAT and RCT Returns are now filed on-line and it is important that you register as soon as possible as it can take up to six weeks for VAT registration to be completed.

We realise that this is a further additional administration burden for the school, but at the moment it is an important obligation that must be complied with.  If you require any assistance in with any aspect of this matter, please do not hesitate to contact us.

Changes are to be introduced in respect of retirement relief with effect from the 1 January 2014, which will reduce the level of retirement relief available to individuals who are 66 or over on the date of the disposal.  Currently, if the sales proceeds do not exceed €750,000, the gain is exempt from Capital Gains Tax.  This ceiling for disposals to third parties will be reduced to €500,000. 

 
At present, if the disposal is to a child, there is no limit and this will continue to apply where the disposal of the business property takes place before the disponer reaches the age of 66.  From the 31 December 2013, if the parent is 66 years of age or over, a ceiling of €3 million on the value of assets transferring, be it a business or shares in a private trading company, will apply.

The amendments are designed to encourage the early passing on of business assets to the next generation.  The important point to remember is that the restrictions will not be introduced until 1 January 2014 and this gives anyone who may be affected by the restrictions ample time to consider their options and put in place a strategy to pass the assets onto the next generation.

The cost of not taking action will be that there will be an exposure to Capital Gains Tax at 30% on any gain.   There will be marginal relief where the disposal is just in excess of the ceiling.  This tax cost could put a considerable strain on business assets passing to the children especially where a significant portion of the value may be tied up in illiquid business assets such as property.

The important thing for individuals who may be affected is, that with forward planning it may be possible to reduce the charge to Capital Gains Tax.  If you are approaching 66 or if you will be over 66 on the 31 December 2013, then you will need to consider taking action now.  You will need to consider carefully the pros and cons of passing assets to the next generation in the near future as whilst property values are low, there are many other matters to consider other than taxes when one is passing assets to the next generation.


If you have any queries on the proposed changes please do not hesitate to contact us.