29/10/2020

Statement on NSUN members’ liability in the event of insolvency

Please click here to view an easy read version of this statement in Microsoft Word. Alternatively, click here to view an easy read version as a pdf.

Dear members

Over the past year we have been working on strengthening our governance - that is, how NSUN is run, how we set our strategy, and how we stay accountable to our members. As part of this, we have been looking at our Articles of Association which is the governing document of NSUN.

We have received some legal advice about an issue which is not likely or imminent, and which is more of a technical than actual risk, but which we wanted to share with our members and allies as soon as possible in the spirit of transparency and honesty. We had understood that in the event of insolvency (NSUN not being able to meet all its costs from income on time), the Trustees would carry a limited financial liability of £10 each. However, we have received legal advice confirming that it is NSUN members (including Trustees) who carry this financial liability of £10 each should NSUN become insolvent (Article 2.1 and 2.2 of the Articles of Association).

The first thing to say is that as a Board and leadership team, we take full and collective responsibility for this error. We know it might cause anxiety and distress, and are deeply sorry. This was our mistake in our interpretation of the legal significance of the language used in the Articles, and not a deliberate attempt to make our members legally liable. We believed that the definitions in the Articles meant that it was only Trustees (“Directors”, in the Articles) who would have to pay anything in the event of closure. This situation could only ever arise if we closed, and also left debts unpaid at closure. We know many members are on low incomes and in those circumstances £10 is a lot of money. In practice, we would never chase our members for this liability, and we have been informed that if we became insolvent, creditors would be unlikely to do so either.

We have explored if we can quickly change or reduce this liability. However, this liability is legally tied to members’ voting rights on how NSUN runs. This is because as NSUN is a Company Limited by Guarantee registered with the Charity Commission, and we are a membership organisation where members vote on important issues (for example at the AGM), these voting rights are linked to liability. It’s not something we can change quickly.

The second thing to say is that NSUN’s financial position is currently strong. The issue of the £10 guarantee from voting members would only arise in the event that NSUN became insolvent. The risk of this occurring is considered very low over the next 12 months. The following factors contribute to this low risk: 1) In line with good governance the Trustees monitor finances at every meeting and plan many months in advance to be able to meet ongoing commitments. Whilst no financial difficulties are expected, this gives them plenty of time to react should difficulties unexpectedly arise. 2) NSUN’s fixed ongoing costs are very low and flexible, with no office buildings or commitments to leases, and staff with short notice periods and (due to their length of service) low or no redundancy entitlements. This means that the Trustees are able to ensure they have sufficient funds to meet liabilities well in advance and are able to cut costs if necessary. 3) The main source of income for NSUN is grant funding which, once secured, is a very reliable source of income. Together with a small amount of 'savings' held, NSUN has been successful in securing grant funding to meet all of its minimum cost commitments over the next 12 months. We are always seeking more funding opportunities to create a more dynamic NSUN both in the short term and into the future. 

What happens next

NSUN has grown considerably over the last 10 years. What was right for NSUN in 2010 may not be right for us now. Over the next 6 months, we will be looking at a more 'fit for purpose' structure for the organisation. It is likely that we will call an Extraordinary General Meeting to ask you- our members- to vote on this. We want to find a structure which involves you and which is user-led, but which does not incur any financial liability for you unless you have agreed to it. We have also been evaluating the skills of our Board so that we can improve our induction process and bring on trustees with specialist knowledge when needed so that we can avoid making mistakes like this. A new structure will take some time for us to work out, but we will keep you informed. Thank you for bearing with us on it.

If you are a member of NSUN and do not want to incur the potential liability of £10 in the unlikely event we become insolvent, you can instead become a “supporter”. This will mean you can no longer vote at the AGM, but you will also no longer hold this liability. You can still attend our AGM, and you can still receive our bulletin. If you would like to transfer over and become a supporter, please fill in this short form. You can do this at any time. You can also stop being a member of NSUN- please just fill in this short form, and we will remove you from our mailing list. Again, you can do this at any time.

You can email us if you have any questions about any of this, or if you would like to share your concerns with us. We will also set aside some time at our AGM to answer any questions about it publicly. If you would like to make a complaint, our complaints policy is here.

Thank you.

The NSUN Board of Trustees & CEO