When establishing a not-for-profit (“NFP”), it is understandable that the focus of its founders is on the mission that they have set out to achieve. How an entity is structured will invariably affect how it is governed, and therefore how successful it is in achieving its mission. Despite this, the structuring of NFPs is often overlooked or treated as an afterthought resulting in an organisational structure that is not well-placed to achieve its objectives.
Because NFPs have unique goals, questions pertaining to their legal structure and governing documents are often more complex than those applying to commercial-profit-maximising companies. Traditionally, NFPs in common law jurisdictions are often established as either a charitable trust or a company limited by guarantee, with each legal structure offering distinct advantages and disadvantages. The key distinction between the two is that unlike a company, a trust does not have separate legal personality and so cannot sue or be sued, or hold property in its own name.
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A Strong Foundation for Philanthropy: The use of Cayman Foundation Companies as Not-for-profit Enterprises