Legal structures of preserved railways?

[bangor-toad]

Hi there,
I'm looking for some knowledge of how preserved / heritage railways arrange or organise themselves to protect themselves in case of various problems. The reason for my question is that I'm looking for some ideas on how we set up a new multi-partner project that will separate the assets from the trading part of the work. (What I'm looking at is nothing to do with the heritage rail sector but it's good to get input from all sorts of sources...)


I am aware that some places have a company or trust that hold the land, possibly the land and track, a trust that looks after the rolling stock and a limited liability company that does the trading (such as hiring and operating services and the ticket sales).

If anyone knows how some organisations are structured, and you are allowed to disclose it, please can you post something?
Many thanks,
Mr Toad

 

[Titfield]

Heritage Railways employ a wide variety of corporate structures. A common structure, as you allude to, is one organisation to hold the assets and a separate organisation to operate. Thus if the operating company goes bust it does not result in the assets in the other organisation being placed in jeopardy. If the organisation is a charity then charity commission rules compel a separate trading organisation to the charity itself.

One theme common to many heritage railways seems to be degrees of friction between the various organisations for example the issues on the West Somerset Railway. Another theme for many is a feeling that their structure is less than ideal and needs changing though change can be very challenging and costly to achieve.

This really is an area where specialist advice tailored to your needs (situation and objectives) is required. It is essential you get this right to avoid very high costs in trying to put matters right subsequently.

 

[bangor-toad]

Thanks Titfield.

Yes, the separation of assets and operation is exactly what I'm interested in. You raise a good point about the potential for friction & tension between the various parts. That's something to keep in mind.
I would agree about specialist advice. I'll be with the lawyers over the next few weeks on this...

What I'm aiming to do is to get some scenarios from outside the legal team's usual expertise to provoke some different and hopefully useful consideration and discussion. It might not lead us anywhere or it might have a fabulous nugget of an idea we can develop.
Any examples anyone can provide of how they've gone about the separation of assets and operation in the heritage rail sector will be gratefully read!

Many thanks,
Mr Toad

 

[paul1609]

At the Kent & East Sussex Railway the main company is a company limited by guarntee (Kent & East Sussex Railway Co Ltd) which is also a registered Charity and the statutory authority that operates the railway. It has a subsidiary trading company Colonel Stephens Railway Enterprises Ltd that carries out the non charitable trading (money earning stuff like Pullman Dining and Santa Specials). There are separate companies for some of the locomotives and rolling stock. Beyond Bodiam the railway is owned and under construction by the separate Rother Valley Railway Ltd.
Its probably fair to say that if it were to be set up now it would be set up in a different manner and that's true of many heritage railways. In particular there were a lot of changes to the regulations for new charitable organisations after 2008.
I seem to remember that you are a Northern Ireland resident so it may well be that the optimal set up is different there.
You definitely need the advice of a specialist law expert rather than considering the structure of organisations set up 50+ years ago.

 

[thejuggler]

Not railway, but the rugby club I'm a member of has a structure which is set up in a way which may be what you are looking at.

The main rugby club is a CASC (Community Amateur Sports Club), which gives it a very similar status to a Charity. No business rates, gift aid, various tax reliefs Etc The clubhouse and grounds (and a couple of other investment properties) are held within the CASC. It also means players can't get paid! The CASC holds all the assets and covers any shortfall over a year.

Outside of that we need operating companies as a CASC can't 'trade'.

One company covers the actual rugby club costs, membership fees income, match day income and costs etc
Another the costs of the bar and grounds costs related to third party hire as we also have other sports teams and groups using the facilities, its also used for weddings, funerals, parties etc.
Third is an events company for none rugby events such as bonfire night, beer festival etc.

Having separate companies makes it easier when applying for funding for the rugby operations, this came into its own during Covid as there were various rugby and none rugby related payments the different businesses could benefit from.

The structure was put in place about 12 years ago for legal and financial reasons, but the structure also removed any liability for debts from members.

 

[Paul Hitchcock]

At the Kent & East Sussex Railway the main company is a company limited by guarntee (Kent & East Sussex Railway Co Ltd) which is also a registered Charity and the statutory authority that operates the railway. It has a subsidiary trading company Colonel Stephens Railway Enterprises Ltd that carries out the non charitable trading (money earning stuff like Pullman Dining and Santa Specials). There are separate companies for some of the locomotives and rolling stock. Beyond Bodiam the railway is owned and under construction by the separate Rother Valley Railway Ltd.
Its probably fair to say that if it were to be set up now it would be set up in a different manner and that's true of many heritage railways. In particular there were a lot of changes to the regulations for new charitable organisations after 2008.
I seem to remember that you are a Northern Ireland resident so it may well be that the optimal set up is different there.
You definitely need the advice of a specialist law expert rather than considering the structure of organisations set up 50+ years ago.

Absolutely so. However, IMHO a high proportion of preserved railways have structures which are complicated verging on the ridiculous, resulting in internecine squabbles being made more likely.

 

[Llanigraham]

Would it not be a good idea for the OP to be talking to the HRA?

 

[30907]

KWVR similarly has 3 public bodies:

KWVR Preservation Society Ltd (company limited by guarantee with charitable status)
KWV Light Railway Ltd (the operating company)
Friends of the KWVR (charitable trust).

I suspect some such structure is fairly common as a result of legislation.

 

[Paul Hitchcock]

KWVR similarly has 3 public bodies:

KWVR Preservation Society Ltd (company limited by guarantee with charitable status)
KWV Light Railway Ltd (the operating company)
Friends of the KWVR (charitable trust).

I suspect some such structure is fairly common as a result of legislation.

Still more complex than it has to be although better than many.

 

[bangor-toad]

Thanks to everyone who responded.
Those replies have actually been really useful to help me form some of the questions I'll need to ask.

I obviously can't go into the detail but we're looking at a structure dealing with English, Northern Ireland and Irish jurisdictions, employment, part tax exemption and a combination of subsidy control and state aid. A somewhat complex scenario that will inevitably have an interesting operation...

The next step is to spend some time with the lawyers to develop what we will need. The examples of the separation of assets and operation will be useful starting points in the discussions.
Many thanks for your examples!
Mr Toad