BLUEBELL RAILWAY PRESERVATION SOCIETY
MEMORANDUM TO THE TRUSTEES

Subject: Governance
Submitted by : B. Coward
Date 18th January 2009

1. Introduction

1.1 The Bluebell Railway's present structure for the governance of its business, an unincorporated body (BRPS) a company (Bluebell Railway PLC) and a private charitable trust (Bluebell Railway Trust) were devised in the mid 1980s to enable the railway to function and extend to East Grinstead. This structure has now served its purpose.

2. Purpose

2.1 The purpose of this memorandum is to consider how best the Bluebell Railway can be governed for a new phase following its arrival at East Grinstead.

3. Aim

3.1 The aim is to achieve governance consistent with the BRPS Objets (Rule 2) and Long Term Plan within the new conditions created by the railway operating form East Grinstead.

4. Changes caused by the extension to East Grinstead

4.1. Historically Bluebell has operated in the Sussex countryside and has relied primarily on passengers arriving by car. On reaching East Grinstead the railway will become part of the town's tourism strategy.

4.2 The extension will increase the operating and maintenance costs of the railway without any obvious benefit to the society's objectives other than the fact of actually operating from East Grinstead.

4.3 Operating from East Grinstead involves Bluebell in the town, its community, economic and social well being.

5. Existing Governance

5.1 The unincorporated nature of the BRPS , while it has served the railway well for fifty years, is by its very nature vulnerable to factional interests (something that at one time or another appears to have blighted many preserved railways) and carries unlimited liability. It could be unwise to continue unincorporated if the society's objectives are to be secure for the foreseeable future.

5.2 The Bluebell Railway PLC was devised to raise capital to construct the extension to East Grinstead. It also took over the business of Bluebell Railway Operating Ltd. It has now served this purpose. The difficulties surrounding the recent share issue, arising from legislation primarily designed to prevent money laundering, suggest a better vehicle in which to raise capital is needed in future.

5.3 The Bluebell Railway Trust was established by five individuals as a private charitable trust. Although it has been fully committed to supporting the Bluebell Railway it is not answerable to the Railway and it has no legal duty to make grants solely to the Bluebell Railway or for that matter keep its assets at the Bluebell Railway.

5.4 None of the foregoing bodies are ideal for governance of the post extension phase in which increased costs will drive the need to improve revenue and find new ways of financing the railway.

6. Community Interest

6.1 A Community Interest Company (CIC) could be a suitable body to order to ensure the aims of the Bluebell Railway Preservation Society are secure for the future and to ease the burden of administration caused by operating a PLC

6.2 Community Interest Companies (CIC) are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. This is achieved by a "community interest test" (see para 6.6) and "asset lock" (prevent the assets and profits being distributed, except as permitted by legislation and thereby ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity), which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role. Since its inception in 2005 there are now more than 2000 CICs. CICs can be limited by shares, or by guarantee.

6.3 With the extension to East Grinstead there will be a wider community interest in the railway. The communities covered by the three district councils through whose areas the railway runs (Lewes, Wealden and Mid Sussex) are all potential partners in helping the Bluebell Railway meet its objectives. Bluebell already contributes significantly to the local economy (although we are not very good at making them aware of this fact). By opening the Bluebell Railway to community involvement Bluebell will be able to develop as a Social Enterprise.

6.4 What is a Social Enterprise? A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. Three common characteristics of social enterprises as defined by Social Enterprise London are:

1. Enterprise orientation: They are directly involved in producing goods or providing services to a market. They seek to be viable trading organisations, with an operating surplus.
2. Social Aims: They have explicit social aims such as job creation, training or the provision of local services. They have ethical values including a commitment to local capacity building, and they are accountable to their members and the wider community for their social environmental and economic impact.
3. Social ownership: They are autonomous organisations with governance and ownership structures based on participation by stakeholder groups (users or clients, local community groups etc.) or by trustees. Profits are distributed as profit sharing to stakeholders or used for the benefit of the community.

6.5 CICs are more lightly regulated than either PLCs or charities. In turn this means a CIC does not benefit from charity tax advantages. However a charity can own a CIC and pass profits to the charity. However a CIC can, unlike a charity, identify and adapt to circumstances, but with a clear assurance of not-for-profit distribution status.

6.6 The Community Interest Test is what differentiates CICs from other not-for-profit organisations. Demonstrating community interest is of value to those seeking grant funding or philanthropic investment. The test is intended to be light touch. To become a CIC, an organisation would need to satisfy the regulator that its purposes could be regarded by a reasonable person as being in the community or wider public interest. It will also be asked to confirm that access to the benefits it provides will not be confined to an unduly restricted group.

6.7 Whether or not Bluebell would benefit from a charitable arm if it were to follow the CIC model is a matter for further investigation.

7. Options

7.1 Do nothing. The existing structure would have to cope with the new environment brought about by the extension. It has already proved a somewhat cumbersome structure when seeking sources of funding.

7.2 Investigate the possible benefits in becoming a CIC, especially in relation to involvement form the communities served by the Bluebell Railway.

8. Recommendation

8.1 It is recommended that a working party, chaired by the BRPS Chairman (or Vice Chairman) and consisting of such trustees and society officers as wish to serve, investigate option 2 above and report with their findings to the November 2009 Trustees meeting so that any constitutional change can be placed before the 2010 Annual general Meeting.

8.2 The working party terms of reference shall be:
To review the existing governance of the Bluebell Railway in the light on opening the extension to East Grinstead and to recommend such structural and constitutional changes as would best meet the objectives of the BRPS (as set out in rule 2) within the context of increased community involvement once Bluebell reaches East Grinstead. The working party will consult within the Bluebell, its volunteer and wider membership ( the latter via Bluebell News) and employees of Bluebell Railway PLC and will, identify and consult with those organisations within the area served by the railway who may wish to show their support by taking a stake in a CIC. The working party shall also consider and recommend the role and nature of charitable status within the Bluebell Railway.