Charities should ‘review constitutions’ before government act expires, legal expert advises
Posted on: August 6, 2020
Content from Third Sector
Charities should take advantage of relaxed laws around board and general meetings, or enact compliance measures, as soon as possible to ensure there are no future governance issues when the provisions end next month, a legal expert has advised.
Speaking to Third Sector, Nicola Evans, charities counsel at the law firm BDP Pitmans, warned organisations must not “bank on the government deciding to extend the 30 September deadline” for postponing AGMs and relaxing rules around general meetings.
The Corporate Insolvency and Governance Act 2020 received royal assent on 25 June this year, as part of the government’s emergency response to Covid-19.
The act allows some charities to hold board and members meetings virtually, even if the organisations’ constitutions do not permit it, and includes a relaxing of some corporate governance laws to help organisations deal with the challenges of meeting during the coronavirus pandemic.
It applies to charitable companies, charitable incorporated organisations and community benefit societies, but not to unincorporated organisations.
As well as letting members to attend meetings virtually, flexibility under the act allows for meetings that do not have to be held in a specific physical location, even if a charity’s governing document says that they should be.
It also permits votes to be placed electronically or in a way different from that set out in that charity’s constitution.
In addition, any organisation that was required by its constitution to hold an AGM during the crisis would be able to postpone the meeting until as late as September if necessary.
In June, Third Sector reported that the Charity Commission had updated its guidance after the act received royal assent.
“Coronavirus is having a major impact on charity events and the government’s health advice may lead to some charities having no choice but to decide to cancel or postpone their AGMs and other critical meetings… [temporary changes] make it lawful for charitable companies and charitable incorporated organisations to postpone members’ meetings or to hold them remotely, even if this is not allowed by the charitable company’s articles of association or the CIO’s constitution”
Some charities that have clauses in their governing documents that allow them to meet virtually or over the phone, are advised to record any decisions made in this way “to demonstrate good governance of your charity”.
“[trustees should] check their governing document and see if they can make amendments themselves to facilitate changes as to how or when meetings are held”
The guidance applies to any AGMs that were due to be held between 26 March and 21 August, temporarily overriding the timing requirements in a charity’s governing documents.
However, the measures under the act expire on September 30, unless the government believes an extension is necessary.
Evans is concerned that charities who have not yet made use of these provisions should check and review their constitutions as soon as possible:
“There are so many unknowns at the moment, including how long we will need social distancing and where or when any wider lockdown may be put in place.
“We also cannot bank on the government deciding to extend the 30 September deadline for postponing AGMs and relaxing the usual rules for general meetings.
“Charities that can take advantage of these provisions should review their constitutions now to see if they need more flexibility in there to help them operate in the months ahead.
“If so, they can take the opportunity to put changes to the members now in compliance with the relaxed regime. If they wait, the risk is that they lose that chance and give themselves governance problems further down the line.”
Nicola Evans, Charities Counsel, BDP Pitmans