Charities – the Impact of the Companies Act 2006

There have been many changes introduced by The Companies Act 2006 ("the Act") that will affect charitable companies, with the key ones being:

 

1. The role of the memorandum of association. For charitable companies incorporated after 1 October 2009 the memorandum will simply state the intention to form the company. For those incorporated before 1 October 2009, the objects and other provisions listed in the memorandum will now be deemed to be part of its articles of association. Consequently, any amendments that need to be made to the memorandum will need to be made by amending the articles.
2. Amendment to Articles. Where a charity wishes to amend its articles, it is advised to include a copy of its memorandum as part of those amended articles as the failure to do so may have the effect of deleting the provisions which were contained in a charity’s memorandum. This could be construed as meaning that the charity now has unrestricted objects and could be regarded as failing to satisfy the definition of "charity" as set out in the Charities Act 2006. In turn, the Charity Commission would then have the power to remove the charity from its register.
3. Obligations relating to the register of members. Charitable companies now have an obligation to inform a person making a request to inspect the register whether the information is up to date and if not then the date it was made up to. The charity and each trustee may be liable to a fine for failure to comply.
4. Electronic communications. A charity can now communicate electronically with its members. A charity’s articles must permit it to circulate information electronically.
5. Annual general meetings ("AGM"). AGM’s are optional unless a charity’s articles require one to be held. Only 14 clear days’ notice is now required unless there is anything to the contrary in the articles.
6. Written resolution procedure. It is no longer necessary for all members to sign a written resolution.
7. Duties of trustees. These duties are now set out in the Act. These include the duties to act within a charity’s constitutional powers, to avoid conflicts, to declare interests and to exercise independent judgment and reasonable care. In addition, the trustees of a charitable company also need to ensure that the charity’s resources are used to further the charity’s aims.