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Coronavirus Update - Charity Administration and Meetings

on Thursday, 21 May 2020.

In an earlier briefing we highlighted the challenges for charities and other organisations organising their Annual General Meeting, or other members meetings, while complying with guidance on social distancing during the coronavirus (COVID-19) pandemic.

Our earlier briefing noted that:

  • the Charity Commission as a regulator had indicated it would take a "pragmatic and proportionate" approach where charity trustees acted in good faith
  • this would not eliminate the risk of legal challenge where, for example, an aggrieved member objected to the charity's proposals
  • the Business Secretary had announced (in a speech on 28 March) that: "the government will introduce legislation to ensure those companies required by law to hold Annual General Meetings (AGMs) will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus [by temporarily extending them] greater flexibilities, including holding AGMs online or postponing the meetings."

The promised legislation has begun its journey through Parliament. The Corporate Insolvency and Governance Bill 2019-21 was introduced to the House of Commons and given its first reading on Wednesday 20 May 2020.

Coronavirus Legal Advice

What Does the Bill Say About General Meetings?

The Bill provides for the relaxation of the rules on holding general meetings to help charitable companies, charitable incorporated organisations (CIOs) and other "qualifying bodies" continue to meet their constitutional obligations while face-to-face meetings cannot safely be held due to the coronavirus. The list of qualifying bodies is set out in the Bill.

The relaxation in the rules will help some of the charities grappling with the challenges outlined in our previous briefing. These changes will be welcomed by charities that have:

  • large memberships, which can make meeting by electronic means more difficult
  • older governing documents that do not provide for meetings to be held by electronic means (such as video conferencing using tools such as Zoom or Microsoft Teams)
  • plans to make contentious decisions requiring a resolution of the members, where adopting the "pragmatic" approach envisaged by the Commission would carry a real risk of legal challenge.

The Bill may change during its passage through parliament over coming weeks. The Government has indicated it intends the new rules to have retrospective effect back to 26 March, but it would be safest not to rely on that.

As drafted, the Bill includes the following new rules:

  • Up to the end of September, qualifying bodies will be able to postpone AGMs that were due to take place between 26 March and 30 September.
  • Charity trustees will be able to temporarily override any rules in their constitution that require a physical general meeting to be held. The Bill also expressly states that a meeting need not be held in any particular place. The directors/trustees will be able to determine the way the meeting is held.
  • Electronic voting can be used, whatever the governing documents say.
  • It will be possible to count members joining the meeting remotely as part of the quorum, even where the constitution says they must be present in person. It will be possible for each member to join the meeting from a different location.
  • Members will have no right to demand that they participate in the meeting (except by voting), vote in any particular way or attend in person.

These temporary rules are intended to apply to all general meetings and not just for AGMs. The new rules will be in place until the end of September, but that period may be extended up until 5 April 2021.

The UK Government stresses that trustees should engage with members and ensure they are offered opportunities to challenge and question the board.

Charities will need to ensure the process they adopt gives members the opportunity for discussion, questions, debate and feedback. They will need to consider how best to achieve this. While some members will welcome these changes, careful planning will be essential to ensure that general meetings are effective and members are not disenchanted or confused by the adoption of  a new meeting format.

Organisations which are not "qualifying documents" will need to review the relevant rules under their governing documents and assess the risk of a legal challenge from members or other interested parties, even in the context of the flexible stance taken by regulators.

Where the changes are managed effectively, this may be an opportunity to try new approaches on an experimental basis and, if they prove successful, transition to a new way of working for the long-term. The dramatic changes required by the pandemic response have hit fast forward on many changes which were once widely resisted - wide-spread home working, video conferencing and more. The same may prove true of running charity general meetings by electronic means. Charities and other qualifying bodies should take the opportunity to consider updating their governing documents to enable more flexible meeting procedures while making appropriate provision for members to hold the board of trustees to account.  

For specialist legal advice on the implications of this bill on your organisation, please contact Shivaji Shiva in our Charities team on 07788 313298, or complete the form below.

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