Coronavirus (COVID-19) legal implications on meetings for charities

Note: The regulatory landscape is shifting rapidly. The Department for Business, Enterprise & Industrial Strategy announced on Saturday that it would shortly be introducing new legislation permitting publicly traded companies to hold their AGMs online, or to postpone them. The legislation could potentially extend these permissions to other types of company, including charitable companies. The Charity Commission may also update its current guidance, as the Government is taking steps to reduce the regulatory burdens on organisations during the crisis. We will keep the below under review, but please also check your regulator’s website, as their position may change regularly and at very short notice.

Governing incorporated charities during lockdown

Imagine that you have been invited to attend the annual general meeting of a charitable company of which you are a member. The charity has a large membership which meets yearly. At the AGM, you would usually expect to contribute to important discussions and decisions about how the charity is being run.

The meeting is due to take place while the United Kingdom is still under lockdown due to the coronavirus outbreak. You know that the government has advised everyone to stay at home and so you are, correctly, very unlikely to go to the AGM this year. You may be surprised that, at a time when events from Glastonbury to the Chelsea Flower Show have been cancelled, any physical charity general meeting would go ahead.

But now imagine that you are a trustee of the same charity. You need to decide carefully if, when and how to hold meetings. You might very reasonably decide you cannot go ahead, but this should not be automatic, and the method, message and consequences of your decision need to be carefully considered.

Clearly, public health and people’s lives come first, but the right of members to have a say on important charity matters, and to scrutinise trustees’ governance of the charity, where that is how the charity is normally governed, is important and so is protected by law.

Trustees’ decisions and meetings

Firstly, you will likely have been in touch with your fellow trustees to decide how any upcoming board meetings will proceed, and there are likely to be important decisions you need to make outside of your regular meeting pattern in light of the dramatic impact of coronavirus.

Can you do this from home? As with any governance question, the first place to look is your charity’s governing document. These documents vary considerably from charity to charity, and so this article can only offer general comment and is entirely subject to any contrary provision in your charity’s governing document.

However, for most charities, unless the governing document expressly provides otherwise, the arrangements for trustee meetings can be flexible. The Charity Commission’s current model documents for charitable companies and for charitable incorporated organisations (CIOs) permit trustees to hold their meetings via telephone or video conference.

If holding meetings via electronic means, trustees should ensure that:

  • everyone entitled to receive notice of the meeting gives their express consent to use of electronic means;
  • each participant can hear all the other participants; and
  • minutes are circulated to each trustee for approval.

The current crisis may mean an important decision has to be made quickly, possibly before a board meeting can be convened. If the trustees all agree, they can make specific decisions informally – for example, over email – if they are unanimous.

However, an informal process should be the exception rather than the norm, even during lockdown. Decision-making within a meeting – which does not have to be a physical meeting – generally involves more thorough discussion and draws out more effectively the costs and benefits of any given course of action.

Members’ meetings

The position on meetings of your charity’s members is less flexible if the charity is a company. Both charity and company law generally accommodate trustees proceeding via electronic means, but have been slower to do so for members. The difference is primarily due to the role members have in some (although not all) charities: that of people separate from the board who can ask questions and monitor how the board is running the charity. Permitting less formality could result in members not having the proper opportunity to play this role.

However, if you are a trustee of a charity which traditionally has (or is required to have) an AGM, and the date of this year’s meeting is imminent, you will be rightly concerned about going ahead during a lockdown.

The Charity Commission has assured charities that it will be ‘flexible and supportive’ during the crisis, but also that if trustees decide to postpone or cancel meetings, or to hold meetings via alternative means without being certain that their governing document permits this, trustees should record such decisions.

Firstly, you should check your governing document to be sure that you are required to have an AGM. CIOs with memberships separate from their trustee bodies – “Association-model CIOs” – will almost definitely have such a requirement in their Articles of Association: the Charity Commission strongly encourages using its model provisions, which include mandatory general meetings.

If an AGM is required, you should next check the maximum period you can allow to elapse before holding your AGM, and choose a date as close to the maximum limit as possible.

If your AGM notice has already been issued to your members, or the maximum period is likely to expire before the outbreak is over, not going ahead with the meeting is likely to be a breach of your charity’s rules. Charities who need their members to approve their accounts and appoint new trustees during an AGM have even greater reason to go ahead.

But how can you go ahead?

In the UK, there is not yet a legal consensus on whether entirely virtual members’ meetings are possible: such uncertainty is discouraging. As noted above, such certainty may be provided by new legislation in the coming weeks or even days. However, fully virtual meetings are also technically difficult to achieve for charities with a wide membership – such charities are unlikely to want to pursue this route, particularly with less IT support on hand for most people.

However, in the present circumstances, you are even less likely to want the full membership to attend a physical meeting.

There is a middle-ground position, sometimes called a ‘hybrid meeting’. This could take various forms: the Chartered Governance Institute (ICSA) has recently published guidance, aimed at share companies but based on generally applicable company law, on the options available.

Charities who need their members to pass resolutions while lockdown is still in place should consider ways they can do so without requiring a physical meeting with all members in attendance. For charities with only a small number of members, passing written resolutions would be the simplest and most effective way of addressing the issue.

By way of illustration, a charitable company with typical Articles of Association might overcome the issue via the following steps:

  1. Convene the meeting in the usual way.
  2. Trustees who are also members of the charity give their Chair enough proxies to form a quorum (assuming that a proxy can count toward the quorum which is normally the case).
  3. If the meeting was convened before lockdown measures were in place, the Chair and the proxies (physically, one individual) attend the meeting for the sole purpose of adjourning it. The meeting need not be adjourned if it is known that it will be a hybrid meeting before it is convened. If the meeting is adjourned, the charity could proceed with step 4 between sending out the notice of general meeting and the date for the meeting. You may want to allow a longer notice period to enable questions to be collated, answered, consideration to be given and then votes to be cast.
  4. The trustees canvas views from the charity’s members on proposed resolutions that would have been discussed at the meeting, for example by making online statements, and providing online questions and answers. The objective is to enable, in the most pragmatic way practicable, all members to raise questions and comments and for all members to consider what others have said and all responses before exercising their votes.
  5. The members vote via electronic ballot papers (these will take a prescribed form).
  6. The Chair and the proxies he or she holds reconvene the meeting to declare the result of the voting. Members and/or proxies cannot be prevented from attending any general meeting by the trustees – although, of course, everyone will be subject to the general lockdown rules.

How much flexibility a charity has and the technical procedures that need to be complied with in relation to the appointment of proxies, to ensure that a quorum is present and who chairs the physical meeting will depend on the constitutional documents. Please always check them carefully.

Charitable companies that have not yet convened their general meetings

The risks of not going ahead with a required AGM include:

  • The board’s relationship with the charity’s members could suffer – this risk can be mitigated by ensuring there are other means for trustees to listen to members’ views and respond to their questions.
  • Accounts and annual reports may be filed late – the Charity Commission has said that it expects these to be filed on time, and that charities that cannot do so should contact them. Companies House will permit late filing, but an application to file accounts late must be made before the date by which the accounts are due to be filed.
  • A hostile member or group of members might begin court proceedings based on prejudice to their rights as members. This action would not succeed if their rights have not, in fact, been prejudiced. If an alternative arrangement, such as a hybrid meeting, is carried out, and the process complies with the charity’s governing document, ensures that members are kept appropriately informed, and preserves their rights to vote on matters reserved to them, then the arrangement is unlikely to be prejudicial.

Clearly, the above considerations will not outweigh the risks currently posed by having a physical meeting of all the members of the charity. Nonetheless, there will be methods available to many charities which allow their trustees to continue good governance practices, and all trustees should be actively considering such methods.

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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