Company Secretary Update (2)

This quarter the key highlights are:

1. HCA outcome of consultation on new Regulatory Framework

Just as we were all breaking our new year’s resolutions the HCA delivered on theirs! The long-awaited outcome of the HCA’s consultation on the new Regulatory Framework was published on 30 January 2015 (click here to read the full document). The new Regulatory Framework will, as expected, take effect from 1 April 2015.

You can read our comprehensive digest of the key changes here. Find out more about our Board Training packages on the new Regulatory Framework.

2. Welsh Government’s decision on Board Pay

On 26 February 2015, the Welsh Government decided that housing associations in Wales would not be able to pay Board members, disappointingly retaining the status quo following the consultation process late last year.

Lesley Griffiths, minister for communities and tackling poverty expressed the view that payment of Board members was not right currently, since many housing associations’ resources are squeezed in the current climate. As a result it is hoped that the issue will remain open for the future.

3. Department for Business, Innovation and Skills publishes regulations on company and business names

On 4 October 2013, the Department for Business, Innovation & Skills published a response to its consultation on reducing company and business names regulations as part of the Government’s Red Tape Challenge. As a result of this, two new Regulations (The Company, Limited Liability Partnership and Business (names and Trading Disclosures) Regulations 2014 and The Company, Limited Liability Partnership and Business names (Sensitive Words and Expressions) Regulations 2014) took effect on 31st January 2015 (“the Regulations”).

The Regulations amend the words to be considered or disregarded when determining if a name proposed to be registered is the same as another in the Registrar’s index. This is a key change for organisations with popular names (particularly where, for example, they have had a dispute in the past). If you are concerned you should consult the Regulations and consider registering a dormant company to protect any names you consider would be too similar.

Twenty-six words have also been removed from the “sensitive” list including “International”, “Group”, “Holding”, “United Kingdom” and “National”. Unfortunately one of the names our clients often request, “Institute”, remains on the sensitive list. The Regulations also extend the list of characters that can be used in a company name and includes various accents and other diacritical marks, signs or symbols.

The Regulations also relax some current requirements, so that if at least six companies share an office, place or location, their registered names may be held and made available for inspection at that venue, rather than having to be displayed at all times.

4. Charity Commission publishes a ‘strategic statement’ on its regulation of fundraising

In December the Charity Commission published a Strategic Statement on the Regulation of Fundraising. The paper acknowledges the importance of fundraising to charities and how, if done well, it builds public confidence. However, it also acknowledges that mishandled or fraudulent activities can damage this.

The paper is divided into three parts; Part 1 deals with self-regulation of charity fundraising and describes the three bodies that are involved in the self-regulatory system: The Fundraising Standards Board, The Institute of Fundraising and The Public Fundraising Regulatory Association. Part 2 deals with the Commission’s role in regulating charities which fundraise. This section emphasises the obligations of the Trustee in preventing fundraising problems and the misapplication of funds, and the circumstances in which the Commission will intervene. This reflects the regulatory rather than advisory approach that we have seen the Commission take in the past few years. The third part covers other organisations with a role in fundraising, such as the Gambling Commission, the Advertising Standards Authority, Action Fraud and HMRC.

5. Stationery Requirements

We have received several queries over the last month from our Registered Provider clients regarding what information must appear on their rent review letters and websites. We therefore thought it would be helpful to include an overview of the trading disclosure requirements for companies and registered societies.

Companies

• full name;
• place of registration (i.e. ‘Registered in England and Wales’);
• registration number;
• address of registered office;
• either all of the directors’ names or none; and
• if a charitable company, include the words ‘Registered Charity’ (although it is not necessary to quote the charity registration number).

Registered societies

• full name (but there is no requirement to disclose the registration number); and
• if charitable, then confirmation of exempt charitable status.

Although there is no statutory requirement to include the place of registration or registration number, most registered societies will still include this information on their stationery and websites.

If you do not comply with these requirements then the organisation can face a fine of up to £1,000. Officers may also be liable, and the ability of the organisation to indemnify them for such liability will be subject to the provisions in the organisation’s constitution. Therefore, in any situation where there is any doubt as to what information needs to be disclosed, it is always better to provide too much information rather than too little!

Spotlight: Political activities by charities

Now that we are in the throes of campaigning season, our ‘spotlight’ explores the law around political activities by charities and the effect of the Transparency of Lobbying, Non Party Campaigning and Trade Union Administration Act 2014 (“the Lobbying Act”), which took effect for the current campaigning season on 19 September 2014.

Political activities

Although charities play a vital role in campaigning for law and policy change at government level, they must not be established for purely political purposes. The Charity Commission’s guidance states that political campaigning, or political activity (see the guidance for the definition it uses for these), must be undertaken by a charity only in the context of supporting the delivery its charitable purposes. Although some charitable aims are best served by carrying out political activities, this must never become the reason for a charity’s existence. In particular, charities must never engage in activities which appear to favour one political party over another.

In practice this distinction can be quite difficult to ascertain, particularly because what is considered to be ‘political’ evolves over time (for example, the promotion of human rights is now considered charitable following the Human Rights Act 1998). One well-publicised example of this tightrope was Oxfam’s “The Perfect Storm” tweet last summer, which suggested that a number of government policies had forced people into poverty and which was criticised by the Charity Commission as creating a misperception of political bias.

A key ‘warning sign’ that a political activity is becoming the primary object of your charity is where your activities are focused wholly on securing or opposing a change in the law or policy. When considering whether to engage in political activities, trustees must first check that the charity’s governing document contains a power for it to do so. If it does, you should then carefully consider whether such a campaign is reasonably likely to be effective in actually supporting or achieving your charity’s purposes. You should weigh the costs and risks involved (particularly from a reputational perspective) against the likely impact the activity will make. Such objective consideration can be difficult when a cause is close to trustees’ hearts, so where substantial costs may be incurred it is worth seeking independent advice for an objective point of view.

The Lobbying Act

The Lobbying Act is intended to limit the activities of ‘non-party campaigners’ (individuals or organisations that campaign in elections but are not standing as political parties or candidates) in the run up to an election, and to limit the amount of money they spend on ‘regulated campaigns’. ‘Regulated campaigns’ are activities that:

• can reasonably be regarded as intended to influence voters at elections (the Purpose test); and
• are aimed at, seen by or involving the public or a section of the public (the Public test).

Influencing voters includes enhancing or reducing the prospects of specific political parties, candidates or groups of candidates that support particular policies or issues. Organisations don’t have to name a political party or group of candidates to influence voters – material can be covered by the rules even if it is intended to achieve something else, such as raising awareness of a public policy issue.

Material that a charity sends to its members and committed supporters isn’t captured by the Lobbying Act, as long as it deals with issues that fall within the charity’s aims and objectives. The exact nature of a ‘committed supporter’ will vary between organisations, but could include:

• regular donors by direct debit;
• people with an annual subscription; and
• people who are actively involved in the organisation.

It will not include the wider range of supporters, such as those you may update via Twitter and other social media.

If you think that your charity is carrying out a regulated campaigning activity, you should:

1. estimate the likely costs of the activities – if you are spending more than £20,000 in England or £10,000 in Scotland, Northern Ireland or Wales then you may need to register the charity with the Electoral Commission;
2. estimate whether the costs relate to activity in particular constituencies – there is a spending limit at constituency level of £9,750;
3. consider whether your campaigning is/will be ‘co-ordinated’ with another organisation – if it is, there are joint campaign rules that should be considered;
4. register your charity if costs exceed the threshold – once registered, your charity will need to follow certain rules on how it manages and reports its spending on regulated activities, and on which donations it can accept.

For more detail please see our Lobbying Act ebriefing or contact Sarah Tomlinson in our Charities team.

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