Happy New Year - our first newsletter of 2021! Throughout this year we will continue to bring you news and developments relating to the charities sector.
1. The Small Business, Enterprise and Employment Act 2015 (the ‘SBEEA 2015’) – watch this space!
A number of key provisions in the SBEEA 2015 are expected to come into force over the next six to nine months, including:
- Payment Practices: The requirement for large private and quoted companies and LLPs to publish information about their payment practices, policies and performance, including details on standard payment terms, variations on those standard terms, average time taken to pay invoices, percentages of invoices paid within specified timescales and dispute resolution procedures.
- Corporate Directors: The SBEEA has inserted into the Companies Act 2006 a restriction on companies having corporate directors. This applies not only to new directors - one year after the restriction comes into force, any remaining corporate directors will automatically cease to be directors (subject to any exceptions set out in subsequent regulations). There is currently no date set for this restriction to come into force; however the Government has indicated that it does intend to implement the prohibition, and publish regulations setting out exceptions to the prohibition, in due course.
2. Electronic signatures
On 21 July 2016 the Law Society published a practice note on the execution of documents using electronic signatures (including typing in a name or pasting in an electronic signature). The note considers various issues including the evidential weight of electronic signatures and the legal and practical considerations to take into account before using an electronic signature.
Of most relevance to this update are the following:
- Deeds have specific requirements for electronic signatures to be valid. Either the document is duly executed and delivered as a deed, or a witness attests the signature.
For the former, the document must be executed as a deed (as per section 44 of the Companies Act 2006), with two authorised signatories applying their electronic signature either in counterpart or to the same document. The signing arrangements must address when delivery takes place, especially where the signed documents are held to order prior to the deed coming into effect.
Where a witness attests the signature of an individual or an authorised signatory of a company, the witness must genuinely observe the signing by application of electronic signature. For evidentiary purposes, it is best for the witness to be physically present for this, rather than witness by video-link.
- Companies incorporated under the Companies Act 2006 may use electronic signatures for minutes and resolutions. Where a document is sent to a company in soft-copy, an electronic signature can be accepted if the identity of the sender is confirm either by statement of identity of the sender (and the company has no reason to doubt its truth) or in the manner prescribed by the company.
- Combination of execution methods - the note confirms that using a combination of signatures (e.g. an electronic signature and a ‘wet-ink’ signature) is acceptable.
The full practice note can be found here.
3. Minute taking - guidance
ICSA has published guidance on the practice of minute taking. The guidance acknowledges that every organisation will draft minutes differently but sets out good practice principles including the following:
- minutes should provide an objective, accurate, balanced and impartial internal record of the meeting;
- as a minimum, minutes should include the key points of discussion, decisions made and, where appropriate, the reasons for them and agreed actions, including a record of any delegated authority to act on behalf of the company;
- minutes should not be a verbatim record of the meeting but should document the reasons for a decision and include sufficient background information for future reference;
- the company secretary is responsible to the chair for the preparation and retention of minutes; and
- the audio recording of board meetings or the publication of board minutes is not, generally, recommended. Any such recording should be deleted once the minutes have been approved.
The ICSA feedback statement can be read here and the guidance note can be downloaded upon registering with the ICSA.
4. Guidance update: Social Investment Powers
The Charity Commission has published interim guidance following the new social investment power available to charities set out in the Charities (Protection and Social Investment) Act 2016 (“the Act”) which came into force on 31 July 2016.
The guidance explains what a social investment is and sets out some of the issues trustees should consider when making social investment decisions. The Act does not override or change the trustees’ general duties but sets out further duties that apply to social investment decisions.
This new power does not change the fact that a charity must only act in pursuance of its own charitable purposes.
What is a social investment?
It is a relevant act by a charity carried out with a view to both directly furthering the charity’s purpose and achieving a financial return for the charity.
This is a wide definition and as a result can include actions which may not be thought of as investments, such as taking on another person’s liability (but these must be approached with caution). It is important to remember that a social investment will be determined by the motivation of the charity.
Issues to consider
Before making any sort of decision about investment, the charity should check its governing document to make sure this statutory power is not restricted. This new power does not apply to charities established by Royal Charter or charities where their functions are set out in legislation.
A list of the factors trustees must consider is set out in the guidance. These duties cannot be delegated and the decisions should be made reasonably considering all the factors.
The full interim guidance can be found here. This guidance is next set to be reviewed in 2017.
5. Spotlight: Goodbye to the golden share? An update
Back in April, we reported on the introduction of powers under the Housing and Planning Act 2016 (the ‘HPA’) for the Secretary of State to introduce regulations removing a transferring authority’s so-called “golden share” in, and nomination rights to the boards of, the registered provider (RP) to which it transferred its housing stock (see the full article here).
The powers to reduce local authority influence over RPs (which were introduced as part of the Government’s deregulation package for RPs) are potentially very wide in scope and could include:
- Limiting or prohibiting local authorities’ powers to appoint board members;
- Limiting or prohibiting local authorities’ voting powers as shareholders;
- The power to amend constitutions without local authority consent, overriding provisions in transfer agreements.
If your organisation continues to have local authority appointed board members or golden share arrangements, we recommend:
- reviewing your constitutional document – consider changes which could be made to the governance arrangements and board structures. Would your quorum provisions still work without the local authority?;
- considering the skills mix on your board - does this proposal allow you to meaningfully achieve the requirement of having a board comprised of board members with the appropriate skills and experience?; and
- discussing the proposed changes and the evolving relationship with the local authority. In many cases the local authority can be a valuable partner and RPs may want to preserve a good relationship.
For more information
For further advice or information on any of the topics covered please contact Rose Klemperer on 0121 214 3638 or by email email@example.com
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