September marks the end of summer, the start of a new school year and the release of this quarter’s company secretary update.

This quarter we take a look at:

  • automatic disqualification of charity trustees and senior managers;
  • the impact of the General Data Protection Regulation (“GDPR”) on company secretaries;
  • the Social Housing Green Paper;
  • anti-bribery compliance;
  • Companies House enforcement of PSC registers;
  • the new annual return for charities; and
  • a follow up on the key dates highlighted in our last quarterly update and those coming up in the next.

Our spotlight piece this quarter also sheds some light on the new automatic disqualification of charity trustee rules which came into effect on 1st August this year.

Automatic disqualification of charity trustees and senior managers

The criteria for automatic disqualification for charity trustees and senior managers was extended as part of the Charities (Protection and Social Investment) Act 2016 from 1 August 2018. The changes extend both the criteria for disqualification and those to whom the rules apply.

Who do the rules apply to?

The new rules extend the remit of disqualification to apply to “Senior Managers” of charities. The Charity Commission has produced guidance on the positions affected by the new rules, which will apply to Chief Executives (or equivalent) and Chief Finance Officers (or equivalent) and is keen to emphasise that it is the function of the role (and not the title) that matters in determining whether a senior manager will be encompassed within the definition.

A Chief Executive (or equivalent) will normally have overall responsibility for the day day-to-day management and control of the charity and will only be accountable to the charity trustees. Chief Financial Officers will be those responsible for the overall management and control of the charity’s finances and will usually only be accountable to the Chief Executive or the charity’s trustees.

Disqualification criteria

Prior to the introduction of the new rules, individuals could be prevented from acting as a charity trustee due to having unspent convictions (predominantly those relating to bankruptcy or dishonesty/deception offences).

Other than disqualification under the Disclosure and Barring Service rules and Charity Commission Orders, a trustee or senior manager will now be automatically disqualified for unspent convictions relating to the following specific offences: terrorism, money laundering, bribery, contravening a Charity Commission Order or Direction, misconduct in public office, perjury, or perverting the course of justice.

The other non-financial disqualifying criteria now includes being on the sex offenders register, having an unspent conviction for contempt of court, disobeying a Commission Order, or being a “designated person” under specific anti-terrorist legislation. In addition, being removed from a “relevant office” (that of a charity trustee or officer), or being subject to a director disqualification, or insolvency proceedings also falls within the criteria. A detailed list of the full disqualifying criteria can be found here.

It is an offence to act for a charity as a trustee or senior manager once disqualified – this includes acting as a board member of a charity (whether exempt or registered). A conviction could lead to a fine, imprisonment or both. We would recommend that organisations have systems in place to identify individuals to whom the rules apply. Charity trustees or senior managers that are automatically disqualified under the new rules must immediately cease to act in any trustee or senior management position. They should also resign formally from their position so that it is clear that they are no longer acting for the charity. Having said that, it is important to note that those disqualified under the rules are still able to be involved in voluntary or non-senior employment roles for charities once they have been disqualified.

Disqualification may only be waived on application to the Charity Commission.

A copy of our full e-briefing on the new rules and their effect can be found here

Company secretaries – The new DPO?

Over the last few months, the sheer volume of information produced on the introduction of the GDPR has been overwhelming and has left many wondering what exactly is expected of them under the new regime. In this section, we consider the impact of the GDPR on company secretaries, specifically the obligations and expectations surrounding the new role of Data Protection Officer (“DPO”) introduced by the regime.

Company Secretary – Automatic DPO?

Under the legislation, organisations are required to appoint a DPO. A DPO has the responsibility of monitoring compliance with the GDPR and other data protection laws. The DPO acts as the port of call for any data protection queries by data subjects and the supervisory authority, as well as ensuring appropriate training and policies are in place to comply with the GDPR.

As company secretary, you may be tasked with the role of DPO, as it may fall within the remit of your existing duties that require you to ensure compliance with the statutory and regulatory requirements of the organisation. You will be best placed to assist your organisation with the latest information and updates received from the Information Commissioner’s Office (“ICO”) and to arrange appropriate training for staff.

Your board will need reliable and accurate updates from the DPO and, due to the nature of your role as company secretary, you may be best equipped to act as a contact for information from the various areas within your organisation such as HR, IT, Marketing and Customer Services. Being the channel of data information will enable transparency at board level by providing the board with details as to why your organisation holds the data and how long it can be held for. 

What will the new role entail?

Taking on the role of DPO will add to your administrative duties and responsibilities as company secretary but will be an invaluable role for your organisation. Some of your tasks to ensure your organisation is compliant with GDPR and data protection might include:

  • Relaying information received from the ICO under GDPR;
  • Checking your organisation’s website is meeting the minimum data protection requirements and e-commerce regulations;
  • Review your organisation’s Terms & Conditions regularly; and
  • Ensuring subject access requests are dealt with in a procedural, timely and compliant manner.
Social Housing Green Paper

In case you missed it, (let’s face it, how could you!) the much anticipated Social Housing Green Paper (the “SHGP”) was published on 14th August. The SGHP sets out five core principles, around which the SHGP is drafted:

  1. Ensuring homes are decent and safe;
  2. Effective resolution of disputes;
  3. Empowering tenants and strengthening the Regulator;
  4. Tackling stigma; and
  5. Boosting the supply of social housing and supporting home ownership.

Some of the key proposals coming out of the SHGP which the Government has invited views on include:

  • New ‘league tables’- including performance indicators and league tables to compare organisations against each other;
  • Reviewing the way the consumer standards are regulated – including whether a Code of Practice should be introduced and whether the ‘serious detriment test’ is fit for purpose;
  • New home ownership options for new shared ownership properties – including allowing a purchaser to purchase as little as 1% equity in shared ownership homes;
  • Looking at a community-led stock transfer programme – including the benefits offered by such models as Community Land Trusts, Tenant Management Organisations and Housing Co-ops;
  • Removal of the Local Authority high-value asset levy; and
  • Abandoning the fixed tenancy proposals previously announced.

The SHGP places particular onus on tenant engagement and how tenant governance may shape up going forward. A number of housing associations are consulting with their own tenants on the SHGP to help in formulating a response and the Ministry for Housing, Communities and Local Government are also hosting a number of tenant consultation events. Consultation on the SHGP (and the accompanying paper on the future of regulation) closes on 6 November.  Our full briefing on the Social Housing Green Paper can be found here.  

Anti-bribery policies: a ‘must’ or a ‘should’?

Recent case law re-emphasises that all businesses must comply with anti-money laundering and anti-bribery requirements. Formal processes must be in place to prevent financial crimes, or organisations run the risk of having legal action brought against them under UK anti-bribery law if someone ‘associated’ with the organisation makes a bribe with the intention of obtaining, retaining or improving business or business relations for that organisation.

The definition of an ‘associated’ person is wide and does not only apply to employees or directors of an organisation. A person is ‘associated’ with an organisation if they provide services on the organisation’s behalf and so can encompass third-party contractors and service providers. Under the legislation, the business doesn’t even have to know about the associated person’s behaviour to be found guilty of bribery. The only defence to the corporate offence of failing to prevent bribery is to demonstrate that an organisation had “adequate procedures” in place to prevent bribery.

This recent decision comes after a small business failed to show that it had anti-bribery policies and procedures in place which were sufficient for them to utilise the defence of “adequate procedures” in the action. The procedures fell short of the mark in that, though the business was run in an open plan environment and transparency was encouraged, there were no actual anti-bribery policies in place. Further, there was insufficient staff training, no one to report concerns to, and inadequate record keeping when reports were made.

We advise that all organisations, whether small or large, charities or commercial, must ensure they have an anti-bribery policy in place which is monitored and enforced, a designated officer to whom reports of concerns can be made, proper record keeping, and adequate staff training. The efficacy of these procedures must be reviewed in accordance with the risk and size of the business, but certainly must not be ignored.  Guidance on “adequate procedures” to prevent bribery can be found here.

Companies House steps up enforcement of PSCs

Since 30 June 2016, companies (along with partnerships and certain other entities) have been required to complete a register of persons or registrable legal entities which exert significant control over the company (or other entity), or otherwise declare that there is no such person or entity.

However, the mode of compiling such a register has been the subject of confusion by some, and Companies House is now increasing its audit and investigation powers to ensure that all PSC registers are properly completed. Companies House will share information with law enforcement and government departments to deal with economic crime, more vigorously pursue companies which have failed to file PSC information and deal swiftly with complaints about missing or incorrect PSC information.

It is important that you ensure that your PSC registers accurately reflect who the PSCs in your organisation are.

Is your PSC register up to date?

For further information on how to complete your PSC register, please see the Companies House guidance page here and our detailed guidance here.

Annual return for charitable bodies: new requirements

The Charity Commission has now published its new annual return form which includes additional questions relating to overseas funding, origin and expenditure of funds, employee salaries and safeguarding of children and vulnerable adults, following on from the Charity Commission Consultation report on the new questions earlier this year.

Questions consider the methods used in overseas transfers, whether satisfactory risk management policies are in place and whether funding is received from overseas governmental or quasi-governmental bodies.

The Charity Commission is aware that, in order to answer some of these questions, charities will have to change their recording methods. Questions relating to receipt of funding from, and transfers of money to, overseas organisations or individuals are therefore voluntary until 1 January 2019, but will then become compulsory. Registered charities should act now to ensure their governance enables them to meet these reporting requirements – for example, European funding or funding from non-UK funders could be caught.

The Charity Commission aims to increase public confidence in the sector and crack down on money-related offences, including the funding of terrorism. Further disclosures include:

  • whether any staff members earned more than £60,000 in the relevant year;
  • whether trustees or staff work with vulnerable children or adults and whether DBS checks have been applied to eligible individuals;
  • whether funding has been received from the UK central or local government;
  • what relationships are in place with professional fundraisers;
  • whether any trustees resigned and were appointed as staff during the relevant year; and
  • whether any trustees are directors of trading subsidiaries.

We would advise all registered charities to familiarise themselves with the new reporting requirements and begin compiling the information required as soon as possible, as the 2018 annual return service was made available on 20 August 2018.

Further information on the submission of 2018 Annual Returns can be found here.

Follow up and key dates
  • 5 July 2018 - Introduction of the new regime for administration and insolvency of registered providers of social housing.
  • 15 August 2018 - Key parts of the Regulation of Registered Social Landlords (Wales) Act 2018 came into force (including removal of s9 consent for disposals). Please see our e-briefing for further information on the Act here.
  • Oct 2018 - Formal separation of Homes England and the Regulator of Social Housing is due to take place.
  • 6 Nov 2018 - Consultation on the Social Housing Green Paper closes.
For more information

If you have any questions on any of the topics within this update, please contact Sharon Thandi or Ellen Briers.

Contract management pitfalls – payment
Contract management pitfalls – payment

In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.

Standard of proof in suicide cases
Standard of proof in suicide cases

A long-awaited decision of the Court of Appeal has clarified that a lower standard of proof should apply than previously thought before an Inquest can return a conclusion of suicide.