CO3:  Good Governance –  Leading the Way: 3 Developing your Board to Meet New Governance Challenges Charity Law & Company ...
Introduction to  Cleaver Fulton Rankin <ul><li>One of Northern Ireland’s leading law firms </li></ul><ul><li>Association w...
Outline of Talk <ul><li>Board awareness of new legislation: </li></ul><ul><ul><li>Charities Bill – Northern Ireland Assemb...
Northern Ireland – present and future <ul><li>Part of UK but Northern Ireland has separate legal jurisdiction </li></ul><u...
Charities Bill - NI <ul><li>Culture change  </li></ul><ul><li>Modernises and updates the law </li></ul><ul><li>Supervision...
What is a charity? <ul><li>All institutions which are charities under the law of Northern Ireland  must  register </li></u...
What is a charitable purpose? <ul><li>Four at present (presumption of public benefit): </li></ul><ul><ul><li>Relief of pov...
Charitable Purposes <ul><li>New 12 include: </li></ul><ul><li>Advancement of health or saving of lives </li></ul><ul><li>A...
Public Benefit Test <ul><li>No presumption of public benefit </li></ul><ul><li>What is the benefit? </li></ul><ul><li>How ...
Charity Commission for Northern Ireland <ul><li>Body corporate – independent NDPB </li></ul><ul><li>Members appointed by D...
Powers of the Commission <ul><li>Institute enquiries  </li></ul><ul><li>Report on enquiry to the public </li></ul><ul><li>...
Trustees <ul><li>Guidance </li></ul><ul><li>Under more scrutiny </li></ul><ul><li>Disqualification of trustee and removal ...
Regulation & Reporting –  Trustees Responsible  <ul><li>Specific info on sector will be collected enabling yearly comparis...
Disclosure of charity status <ul><li>Disclose that a charity on official publications involving money or soliciting for pr...
Charitable Companies (& also note Companies Act 2006) <ul><li>Commission can petition for a winding up/for restoration of ...
Charitable Incorporated Organisations <ul><li>Body corporate but not a company (not regulated by Companies Act) </li></ul>...
Charity Land <ul><li>Official Custodian – holds charity property but not manage it </li></ul><ul><li>Dealings with charity...
Dealings with charity land <ul><li>Power of charity trustees to dispose of land/grant a lease/lands held in trust </li></u...
Fundraising <ul><li>New rules – public charitable collections </li></ul><ul><ul><li>street and ‘door to door’ </li></ul></...
What does it mean for non-Northern Ireland charities, e.g. Irish, English? <ul><li>“ Section 167 Institution” – not a char...
Section 167 Institutions (2) <ul><li>Required to prepare and submit: </li></ul><ul><ul><li>Financial statement;  and   </l...
Additional Features <ul><li>Designated religious charities  </li></ul><ul><li>Charity Tribunal </li></ul><ul><li>Simplific...
Companies Act 2006 <ul><li>Consolidates and changes company law </li></ul><ul><li>Largest statute on UK statute book </li>...
1 October 2009 - Constitution <ul><li>Memorandum of association will become form filling exercise </li></ul><ul><li>Articl...
Meetings and Company Secretary & Deeds <ul><li>AGMS no longer required (unless articles say otherwise) </li></ul><ul><li>1...
Written Resolutions <ul><li>Special written resolutions can be passed if 75% voting members agree  </li></ul><ul><li>Ordin...
Proxies – Major Change <ul><li>Overrides Articles – statutory right </li></ul><ul><li>Notice of general meeting or AGM  mu...
Register of Members <ul><li>Keep addresses private </li></ul><ul><li>Inspection right </li></ul><ul><li>Proper purpose – r...
Directors  <ul><li>Must be at least one natural person (check trading subsidiaries) </li></ul><ul><li>Service address -Res...
October 2007 - Duties of Directors  <ul><li>Some in force from 1 October 2007 (remainder 1 October 2009) </li></ul><ul><li...
Director’s Duties (contd) <ul><li>Statutory code of general duties: a codification of common law with some changes </li></...
Directors’ Duties (contd) <ul><li>Seven general duties (sections 171-177) </li></ul><ul><li>October 2007 </li></ul><ul><li...
Directors Duties – Conflicts of Interest <ul><li>Duty to avoid conflicts of interest (section 175) </li></ul><ul><li>Duty ...
Directors’ Duties – Promote the success of the company <ul><li>Duty to promote the success of the company  in furtherance ...
Directors’ Duties - Actions to Take <ul><li>Will the codified duties and the list of factors to “have regard to” lead to g...
Stationery &  Communications <ul><li>Full statement of company name, registration place, company limited by guarantee/shar...
Actions <ul><li>Review your Memorandum and Articles of Association </li></ul><ul><li>Review your stationery, emails & webs...
Ni Charity Law Update
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Ni Charity Law Update

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Ni Charity Law Update

  1. 1. CO3: Good Governance – Leading the Way: 3 Developing your Board to Meet New Governance Challenges Charity Law & Company Law Changes Jennifer Ebbage Cleaver Fulton Rankin, Belfast 4 June 2008
  2. 2. Introduction to Cleaver Fulton Rankin <ul><li>One of Northern Ireland’s leading law firms </li></ul><ul><li>Association with Matheson Ormsby Prentice, Dublin </li></ul><ul><li>Only Northern Ireland firm ranked in charity law in Chambers UK Directory </li></ul><ul><li>Members of Charity Law Association </li></ul><ul><li>Legal advice to charities, social enterprises, housing associations, not for profit organisations and companies </li></ul>
  3. 3. Outline of Talk <ul><li>Board awareness of new legislation: </li></ul><ul><ul><li>Charities Bill – Northern Ireland Assembly </li></ul></ul><ul><ul><li>Companies Act 2006 </li></ul></ul>
  4. 4. Northern Ireland – present and future <ul><li>Part of UK but Northern Ireland has separate legal jurisdiction </li></ul><ul><li>Present </li></ul><ul><li>No charities regulator (but consent of DSD/High Court/Att Gen in some matters) </li></ul><ul><li>Tax exemptions - HMRC Bootle </li></ul><ul><li>Legislation 1964 and 1987 and case law </li></ul><ul><li>Future </li></ul><ul><li>Major reform in UK [and Ireland] </li></ul><ul><li>Charities Bill - Northern Ireland Assembly </li></ul><ul><li>2008 implementation </li></ul><ul><li>Major changes to NI Regime </li></ul>
  5. 5. Charities Bill - NI <ul><li>Culture change </li></ul><ul><li>Modernises and updates the law </li></ul><ul><li>Supervision & support for charities </li></ul><ul><li>New advisor and regulator - Charity Commission for Northern Ireland </li></ul><ul><li>Openness and transparency </li></ul>
  6. 6. What is a charity? <ul><li>All institutions which are charities under the law of Northern Ireland must register </li></ul><ul><li>What is a charity: established for charitable purposes only and subject to the control of the High Court in Northern Ireland </li></ul><ul><li>Demonstrate “charitable purposes”: </li></ul><ul><li>2 part test: </li></ul><ul><li>12 charitable purposes and public benefit </li></ul>
  7. 7. What is a charitable purpose? <ul><li>Four at present (presumption of public benefit): </li></ul><ul><ul><li>Relief of poverty </li></ul></ul><ul><ul><li>Advancement of education </li></ul></ul><ul><ul><li>Advancement of religion </li></ul></ul><ul><ul><li>Other - benefit of the community </li></ul></ul><ul><li>Under new Bill -12+ charitable purposes </li></ul><ul><li>Some differences from other parts of UK </li></ul>
  8. 8. Charitable Purposes <ul><li>New 12 include: </li></ul><ul><li>Advancement of health or saving of lives </li></ul><ul><li>Advancement of the arts, culture, heritage or science </li></ul><ul><li>Advancement of human rights, conflict resolution or reconciliation or promotion of religious harmony or equality or diversity (includes peace and good community relations) </li></ul><ul><li>Advancement of amateur sport </li></ul><ul><li>Advancement of environmental protection or improvement </li></ul><ul><li>Advancement of citizenship or community development </li></ul><ul><li>Relief of those in need by reason of youth, age ill-health, disability, financial hardship or other disadvantage </li></ul><ul><li>Advancement of animal welfare </li></ul><ul><li>Other analogous to or within the spirit of the above </li></ul>
  9. 9. Public Benefit Test <ul><li>No presumption of public benefit </li></ul><ul><li>What is the benefit? </li></ul><ul><li>How does it relate to charity’s aims? </li></ul><ul><li>How is benefit gained or likely to be gained by the public versus disbenefit incurred or likely to be incurred, eg harm or detriment arising? </li></ul><ul><li>Commission must issue guidance </li></ul>
  10. 10. Charity Commission for Northern Ireland <ul><li>Body corporate – independent NDPB </li></ul><ul><li>Members appointed by DSD </li></ul><ul><li>Advisory and regulatory role </li></ul><ul><li>Functions: </li></ul><ul><ul><li>Determine if an institution is a charity </li></ul></ul><ul><ul><li>Facilitate better administration </li></ul></ul><ul><ul><li>Identify mismanagement misconduct and act </li></ul></ul><ul><ul><li>Public collections regulator </li></ul></ul><ul><ul><li>Register of charities </li></ul></ul>
  11. 11. Powers of the Commission <ul><li>Institute enquiries </li></ul><ul><li>Report on enquiry to the public </li></ul><ul><li>Make disclosures to other public bodies </li></ul><ul><li>Remove/ disqualify trustees </li></ul><ul><li>Appoint interim merger </li></ul><ul><li>Protect and direct application of charity property </li></ul><ul><li>Take Attorney General’s role in some matters </li></ul><ul><li>Determine membership of a charity </li></ul>
  12. 12. Trustees <ul><li>Guidance </li></ul><ul><li>Under more scrutiny </li></ul><ul><li>Disqualification of trustee and removal from office & register will be kept by Commission </li></ul><ul><li>But - relief from liability too if breach of trust/duty & act reasonably, honestly and ought fairly to be excused </li></ul><ul><li>Remuneration (but not in capacity of trustee) </li></ul><ul><li>Trustee indemnity insurance – in statutory form- if in best interests of charity but subject to express prohibition in gov inst </li></ul>
  13. 13. Regulation & Reporting – Trustees Responsible <ul><li>Specific info on sector will be collected enabling yearly comparisons </li></ul><ul><li>Trustees keep accounting records </li></ul><ul><li>Prepare and submit annual statement of accounts to Commission </li></ul><ul><li>Must have accounts examined or audited as required </li></ul><ul><li>Duty of auditors to report to Commission </li></ul><ul><li>Annual report </li></ul><ul><li>Annual return </li></ul>
  14. 14. Disclosure of charity status <ul><li>Disclose that a charity on official publications involving money or soliciting for property: cheques, invoices, documents, advertisements, bills </li></ul><ul><li>Registration number to appear on official publications </li></ul><ul><li>Person guilty of offence for non compliance - fine </li></ul>
  15. 15. Charitable Companies (& also note Companies Act 2006) <ul><li>Commission can petition for a winding up/for restoration of dissolved companies </li></ul><ul><li>Alterations ineffective without consent of Commission: </li></ul><ul><ul><li>Memorandum and Articles </li></ul></ul><ul><ul><li>Dissolution clause </li></ul></ul><ul><ul><li>Members’ benefits </li></ul></ul><ul><li>Ultra Vires acts - ratification </li></ul><ul><li>State “charity” on company stationery documents/communications/ at location/conveyances </li></ul><ul><li>Commission can send in auditors </li></ul>
  16. 16. Charitable Incorporated Organisations <ul><li>Body corporate but not a company (not regulated by Companies Act) </li></ul><ul><li>Charitable body corporate </li></ul><ul><li>Regulated by Commission not Companies Registry </li></ul><ul><li>Not a Community Interest Company </li></ul><ul><li>Company limited by guarantee or shares or I & PS can convert to a CIO </li></ul>
  17. 17. Charity Land <ul><li>Official Custodian – holds charity property but not manage it </li></ul><ul><li>Dealings with charity property by Commission eg if no power in gov inst </li></ul><ul><li>Preservation of charity documents by enrollment/deposit </li></ul><ul><li>Incorporation of trustees </li></ul>
  18. 18. Dealings with charity land <ul><li>Power of charity trustees to dispose of land/grant a lease/lands held in trust </li></ul><ul><li>Order of Commission or Court required in some instances </li></ul><ul><li>Safeguards - disposal must be on best terms reasonably obtainable </li></ul><ul><li>Land held in trust for a charity- state </li></ul><ul><li>Safeguards when mortgaging charity land </li></ul><ul><li>Miscellaneous provisions e.g. designated land, execution of deeds </li></ul><ul><li>Take advice </li></ul>
  19. 19. Fundraising <ul><li>New rules – public charitable collections </li></ul><ul><ul><li>street and ‘door to door’ </li></ul></ul><ul><li>Public collections certificates </li></ul><ul><li>Permits </li></ul><ul><li>Professional fundraiser written agreements </li></ul>
  20. 20. What does it mean for non-Northern Ireland charities, e.g. Irish, English? <ul><li>“ Section 167 Institution” – not a charity under the law of Northern Ireland but which operates for charitable purposes in or from Northern Ireland </li></ul><ul><li>Required to register in Northern Ireland </li></ul><ul><li>A separate “parallel” register of “Section 167 Institutions” </li></ul><ul><li>A clarification of “ operates ” - fundraise? </li></ul><ul><li>- presence? </li></ul><ul><li>- activities? </li></ul>
  21. 21. Section 167 Institutions (2) <ul><li>Required to prepare and submit: </li></ul><ul><ul><li>Financial statement; and </li></ul></ul><ul><ul><li>Statement of activities relating to its Northern Ireland operations for charitable purposes </li></ul></ul><ul><li>Open to public inspection </li></ul><ul><li>Commission may extend other parts of Charities Bill to Section 167 Institutions </li></ul>
  22. 22. Additional Features <ul><li>Designated religious charities </li></ul><ul><li>Charity Tribunal </li></ul><ul><li>Simplification of Cy-pr è s – alteration of the purposes for which charity property may be applied </li></ul><ul><li>Mergers & mergers register </li></ul>
  23. 23. Companies Act 2006 <ul><li>Consolidates and changes company law </li></ul><ul><li>Largest statute on UK statute book </li></ul><ul><li>Phased implementation up to October 2009 </li></ul><ul><li>Will affect charities which are companies limited by guarantee </li></ul><ul><li>Will affect trading subsidiaries which are companies limited by shares </li></ul>
  24. 24. 1 October 2009 - Constitution <ul><li>Memorandum of association will become form filling exercise </li></ul><ul><li>Articles of association become significant constitutional document </li></ul><ul><li>Objects clause disappears: </li></ul><ul><ul><li>Company has unlimited capacity unless stated otherwise </li></ul></ul><ul><ul><li>charitable objects will restrict capacity </li></ul></ul><ul><li>Existing companies’ existing absolute or conditional entrenchment continues i.e. provisions that may not be altered or may only be altered if certain conditions are met </li></ul><ul><li>Possible to conditionally entrench restrictions in articles of association, especially for charities </li></ul><ul><li>Absolute entrenchment for new companies will be impossible </li></ul>
  25. 25. Meetings and Company Secretary & Deeds <ul><li>AGMS no longer required (unless articles say otherwise) </li></ul><ul><li>14 days notice of AGM (unless articles say otherwise) </li></ul><ul><li>Short notice - 95% now 90% (unless articles say otherwise) </li></ul><ul><li>Requisition of members 10% now 5% </li></ul><ul><li>Company Secretary no longer a legal requirement (unless articles say otherwise) </li></ul><ul><li>Deed may be executed by one director before a witness who must also sign </li></ul><ul><li>Accounts </li></ul><ul><ul><li>Distribute to all members and no requirement to lay at AGM (unless articles say otherwise) </li></ul></ul><ul><ul><li>File within 9 months not 10 </li></ul></ul>
  26. 26. Written Resolutions <ul><li>Special written resolutions can be passed if 75% voting members agree </li></ul><ul><li>Ordinary written resolutions can be passed if majority agree </li></ul><ul><li>Change of format and circulation requirements: </li></ul><ul><ul><li>28 days or lapse </li></ul></ul><ul><ul><li>No vote is a “no vote” </li></ul></ul><ul><ul><li>Take legal advice </li></ul></ul>
  27. 27. Proxies – Major Change <ul><li>Overrides Articles – statutory right </li></ul><ul><li>Notice of general meeting or AGM must contain statement informing member of right to appoint a proxy </li></ul><ul><li>Failure to include statement is an offence that attracts a fine </li></ul><ul><li>Enhanced rights of proxies to attend, vote and speak </li></ul><ul><li>Proxy need not be a member </li></ul><ul><li>Timetable for return of proxy changed </li></ul><ul><li>New format for notice of meeting of members and notes regarding proxy votes </li></ul><ul><li>Take advice </li></ul>
  28. 28. Register of Members <ul><li>Keep addresses private </li></ul><ul><li>Inspection right </li></ul><ul><li>Proper purpose – right to refuse and go to court 5 days! </li></ul>
  29. 29. Directors <ul><li>Must be at least one natural person (check trading subsidiaries) </li></ul><ul><li>Service address -Residential address of directors and company secretary no longer accessible at Companies House/Registry </li></ul><ul><li>Must keep minutes for 10 years of meetings after 1 October 2007 </li></ul><ul><ul><li>Criminal offence </li></ul></ul><ul><li>Director and charity trustee </li></ul>
  30. 30. October 2007 - Duties of Directors <ul><li>Some in force from 1 October 2007 (remainder 1 October 2009) </li></ul><ul><li>Duties owed to the company/charity not to other directors nor to members </li></ul><ul><li>Duty to promote the success of the Company: </li></ul><ul><li>Powers must be exercised in furtherance of the Company’s charitable objects or charitable purposes only </li></ul><ul><li>Produce report/review to show members how directors have done this </li></ul>
  31. 31. Director’s Duties (contd) <ul><li>Statutory code of general duties: a codification of common law with some changes </li></ul><ul><li>Regard to be had to the common law rules and equitable principles in interpreting and applying the general duties </li></ul><ul><li>Codified duties apply to shadow directors to the extent the corresponding common law or equitable principles apply </li></ul>
  32. 32. Directors’ Duties (contd) <ul><li>Seven general duties (sections 171-177) </li></ul><ul><li>October 2007 </li></ul><ul><li>Act within powers </li></ul><ul><li>Promote the success of the company* </li></ul><ul><li>Exercise reasonable care, skill and diligence </li></ul><ul><li>Exercise independent judgment </li></ul><ul><li>October 2009 </li></ul><ul><li>Not to accept benefits from third parties </li></ul><ul><li>Declare interest in proposed transaction or arrangement with the company [remuneration] </li></ul><ul><li>Avoid conflicts of interest* </li></ul>
  33. 33. Directors Duties – Conflicts of Interest <ul><li>Duty to avoid conflicts of interest (section 175) </li></ul><ul><li>Duty not infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest, or it has been authorised by the directors </li></ul><ul><li>Independent board authorisation of conflicts </li></ul><ul><li>Companies may need to amend articles if wish to authorise conflicts </li></ul><ul><li>Good Test: if the conflict is not specifically authorised in the Mem & arts the trustee should not carry out the act </li></ul>
  34. 34. Directors’ Duties – Promote the success of the company <ul><li>Duty to promote the success of the company in furtherance of the company’s charitable objects or purposes and have regard (amongst other matters) to: </li></ul><ul><ul><li>The likely consequences of any decision in the long term </li></ul></ul><ul><ul><li>The interest of the company’s employees </li></ul></ul><ul><ul><li>The need to foster business relationships with suppliers, customers and others </li></ul></ul><ul><ul><li>The impact of company’s operation on the community and environment </li></ul></ul><ul><ul><li>The desirability of the company maintaining a reputation for high standards of business conduct </li></ul></ul><ul><ul><li>The need to act fairly as between members </li></ul></ul>
  35. 35. Directors’ Duties - Actions to Take <ul><li>Will the codified duties and the list of factors to “have regard to” lead to greater bureaucracy at board level? </li></ul><ul><li>Impact on board minutes and recording that you considered statutory duties when making resolutions/decisions </li></ul><ul><li>Inform your board of directors of the codified duties </li></ul>
  36. 36. Stationery & Communications <ul><li>Full statement of company name, registration place, company limited by guarantee/shares , number and registration office and if a charity state that and charity number and HMRC Ref number </li></ul><ul><ul><li>Websites </li></ul></ul><ul><ul><li>Order forms </li></ul></ul><ul><ul><li>Emails </li></ul></ul><ul><li>New rules on electronic communication with members </li></ul><ul><ul><li>Consent </li></ul></ul>
  37. 37. Actions <ul><li>Review your Memorandum and Articles of Association </li></ul><ul><li>Review your stationery, emails & website to include the required information </li></ul><ul><li>Speak to your solicitor regarding notices and proxies in good time before meetings eg AGM </li></ul><ul><li>Board training on directors duties and compliance </li></ul><ul><li>Amend format for recording board decisions to take account of duties </li></ul>

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