Charities urged to take a look at governing document

01 February 2023

By all accounts, 2023 is set to be a tough year for many in society which means the services and facilities that charities offer will be called on more than ever.

It is therefore hugely important that charity leaders and trustees ensure they are best placed to deal with the demands placed on their organisation.

In light of these unprecedented circumstances, charities are urged to take a fresh look at their governing document at the start of 2023. Time taken at the start of a New Year could help boost effectiveness and efficiency in the longer term.

Some key recommendations include:

Review your charity’s objects 

Governing documents set out your charity’s objects and the rules dictating how it is run.

Review charitable objects to make sure they accurately reflect your activities to ensure your beneficiaries know what you do and can access your services and funders also recognise what you do.

If the objects clause is out of date then the trustees must apply their collective mind to reviewing those and updating them. There are various reasons why this is important and examples include:

  • Acting outside of your charitable objects is a breach of trust;
  • Potential beneficiaries may not be aware of what work the charity carries out or how it can help them;
  • the charity may miss out on grants or legacies, for example, if it is not clear who or what the charity is set up to help.

Any change to the objects clause requires Charity Commission consent and specialist advice is recommended to make sure the proposed objects are charitable.

We have recently helped charities update their objects to remove out of date references to local authority areas or boundaries and out of date professional qualifications. Another charity wanted to remove reference to ‘financial hardship’ as this was no longer an accurate reflection of the activities it carried out. Other charities might need to expand their beneficiary class if they are having trouble carrying out their charitable purposes.

Administrative provisions

Governing documents also set out who runs the organisation, how meetings will be held and how trustees will be appointed. Whilst these provisions can seem mundane, when not up to date with the way the charity operates and modern governance best practice they can act as a real barrier to efficient and effective administration (see also paragraph 3 of this article). A recent example being a charity with a quorum provision which required a huge number of members to be present before business could be transacted at members’ meetings when they actually had relatively few members, which made calling a valid general meeting very difficult. This can cause huge delays at a time when a charity may need to urgently make a decision.

Virtual meetings

Following the COVID pandemic many charities discovered how beneficial virtual meetings can be with the potential to make decision making more time and cost efficient. 

A lot of flexibility was given to charities during the pandemic around holding virtual meetings, both within company law and from the Charity Commission, so that even where there was no explicit power in your governing document you could still hold a meeting virtually.

However, those flexibilities have now come to an end and it is important to check you have an explicit power to hold virtual meetings in your governing document if you still wish to make use of them. Without an explicit power, decisions made at those meetings could be called into question.

It is possible to amend your governing document to include such a power and to set out how those meetings should be properly managed in line with governance best practice. Specialist advice is recommended and we can advise you on drafting bespoke provisions to suit the needs of your charity.

Changes brought in by the Charities Act 2022

There are various changes being brought in by the Charities Act 2022, some of which have already been implemented and some of which will come into effect during the course of 2023.

The intent behind the provisions implemented by the Charities Act 2022 was very much to try to remove unnecessary bureaucracy and make certain processes more straightforward for trustees. Making sure you have all the up to date powers available from the Charities Act, including the extended power for charities to pay trustees for providing goods to the charity in certain circumstances (in addition to services, and goods connected to services) could help in the smooth and effective management of your charity for many years to come.

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