Chartered journey: The legal perspective

Chartered journey: The legal perspective

Guest Bloggers | 16 April 2019

From a legal and governance perspective what would the move of the IoF from being a limited company to a being a chartered body mean for me as a member? Thea Longley, partner BWB, and Lucy Rhodes, Associate BWB, take a look.

Briefing on the potential move from being governed by the Articles of Association of a limited company to a Charter, Bye-Laws and Regulations 

BWB has advised many chartered bodies on changes to their Charter, Bye-Laws and Regulations. The IoF’s instructions to us have been to:

1. Retain the substantive provisions of the current Articles of Association which had been substantially revised, updated and agreed by its members at its AGM in 2015.

2. Modernise provisions where possible, both to bring them up to date and future-proof as far as possible.

3. Make some minor changes to reflect the way that IoF operates in practice

4. Retain key provisions, such as IoF’s charitable objects, limitation on private benefits to members and trustees and the dissolution clause, which are required for IoF to retain charitable status across the UK

5. Ensure that those key provisions and others, such as the composition of the Board, and the commitment to high standards, are enshrined in the charter and Bye-Laws, which are subject to additional oversight from the Privy Council, as set out in more detail below

6. Set out matters of internal procedure in the Regulations which can be, if necessary, amended by members at an AGM without the need to seek further approval from the Privy Council.

These considerations are all reflected in the draft Charter, Bye-Laws and Regulations, which the IoF is now consulting on with both you and the Privy Council. Once your feedback, and that of the Privy Council, has been taken on board, the final Charter, Bye-Laws and Regulations will be submitted for your formal approval at the IoF’s AGM on 1st July.

The key legal and practical differences between a chartered body and a limited company

A Royal Charter charity is a corporation for legal purposes and, like a limited company, it has legal personality (separate from its trustees). However, as a chartered body, it will no longer be subject to the provisions of the Companies Act, so references to the provisions of the Companies Act have been removed throughout the documents. In practice, this simply means the IoF has slightly more flexibility in governing its affairs.

From a practical perspective, a chartered body is governed by three documents – the Charter itself, its Byelaws and its Regulations, rather than by a single set of Articles of Association, which the IoF now has. As with changes to the Articles of Association, changes to the Charter, Bye-Laws and Regulations require member approval. However, in addition, changes to the Charter require approval from the Queen (acting on the advice of the Privy Council) and changes to the Bye-Laws require approval from the Privy Council.

As set out above we have kept the substantive provisions, and simply transferred them to the most appropriate place in either the Charter, Bye-Laws or Regulations. Not being subject to company law has allowed us to suggest some areas of simplification, as detailed below.

What has stayed the same and what has changed?

At the front of the draft Charter, Bye-Laws and Regulations you will find a Destinations Table. This identifies each clause of the current Articles of Association, and shows where the provisions of that Article have been transferred into in the draft Charter, Bye-Laws and Regulations. It also notes any material changes which have been made to provisions. 

For ease, we have set out the key changes for you to be aware of below:

Retaining substantive provisions

We have retained key substantive provisions. A good example is Article 7.2 of the Articles of Association which has become Bye-Law 8.1. Bye-Law 8 sets out the composition of the Board (8 elected members, 4 co-opted) and the responsibility of the Board to ensure that the Board is both reflective of the wider fundraising community and has the skills it needs to lead the IoF.

Modernising where possible

We have taken the opportunity to modernise procedures and wording where appropriate.

For example:

  • In relation to detailed wording, we have modernised what was Article 3.5, in relation to what we might publish, removing pamphlets and tapes, and being clear we are able to publish things online.
  • In relation to governance practices, we have removed cumbersome proxy voting procedures which are seldom used, made it easier to send notices of meetings to members by email, and retained the use of electronic voting to enable members to vote in advance of meetings. We have inserted a new right for members to cancel their advance vote if they attend the meeting to allow them to vote at the meeting. This provides flexibility for members taking part in IoF’s decision-making.

 

Locking in key provisions while enabling members to update internal procedural matters at AGM

There is no clear delineation between the matters that have to be set out in Charters, Bye-Laws and Regulations. As a general rule, the Charter will formally grant Chartered status and often set out the purposes and powers of the Chartered body, the Bye-Laws often sets out the Chartered body’s governance structure in more detail and the Regulations tend to concern internal procedures. 

We have allocated provisions within the Charter, Bye-Laws and Regulations so that future amendment can be carried out with the appropriate level of oversight. 

For example, we have embedded members’ commitment to the Code of Conduct and the Code of Fundraising Practice in the Bye-Laws, which would require consent from the Privy Council to change.

We have set out how voting at AGM should take place in the Regulations, so they can be more easily updated by the members, should the need arise.

Retaining charitable status

Many chartered bodies have charitable status, and we see no problem in the IoF retaining its charitable status as we have embedded it’s charitable objects in Article 3 of the Charter. It will be registered at Companies House with a new identification number prefixed by RC for Royal Charter in England & Wales, to distinguish it from the limited companies which are registered at Companies House. It may also have a new charity numbers.

The IoF and the Privy Council will also include the Charity Commission, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland in its consultations on the draft Charter, Byelaws and Regulations to ensure charitable status for the IoF moving forward.

Thea Longley, Partner BWB and Lucy Rhodes, Associate BWB

 Find out more about our journey towards chartered status here. 

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