OPERATIONAL GUIDANCE

ALTERATIONS TO GOVERNING DOCUMENTS: CHARITABLE COMPANIES

A SUMMARY OF THE LAW AND OUR POLICY ON REGULATED ALTERATIONS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF CHARITABLE COMPANIES (CSD1388A)

OG 47 D1 – 18 March 2008

Purpose

This reproduces the public guidance CSD1388A, available on our website in the Apply for it section.

Contents

1. Who should read this summary guidance?
2. Some terms used in this guidance
3. When is our consent needed?
4. What is our policy on giving consent?
5. How to apply for our consent
6. Where can I find out more?
7. Contacting us

Index to further related information

1. Who should read this summary guidance?
	This summary is primarily intended for directors and members of companies who are considering making changes to the Memorandum and Articles of Association of their company.

2. Some terms used in this guidance
	In this guidance:
	where we use ‘must’, we mean it is a specific legal or regulatory requirement affecting trustees or a charity. Trustees must comply with these requirements;
	we use ‘should’ for items we regard as minimum good practice, but for which there is no specific legal requirement. Trustees should follow the good practice guidance unless there is a good reason not to;
	we also offer less formal advice and recommendations that trustees may find helpful in managing their charity.
	A body is a charity if it is:
	set up under the law of England and Wales; and
	established for exclusively charitable purposes.
	This guidance does not apply to organisations set up under the laws of a foreign country, or in the Channel Islands, the Isle of Man, Northern Ireland or Scotland.
	Charitable company means a charity formed as a company and registered at Companies House with a memorandum and articles of association as its governing document.
	Governing document means any document that sets out a charity’s purposes and, usually, how it is to be run. It may be a trust deed, constitution, memorandum and articles of association, Scheme of the Commission, conveyance or will.
	Purposes means the aims and activities that a charity has to carry out and for which its assets must be used. They must be exclusively charitable in English and Welsh law and will be set out in a charity’s governing document. They will usually be found in a specific clause or paragraph near the beginning of the document, but may also be found elsewhere, for example, in a clause or paragraph that says how specific property must be used or that directs how the charity’s assets are to be used when it is dissolved.

3. When is our consent needed?
	The Charities Act 2006 amends the 1993 Act by restricting the occasions on which charitable companies need to seek our written consent before passing resolutions to change their memorandum or articles of association, to what are call ‘regulated alterations’.
	Regulated alterations are:
	any alteration of the objects clause;
	any alteration of any provision directing the application of property of the company on its dissolution;
	any alteration which would provide authorisation for any benefit to be obtained by directors or members of the company or persons connected with them.
	Some companies incorporated before 1982 may include a requirement in their governing document to obtain our consent to all changes, but in all other cases, our consent is not needed for changes which are not ‘regulated alterations’.

4. What is our policy on giving consent?
	As we have seen, the general aim of the new legislation is to relax the restrictions on the changes which companies can make without getting our prior consent.
	Where our consent continues to be needed, however, we will require the company to make a case showing:
	exactly what changes are being proposed; and
	why the charity wishes to make them.
	The criteria that we would use in our consideration will vary according to the type of change being proposed.
	Where a change to the objects is being proposed, we will be looking at whether:
	the new wording expresses exclusively charitable objects; and
	the proposed change is not something which no reasonable body of trustees could make; and
	the new objects do not undermine or work against the previous objects.
	Where the proposed change would affect the application of property on dissolution, we will consider whether the change:
	would seem to be to the detriment of the existing beneficial class;
	is unworkable for some reason – for instance if the newly named charity does not exist, or is not operating satisfactorily, or there is reason to think it would not accept the gift.
	Where the proposed change would provide benefit to directors, members or connected persons:
	Firstly, we would consider whether the proposals exceed the statutory provision now conferred by section 73A of the 1993 Act as amended by the 2006 Act. If not, we would automatically give our approval, although, with the statutory power, this is not strictly necessary.
	If the proposals do exceed the statutory power and can be exercised each time without our consent, then we will apply the principles which we normally apply to giving consent to an extension to trustee benefit provisions. These are set out in our operational guidance, OG 100 Trustee Indemnity Insurance and OG 92 Payment of Trustees.

5. How to apply for our consent
	Where our consent is required, the directors will normally need to agree the proposed changes with us before they are incorporated into a special resolution to be passed by the members of the company.
	While a resolution can be passed by the members without agreeing it with us first, as long as its effect is expressed as conditional on our consent being given, there is a risk that we may not give our consent or will require changes, which will mean that the process will have to start again.
	We recommend that charities apply to us using the application form CSD 1388B. Not only does this direct the company to the specific questions which we need to consider before giving our consent, but it makes it easier for us to trace all the paperwork, especially in cases where we are notified that amendments have been passed many months after our consent was given. This means that the Register of Charities can be updated quickly, so that we can meet our obligation to keep it up-to-date.

6. Where can I find out more?
	More detailed information about the law and our policy on consent to regulated alterations can be found in our operational guidance OG 47 Alterations to Governing Documents: Charitable Companies.

7. Contacting us
	If you have a query about this guidance or need further advice about using the power to change purposes, or some of the other publications or forms referred to in this guidance, please telephone our Contact Centre on 0845 3000 218 (minicom 0845 3000 219) or write to or e-mail us at the following addresses:
	Postal address: Charity Commission Direct PO Box 1227 Liverpool L69 3UG	E-mail address: enquiries@charitycommission.gsi.gov.uk

Index to further related information