In this article...

• Companies Act 2006
• Conduct and Calling of Meetings
• Directors’ Duties
• Charities Act 2006
• Mergers
• Accounting and Audit
• Fundraisers

Companies Act 2006

On 1 October the next tranche of the Companies Act 2006 was brought into force. This amended the requirements for the conduct and calling of meetings and clarified directors’ duties. However, many of the changes will only be applicable in so far as they are compatible with a company’s memorandum and articles of association. Companies may therefore wish to take this opportunity to undertake a review of their memorandum and articles to ensure that they can benefit from the new changes.

Conduct and Calling of Meetings

The key changes introduced are:

		there is no longer a requirement for an AGM
		all meetings (other than those requiring special notice – e.g. the removal of a trustee/governor) can now be called with 14 days’ notice
		in order to facilitate decision making outside of formal meetings, written resolutions can be passed by the majority that would be required if the resolution was passed at a meeting – that is 50% plus one for an ordinary resolution and 75% for a special resolution
		minutes of directors’ meetings have to be kept for a period of 10 years

Directors’ Duties

The Companies Act 2006 sets out various duties that a director is subject to. Although these are not new duties, as they have already existed under case law, this is the first time that the duties have been set out in statute. Accordingly, general obligations have become very specific and easier for directors to be measured against.

The four duties brought into force on 1 October are:

		the duty for a director to act within his powers
		the duty for a director to promote the success of the company
		the duty for a director to exercise independent judgement
		the duty for a director to exercise reasonable care, skill and diligence

Of the four, the duty that has attracted most comment has been the duty to promote the success of the company, in particular because the Companies Act goes on to list a number of factors to which directors must have regard when discharging that duty, including:

		the likely consequences of any decision in the long term
		the interests of the company’s employees
		the need to foster the company’s business relationships with suppliers, customers and others
		the impact of the company’s operations on the community and the environment
		the desirability of the company maintaining a reputation for high standards of business conduct

A well run board of directors will already take into account these issues, but nevertheless having the factors listed in statute will no doubt make directors slightly more aware and considerate of them.

Charities Act 2006

The second tranche of the Charities Act 2006 is scheduled to be introduced towards the end of 2007. This will introduce new provisions to facilitate charity mergers, increase the requirements on professional fundraisers and further harmonise the auditing and accounting regime for charities.

Mergers

In order to help facilitate charities merging there will be a new register of charity mergers held at the Charity Commission. Merging charities will be able to register the merger with the consequence that all future legacies to the previous charity or charities that have merged will automatically pass to the new charity. This will avoid the need for shell charities to be left running in order to catch legacies. There is no time limit on when a merger can be registered so historic mergers will be able to be registered and any shell charities finally wound up. The other new provision to facilitate charity mergers is the introduction of a pre-merger vesting declaration. This is a single document that will transfer all property of a charity to another without need for further documentation. This is principally aimed at situations where a charity wishes to transfer numerous pieces of land to another charity as part of a merger. A transfer agreement would still be needed to transfer non-property assets and liabilities.

Accounting and Audit

The proposed remaining changes to the auditing and accounting regime are scheduled to apply to any financial years starting on or after 1 January 2008. The key proposed changes are:

		introducing a requirement for the trustees to report on charities’ public benefit in the annual trustees’ report
		applying the Charities Act audit or examination requirements to small company charities allowing small companies to opt for an independent examination rather than a full audit
		providing a statutory framework for the preparation and filing of group accounts
		introducing a clearer whistle-blowing duty and protection for auditors and independent examiners

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Fundraisers

Finally, the statements required to be made by professional fundraisers and businesses marketing their goods or services by advertising that an amount of the purchase money will go to charities (commercial participators) have been slightly changed. The changes are aimed at ensuring there is clearer information given about the payments going to the professional fundraisers or commercial participators. Employees of charities or trading companies who are raising money for the charity will also now need to make certain statements.