21/10/2020

AGM flexibilities extended to the end of the calendar year

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (the Regulations) came into force on Tuesday, 29 September 2020. The Regulations extend some of the temporary provisions put in place by the Corporate Insolvency and Governance Act 2020.

Most relevant are the following:

  • The ability to hold virtual AGMs and restrict the attendance of members has been extended to 30 December 2020. Importantly, the extension does not apply to the ‘relevant period’ in which to convene an AGM. We are aware this has posed an issue for some organisations where there has been a delay in auditors signing off accounts as a result of the pandemic.
  • Under the Act suppliers were unable to terminate a supply contract where the other party to the contract enters into an insolvency process. Measures have extended the exclusion from this prohibition for ‘small suppliers’ from the 30 September 2020 to the 30 March 2021. Provisions around insolvency relief including statutory demands on winding up and moratorium provisions for restructuring have also been extended.

Duties of members of charities

Company Secretaries will be familiar with the legal and fiduciary duties owed by board members, but there has always been a question mark over the duties owed by members.

The Supreme Court has recently confirmed that members of a charitable company have a fiduciary duty of ‘single-minded’ loyalty to the company's charitable purposes. The members must act in the best interests of the charitable objects and charitable purposes of the charity, in line with their constitution and legal requirements, rather than in their own interests.

Although the case considered charitable companies, it can be read across to apply equally to charitable community benefit societies.

The case will be of interest to Company Secretaries because:

  • It will have an impact on decision-making within group structures where there may be several charitable housing associations or other charities. The board members of the parent entity will need to balance their duty to act in the best interests of the parent, with the parent’s fiduciary duty as the member/shareholder of the subsidiary. Managing such interests amongst board members who sit on more than one board is challenging, and this adds an additional layer of complexity – reiterating the importance of managing interests carefully.
  • Where there is open shareholding and engagement by residual or legacy shareholders is patchy, this may be a route through which to encourage more active engagement or reduce shareholding membership. Although the Court didn’t go so far as to say that the duty extends to an obligation on members to attend meetings, it is hoped that Charity Commission guidance may clarify this.
  • We are also aware of some associations that are considering opening up their shareholding to encourage active participation within their governance structures, and this will need to be a key consideration when discussing what shareholding would mean for residents.

Your policies and procedures should be reviewed to reflect this decision.

AOB

We are pleased to welcome Laura Dodds as a solicitor working in our Housing Corporate Governance team alongside Sarah Greenhalgh and Hugo Stephens.

Our first Legal Update Report has been shared with housing associations taking part in the pilot. The update is a six-monthly ‘look forward / look back’ for associations to manage their obligation to comply with ‘all relevant law’. Please get in touch if you are interested in taking part in the pilot.

Look out for our Quarterly Governance Spotlights – next month we take a detailed look at some of the new requirements in the NHF Code of Governance 2020. 

Our use of cookies

We use necessary cookies to make our site work. We'd also like to set optional analytics cookies to help us improve it. We won't set optional cookies unless you enable them. Using this tool will set a cookie on your device to remember your preferences. For more detailed information about the cookies we use, see our Cookies page.

Necessary cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.

Analytics cookies

We'd like to set Google Analytics cookies to help us to improve our website by collection and reporting information on how you use it. The cookies collect information in a way that does not directly identify anyone.
For more information on how these cookies work, please see our Cookies page.