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.
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.