How could Coronavirus affect my Charity?
The Coronavirus outbreak has led to unprecedented actions by Government, the central bank and businesses. Charities will be considering similar actions and whilst doing this it is important to consider both the charities' governing documents and Charity Commission guidance.
Can we use telephone, videoconferencing and the internet in place of face-to-face trustee meetings?
In general, yes. In the current climate it is far more important for trustee boards to be making the best decisions they can, rather than concern themselves too much as to how they make those decisions.
It is important to check your charity’s governing document. Most modern charity governing documents are likely to expressly allow for meetings to be held remotely in any case. The governing document may also give the trustees discretion as to how they conduct their proceedings which may also help.
If your governing document does not expressly allow for this, the Charity Commission has indicated they will not be too concerned about the technicalities as long as trustees record any decision to meet remotely and that you have done this to demonstrate good governance of your charity.
It may also be possible for an amendment to be made to introduce appropriate provisions, although legal advice should be sought first.
Can we cancel or postpone our charity’s AGM or other key meetings?
Given the current lockdown restrictions you are likely to have had no choice.
If trustees decide it is necessary to do so, the Charity Commission have confirmed trustees should record this decision to demonstrate good governance, and where the situation impacts on the completion of annual returns and accounts, charities with an imminent filing date can contact the Commission (and Companies House in the case of charitable companies) for an extension.
If your charity is incorporated, such as a company limited by guarantee, a CIO or a community benefit society, then it is possible you may be able to take advantage of the Corporate Insolvency and Governance Act 2020 which allows some incorporated charities to:
- validly postpone their AGM until 30 September 2020 even if their governing document requires the AGM to be held before that date;
- hold their AGM or other general meeting partially or wholly by ‘virtual’ means up until 30 September 2020 even if their governing document does not expressly permit general meetings to be convened and held in that manner.
Further details of the Act can be found on our latest insight.
Can we hold our AGM or other general meeting by virtual means during the lockdown?
Possibly, but this is a question requiring specific legal advice in the case of each charity.
Under current lockdown restrictions it will not generally be possible for a charity with a larger membership to hold a general meeting wholly ‘in person,’ given the current lockdown measures generally prevent more than six individuals from different households being physically present at the same location.
The ability to hold a members’ meeting partially or wholly remotely is likely to depend on a number of factors, such as:
- Whether your charity’s governing document specifically allows for partial or wholly virtual meetings and/or contains any provisions prohibiting meetings held on that basis;
- What type of legal structure you have for your charity, as there is potentially more flexibility for ‘incorporated’ charities established as companies, CIOs or community benefit societies, as opposed to ‘unincorporated’ member association charities; and
- The capability of the technology you have available given the size of your membership and the extent to which it will enable members attending ‘virtually’ to participate and vote on a ‘live’ basis.
The Corporate Insolvency and Governance Act 2020 provides additional flexibility for some incorporated charities such as companies limited by guarantee, CIOs or community benefit societies, to hold their AGM or other general meeting partially or wholly by ‘virtual’ means up until 30 September 2020 even if their governing document does not expressly permit general meetings to be convened and held in that manner.
The Act also provides an opportunity for such incorporated charities to hold a general meeting by virtual means before 30 September 2020 to amend the charity’s governing document to include provisions expressly allowing for general meetings to be held virtually.
This is therefore a very useful opportunity for such charities to ‘future proof’ their governing documents to allow for future general meetings to be held partially or wholly virtually after 30 September 2020, given the likelihood of some social distancing restrictions remaining in place beyond that date and the possibility of further local or national lockdowns if COVID-19 cases increase.
Further details of the Act can be found on our latest insight.
Can we use our reserves and restricted funds to help my charity through the crisis?
The Charity Commission have confirmed that reserves can be used. Funds which are held for self-imposed restricted purposes can also potentially be re-purposed by the trustees.
But the terms of any restricted funds and funds held as permanent endowment must still be respected. Whilst there may be legal mechanisms available in some cases to relax restrictions, professional advice should be taken before seeking to access or release such funds, and the Commission suggest that should only be considered as a last resort if other options are not possible.
Can we use charity funds to provide additional financial support to our trading subsidiary?
Potentially, yes, but normal Charity Commission rules (set out in their guidance CC35) still need to be complied with and professional financial and legal advice should be taken.
Where the trading subsidiary is carrying out trading activity which the parent charity could not undertake itself, trustees will need to be able to satisfy themselves that any such funding is justifiable as an investment in the best interests of the charity. This is having considered the likely overall economic return to the charity, balancing likely future gifts of surplus profit against the risk of capital loss.
Trustees would need to be satisfied as to the future viability of the subsidiary as best they can and so there would be a need for analysis against updated business plans, cashflow forecasts and financial projections.
Does impact from the coronavirus crisis trigger a serious incident “significant” enough to file a serious incident report (SIR) at the Charity Commission?
Yes if the impact results in or risks significant:
- harm to your charity’s beneficiaries, staff, volunteers or others who come into contact with your charity through its work;
- loss of your charity’s money or assets;
- damage to your charity’s property; or
- harm to your charity’s work or reputation.
The Charity Commission have acknowledged that Charities’ primary focus must be looking after the public and the beneficiaries and communities that they serve. But trustees continue to be responsible to report serious incidents using current guidelines here.
The Charity Commission have also issued updated guidance, including specific examples, for when charity trustees need to make a serious incident report as a result of impact to the charity from the coronavirus pandemic.
Trustees are expected to use their judgement in deciding whether an incident is significant in the context of their charity and should be reported.
We are happy to assist trustees in determining whether an SIR should be made and if so, in the preparation of the SIR.
How Can Tozers Help?
For help and support during this time then please contact our dedicated Charities Team who are on hand to help.
Last updated on 12/08/2020