15: Charities and COVID-19 – an update on members’ meetings and the Corporate Insolvency and Governance Act 2020

We reported in our blog of 1 July 2020 on the changes implemented by the Corporate Insolvency and Governance Act 2020 (CIGA 2020), in particular those relating to members’ meetings. A number of the provisions are temporary and were set to expire on 30 September 2020. Many of those provisions have now been extended by regulations.

Members’ meetings

As reported in our 1 July blog, CIGA 2020 provided for a temporary relaxation on the rules for members’ meetings of certain corporate bodies, designed to enable them to hold general meetings and AGMs during the pandemic.

For charities, the provisions extend to charitable companies, CIOs, SCIOs and mutual societies (such as a Community Benefit Society), as well as the trading subsidiary companies of any charity. (They do not extent to Royal Charter and statutory corporations or to unincorporated charities).

The provisions allow for those bodies covered by CIGA 2020 to hold a general meeting (or a meeting of any class of members or of delegates appointed by members) during the ‘relevant period’ which:

• need not be held at a particular place;
• may be held and votes may be cast by electronic or other means; and
• may be held without a quorum of participants having to be together in one place.

During the relevant period, members of such bodies continue to have a right to vote by some means, but do not have the right to attend in person, participate other than by voting or to vote by particular means.

The ‘relevant period’ was due to expire on 30 September, but regulations have extended the period to 30 December 2020. (If you are wondering why the period was not extended to 31 December, it is because CIGA 2020 only allows for extensions here of up to three months at a time).

As previously reported, CIGA 2020 also provided for bodies covered by the Act to postpone their AGMs, potentially to 30 September 2020. However, that provision has not been extended. Any body which is required to hold its AGM in the next few months should, therefore, consider whether it may make use of the relaxations above to hold its AGM and / or to amend its constitution, eg to better facilitate holding AGMs during the pandemic restrictions or to permit postponement or remove the requirement to hold an AGM.

Given the continuing uncertainty over what restrictions may be in place and for how long, any charity covered by the relaxation provisions should consider now whether to take the opportunity afforded by the significant flexibility in the CIGA 2020 provisions to make any constitutional changes which may be needed to facilitate ongoing operations of the charity.

There is provision to extend these relaxations further, by up to three months at a time, but charities should not bank on such an extension being made. There is also a long-stop date of 5 April 2021 – further primary legislation would be needed for any extension beyond that.

The Charity Commission has updated its coronavirus guidance in view of the above changes. As before, it notes that charity trustees wishing to rely on these provisions ‘must ensure that this decision is recorded in the minutes and that all other meeting requirements are met. You should ensure that you have a robust system to ensure only those eligible to vote can do so and that you record who has voted and the percentages of votes cast’.

For bodies which cannot rely on the CIGA 2020 relaxations, we set out some suggestions in our blogs of 1 July and 21 May.

It is worth noting that the Commission’s coronavirus guidance also references the new ‘rule of 6’ implemented from 14 September 2020 prohibiting (in England) groups of more than six, either indoors or outdoors. It notes that one of the exceptions is for providing voluntary or charitable services. The guidance states that this means ‘you can hold trustee or members’ meetings of more than six people where these meetings are necessary for providing charitable services’. As ever, of course, charity trustees should refer to the latest relevant rules and guidance, including any devolved and / or local restrictions which may apply.

Other temporary provisions extended (or not)

As indicated above, the provisions on members’ meeting were not the only temporary ones in CIGA 2020 which were due to expire on 30 September 2020. Broadly, a summary of other provisions extended is as follows:

• extended to 31 December 2020 – the temporary suspension of the use of statutory demands as a basis for a winding up petition; and restrictions on winding up petitions where a company or CIO cannot pay its bills due to the coronavirus emergency; and
• extended to 30 March 2021 – exclusion of small suppliers from limitations on termination clauses in supply contracts; and relaxation of some of the criteria in some circumstances for companies or CIOs to seek moratoriums (designed to allow a breathing space from debt enforcement action with a view to exploring options for rescue or restructure).

A temporary suspension of wrongful trading provisions, aimed at allowing company directors and charity trustees of CIOs to continue operating through the emergency without the threat of personal liability, was not extended beyond 30 September 2020. Any charity trustee concerned about a risk of insolvency should be aware of their added duties and responsibilities in such circumstances. The Charity Commission has further information on this, which can be found here. Charity trustees should not let potential problems here fester – if worried, speak to your usual BDB Pitmans contact, or alternatively our restructuring and insolvency team who will be able to talk you through your concerns.