Is your charity’s constitution fit for purpose in 2025?
In the ever-evolving landscape for charities in England and Wales, ensuring that your charity's constitution is fit for purpose in 2025 is crucial. A well-crafted constitution not only provides a solid foundation for your charity's operations but also ensures compliance with charity law and best practices. Here are some key considerations to help you evaluate and update your charity's constitution.
LEGAL COMPLIANCE – WHAT IS A CHARITY CONSTITUTION? The legal framework governing charities in England and Wales is continually evolving. For instance, the Charities Act 2022 introduced several changes that impact Charitable Incorporated Organisations (CIOs) in particular.
When discussing the constitution for a charity, also called its governing document, we must first consider the structure of the charity. A charity is not a type of legal form or structure; it is a status conferred on a group of individuals or an organisation due to the activities it carries out. The most common legal structures used to set up a charity are a charitable trust, an unincorporated association, a charitable company or a CIO.
Incorporated charities
This article focuses on incorporated charities registered with the Charity Commission, thus charitable companies such as companies limited by guarantee (CLGs) and, to a lesser extent, CIOs. This article does not focus on unincorporated charities such as trusts or unincorporated associations, nor community benefit societies, Royal Charter bodies or so-called excepted charities or exempt charities, such as local church charities, educational charities such as universities, museums and other institutions of national importance.
The vast majority of charitable companies are CLGs which do not have shareholders. The constitution of a charitable company limited by guarantee is called its Articles of Association.
CLEAR OBJECTIVES AND PURPOSES.
To be a charity, your purposes must be exclusively charitable. Your charity's constitution should clearly outline its objects and purposes. This clarity helps in guiding the charity's activities and ensures that all efforts are aligned with its mission.GOVERNANCE STRUCTURE. A robust governance structure is vital for the effective management of your charity. Your constitution should detail the roles and responsibilities of directors/trustees, the process for appointing new director/trustees, the procedures for decision-making, and how individuals or organisations can apply to become a member of the CLG.
ROLES OF DIRECTORS/TRUSTEES AND MEMBERS. CLGs (companies limited by guarantee) have:
- Directors who meet at board meetings; they will also typically be the trustees for the purposes of charity law.
- Members (akin to shareholders), who meet at general meetings and who can hold the directors to account by appointing or removing the directors. Certain decisions need to be put by the directors to the members for approval, such as changes to the constitution. Such decisions would typically be put to the members in a general meeting, such as at the Annual General Meeting (AGM), or at some other point in the year at what used to be called an extraordinary general meeting.
Different responsibilities
Note that for some smaller charitable companies, the director/trustees may also be the members, but they wear different hats and have different responsibilities, with different formalities applicable to how they meet. Larger charitable companies will have director/trustees and a separate, and wider, membership.
REQUIREMENT TO HOLD AN AGM. For CLGs, there is no legal obligation to hold an AGM of the members. The company law requirement to hold an AGM was removed when the 2006 Companies Act came into force. Notwithstanding this change for CLGs, the governing document for most charities does still require an AGM. The model governing documents produced by the Charity Commission for CLGs and CIOs with voting members other than the trustees do contain a requirement to hold an AGM.
The reason for retaining the requirement is part of what the Charity Commission sees as good governance, affording the members the yearly opportunity to review and hold the directors/trustees to account.
VIRTUAL MEETINGS OF MEMBERS. In 2025, consider incorporating provisions in your Articles of Association expressly providing for virtual general meetings to ensure flexibility and accessibility for members. This can include guidelines for conducting meetings online, voting procedures and ensuring that all members can participate effectively.
A virtual meeting is a meeting held entirely by virtual means. A hybrid meeting is a meeting where some people attend in person and others join the meeting virtually. Some companies hold physical meetings which they broadcast a live recording of, but with no voting allowed other than those actually present at the physical meeting place.
During Covid, the government introduced temporary legislation to allow companies and other qualifying bodies with obligations to hold AGMs to have the flexibility to hold these meetings virtually. However, that dispensation ended in 2021. Whether you can hold a general meeting by virtual means depends on your Articles.
Notice required
Section 311(1) of the Companies Act 2006 requires a notice of a general meeting of members to state the time, date, and place of the meeting. In addition, the articles of association of some CLGs:
- Refer to the AGM at such “place”.
- Refer to needing a quorum of members to be “present”.
- Contain no article which provides that some members may participate by means other than attending (save for appointing a proxy to physically attend).
The interpretation of "place" and whether this can be taken to include an electronic or virtual platform has been the subject of much discussion among practitioners, calling into question the legality and validity of a virtual meeting under English law. In addition, “present” can be taken to mean you need a cohort to be physically present for it to be quorate.
It is therefore best practice to ensure your Articles expressly provide for virtual or hybrid meetings.
So, before scheduling an online meeting, review your governing document to ensure you can hold your meeting in the manner you wish. If a CLG does not have express provisions providing for virtual meetings, careful consideration should be given if the CLG is planning to hold virtual meetings and independent legal advice should be sought.
In terms of practicalities, the CLG in question will also need to consider whether it has adequate technology to facilitate the meeting, and the ability to count votes to ensure each member can vote (and only vote once).
Proxy voting
With respect to members who cannot attend, England and Wales have an established proxy voting system, which allows members who cannot attend a meeting to appoint another person to attend in their place, and such instruction can include directions to the proxy as to how to vote. Often, the chair of the meeting is given such direction. For this reason, it is uncommon to allow votes to be cast in advance of a meeting.
The Charity Commission issued a press release in the summer of 2024 advising trustees to ensure any rules around holding meetings are up to date and practical. See the press release titled “Regulator refreshes meetings guidance for the Zoom era”.
HOW TO AMEND THE ARTICLES. To amend the Articles of a charitable CLG, you must follow specific steps to ensure compliance with both company law and charity law.
First, review your current governing document to identify the provisions for making amendments. Typically, changes require board approval and approval by way of a special resolution passed by at least 75% of the members. Once the resolution is passed, you must notify both Companies House and the Charity Commission of the changes.
Please note that some amendments, particularly those affecting the charity's objects or purposes, or benefits given to trustees, known as “regulated alterations”, require prior approval from the Charity Commission, so permission should be sought in advance of seeking member approval.
Commission consent
The Charity Commission's consent is required to make regulated alterations to a charitable company's articles because these amendments could enable the company's assets to be applied for non-charitable purposes or undermine its status as a charity.
To be recognised and to continue to be recognised as a charity in law, each purpose of the CLG must be a charitable purpose; a charity cannot have some purposes that are charitable and some that are not. The nature of a charity's purposes must be capable of benefiting the community at large (the public benefit requirement). In addition, all charity trustees have a duty to operate their charity for the benefit of the public.
REGULAR REVIEW. Ensuring that your charity's constitution is fit for purpose in 2025 requires regular review and updates. By addressing legal compliance, clear objectives, robust governance, flexibility, transparency, risk management and engagement, you can create a strong foundation for your charity's success.
