Contents The Companies Act 2006
Charity & Education News Spring 2007
The Companies Act 2006 (the “Act”),
together with secondary legislation
implementing an EC directive relating to
the information which a company needs to
display on electronic communications,
websites and some of its other
documentation, has recently been passed
into law in England and Wales.
This is relevant to all charities and other
not-for-profit organisations established as
companies limited by guarantee.
Reference below to a "director" could also
mean a trustee, governor or member of a
council of a charitable company.
The Act is 1300 clauses long and repeals
and restates much of the previous
company legislation. Many of the changes
are not yet in force, as, given its size and
complexity, it is being implemented in
stages. It is expected that the entire Act
will be in force by October 2008.
1–3 The Companies Act 2006
3 Spotlight
4 “Can You Speculate to
Accumulate” - Loans to Trading
Companies
5 Compulsory Retirement at 65 -
Legal or Not?
5 Digest - Stone King News
6 Conference Dates
Making use of Electronic
Communications
Many of the provisions which were
brought into effect in January centred
around electronic communications, for
instance:
� Notice for general meetings can now be
given in hard copy form, electronic form
or by means of a website (although in
this case members must be notified that
the notice is on the website);
“This is relevant to all charities and other not-for-profit
organisations established as companies limited by guarantee”
� Companies may state an electronic
address on a notice of a general meeting
to which electronic communications
concerning the meeting (e.g. proxy
forms) may be sent; and
� Companies must now, by law, state their
registered name, place of registration
(England and Wales), company
registration number, registered office
and the fact that they are a company
limited by guarantee (if that is the case)
on any order forms they use and on their
websites as well as on all business
correspondence.
the lantern
�
The Companies Act 2006 (continued)
Other notable changes, which will come
into force later are:
Company Meetings
� No requirement to hold an AGM unless it
is expressly stated in the Articles;
� Only 90% of members needed to agree
to hold a general meeting at short
notice;
� Members of a company limited by
guarantee will have a statutory right to
appoint a proxy to attend and vote at a
meeting on their behalf. A statement
referring to this right must be included
on all notices for members meetings;
� No longer a requirement to lay company
accounts and reports before a general
meeting (it has not been decided
whether or not provisions relating to the
laying of accounts and reports contained
within existing Articles will continue to
apply); and
� All general meetings will only require a
notice period of 14 days, even if a special
resolution is being proposed (it has not
been decided whether or not provisions
relating to notice periods contained
within existing Articles will continue to
apply).
Written Resolutions
� Written ordinary resolutions will only
require a simple majority of members to
pass them (50%+1), with written special
resolutions only requiring a 75%
majority.
� However written resolutions must now
be signed within a 28 day period to be
valid.
Company Secretaries
� A company will no longer be required to
appoint a company secretary (although it
is likely that a requirement in a
company's articles that a company
secretary has to be appointed will still
be effective);
� In light of the fact that there will no
longer be a requirement to have a
company secretary, deeds will now be
able to be validly executed by:
- a director and a witness;
- two authorised signatories (either two
directors, or a director and a company
secretary if a company still has one and
is a private company); or
- company seal, with the usual witnesses.
Accounts
� An auditor will be deemed to be
reappointed annually unless the
company decides otherwise (again it has
not been decided whether or not
provisions in the existing Articles
governing this, will continue to apply);
and
� The deadline for filing accounts is
reduced to 9 months.
Where charitable companies have
restrictions in their Memorandum and
Articles of Association (“M&A”) preventing
them taking advantage of many of these
provisions, it will be open to them to
change their M&A, and in the majority of
cases Charity Commission consent will not
be required.
Directors
� The Act lists a number of directors’
duties. Whilst this largely codifies
existing case law, there is now a duty to
promote the success of the company for
the benefit of its members. In doing
this the directors must consider the
following issues:
- the likely consequences of any decision
in the long term;
- the interests of the company's
employees;
- the need to foster the company's
business relationships with suppliers,
customers and others;
- the impact of the company's operations
on the community and the environment;
- the desirability of the company
maintaining a reputation for high
standards of business conduct; and
- the need to act fairly as between
members of the company.
“As is often now the case within primary legislation, the Minister
for the Cabinet Office must review the operation of the Act
within five years of its passing”
�
“Charities should read this as a duty to act in a way which is
most likely to promote the success of the company to achieve
its objects and purposes. ”
Spotlight
RNLI
However this is modified for charitable and
other companies, which are established for
purposes other than the benefit of their
members. Charities should read this as a
duty to act in a way which is most likely to
promote the success of the company to
achieve its objects and purposes.
Trustees who are directors of both a
charitable company and any associated
trading company should be aware of these
two versions of the same duty and take
care to ensure they apply the correct
criteria depending on the circumstances.
What major charity, registered in
England, provides an important public
service in four different legislative
regimes?
The answer to this question might just
have been given away by the heading to
this piece! RNLI is of course one of
our most high profile and well-loved
institutions. It provides a 24-hour
lifesaving service around the UK and
the Republic of Ireland.
Because the work of the RNLI
naturally crosses frontiers, it needs to
work within the legal framework of
England and Wales, Scotland, Northern
Ireland and the Republic of Ireland (not
to mention the Isle of Man). As a
result the RNLI has established a
panel of lawyers (pictured) in these
jurisdictions. The lawyers, including
Jonathan Burchfield of Stone King, met
last Autumn in order to discuss the
implications for RNLI of the new
charities legislation which is being
introduced across the United Kingdom
and the Republic of Ireland. After a
busy morning’s work, they were then
allowed the privilege of a trip in a
lifeboat from Poole along the coast to
Swanage.
RNLI depends upon voluntary income
and legacies from its supporters – they
have calculated that six out of ten RNLI
launches are only possible thanks to
gifts in wills.
To learn more visit www.rnli.org.uk
or contact John Marshall on
01202 663032.
Jonathan Burchfield – second from left
“It provides a 24-hour lifesaving service aroundthe UK and the Republic of Ireland.”
� Directors will no longer be required to
enter their residential address on the
register of directors held at Companies
House.
Memorandum and Articles of
Association
� Companies will not need to amend their
Articles of Association following changes
of name; and
� New companies will be established with
a new short form Memorandum of
Association. Provisions contained within
the Memoranda of existing companies
will be deemed to be part of their
Articles.
We will keep you informed of the major
changes as they come in.
Martha Burnige (Charity & Education
Team) and Tamsin Wilkinson (Corporate
and Commercial Team)
It is now very common for charities to
have wholly owned subsidiary trading
companies through which they can carry
out non charitable fundraising activity.
Any profits made by the trading company
can then be donated gross to the charity
via Gift Aid so that no corporation tax is
payable on those profits.
We recently advised a client who wished
to set up a trading company for the
purposes of staging a large fundraising
event for which there would be a lot of
“up front” costs. The charity was
proposing to make a loan to the trading
subsidiary to allow it to stage the event
and for the loan to be paid back after the
event.
We advised the charity to check that the
trustees had the power to invest
charitable funds, which they did. The
next step was to determine on what
terms the money should be loaned.
Her Majesty’s Revenue and Customs
(HMRC) must be satisfied that the loan is
a “qualifying loan” otherwise the charity
could lose some of its tax exemptions.
To qualify for tax relief, an investment
must be for charitable purposes and not
for the avoidance of tax. It must also be
on commercial terms.
We spoke to a representative of HMRC
who confirmed that the following criteria
must be met for a loan to be considered
to be a qualifying loan:-
1.A formal loan agreement must be in
place before the loan is made;
2.A commercial rate of interest must be
charged and actually paid;
3.There must be a fixed capital repayment
schedule which requires the repayment
of the capital over a reasonable period of
time;
4.Security for the loan must be given; and
5.The decision by the charity’s trustees to
make the loan should be carefully
recorded in writing.
Once the trustees had agreed the terms
of the loan and were happy that it
represented a good investment for the
charity, we drew up an agreement and
repayment schedule, the loan was made
and the trading company was able to
start organising the fundraising event.
This is not a difficult process, but one
“Can You Speculate to Accumulate?”Loans to Trading Companies
that should be carefully followed when a
charity considers loaning money to its
trading company.
Points to note when making a loan to a
trading company
� Check power to invest
� Ensure that it is a sound investment for
the charity
� Draw up a loan agreement and
repayment schedule
� Keep records of decisions made and
professional advice taken
Martha Burnige
(Charity & Education Team)
“Any profits made by the trading company can then be donatedgross to the charity via Gift Aid so that no corporation tax ispayable on those profits”
New Cambridge Office
Stone King is pleased to announce that
on 1st March we opened an office at
Wellington House, East Road, Cambridge
CB1 1BM.
Seminars/Workshops/Conferences
As you will see from our conference list,
Stone King is involved in a large number
of events in the months to come. Our
first seminar on the new Charities Act is
now fully booked but we will be running
it again on 17th April. Those who have
already expressed an interest will be
contacted. However please let Avia
Johnson know or check our website for
further details if you would like to attend.
Lifting the Veil on a Difficult Issue
– High Court Win
Mike Brotherton of Stone King LLP
recently advised a school defending its
right to enforce a standard dress code.
The High Court supported the decision of
the school not to allow a female pupil to
wear the niqab or face veil (for a fuller
report see our website).
Those who attended our Age
Discrimination workshops at the end of
last year, will remember that some legal
doubt existed as to whether the UK was
in breach of European Law by allowing a
compulsory retirement age of 65.
The membership organisation for people
in or nearing retirement, Heyday, has
made a reference to the European Court
of Justice (ECJ) questioning the validity
of the UK Age Discrimination
Regulations which allow compulsory
retirement at 65 subject to an employer
following the notification procedure. The
UK Government has not objected to the
reference so it is hoped that a
reasonably early decision will be made.
The Advocate General's Opinion to the
ECJ in another case may be an indicator
of the likely outcome. This case
concerns age discrimination in Spain.
The Advocate General has recommended
to the ECJ that it should find no breach
of the European Directive on age
because the Directive does not apply to a
law regulating retirement ages. In the
alternative, he has recommended that
even if it does apply, setting a retirement
age is justified direct age discrimination.
Of particular interest is that the
Advocate General's Opinion relied
heavily on the introduction to the
Directive which indicated that the
Directive is without prejudice to national
provisions setting out retirement ages.
Whilst the ECJ is not obliged to follow
the Opinion of the Advocate General, his
Opinion is acted upon in the majority of
cases.
Clearly if the ECJ follows the Advocate
General's Opinion it is likely to be of
Compulsory Retirement at 65 - Legal or Not?
significant relevance to Heyday's
application.
On the other hand, if Heyday's
application succeeds then one area of
certainty for employers will be removed,
namely the ability, subject to use of the
notification procedure, to compulsorily
retire an individual at age 65.
For further information on the subject
please contact Nick Watson, Head of the
Employment Team on 01225 324435 or
email [email protected].
Digest – Stone King News
“ if Heyday's application succeeds then one area of certaintyfor employers will be removed, namely the ability, subject touse of the notification procedure, to compulsorily retire anindividual at age 65. ”
Stone King LLP
13 Queen Square Bath BA1 2HJTel. 01225 337599Fax. 01225 335437
28 Ely Place London EC1N 6TDTel. 020 7796 1007Fax. 020 7796 1017
Wellington House, East Road,Cambridge CB1 1BHTel. 01223 451070Fax. 01223 451100
The Lantern deals with some current legal topics. It should not be usedas an alternative to specific legal advice on the individual circumstancesof a particular problem.
© Stone King LLP 2007
email: [email protected]
www.stoneking.co.uk Stone King LLP - registered limited liability partnership no OC315280, registered office 13 Queen Square, Bath BA1 2HJ
Your ContactsCharity:Michael King PartnerRobert Meakin PartnerAnn Phillips PartnerJonathan Burchfield PartnerStephen Ravenscroft PartnerAlexandra Whittaker SolicitorVladka Thwaites SolicitorMartha Burnige SolicitorMatthew Waters Solicitor
Education:Richard Gold PartnerMichael Brotherton SolicitorJane Graham SolicitorNaseem Nabi Solicitor
Legacy Disputes:Nick Watson PartnerRobert Meakin PartnerPaul Sutton Associate
Dispute Resolution:Nick Watson PartnerPaul Sutton AssociateMichael Brotherton Solicitor
Commercial Property:Hugh Pearce PartnerStephanie Howarth Senior AssociateCatherine Sanderson AssociateSally McFadden AssociateDonna Del-Greco SolicitorJoanne Sturges SolicitorKathrine Wardle ParalegalAmandeep Basi Paralegal
Corporate & Commercial:Roy Butler PartnerLynne Rigg SolicitorEmployment:Nick Watson PartnerPeter Woodhouse PartnerNaseem Nabi SolicitorChild Protection:Steven Greenwood PartnerHousing:Geraldine Winkler Legal ExecutiveJess Anstey SolicitorTrust and Taxation:Andrew Mortimer PartnerAlison Allen PartnerCharles Hayward Partner
Conference DatesStone King is often involved in producing seminars andconferences. The following are currently being planned.
Please contact Annette Kirby on 01225 324 413 or e-mail
[email protected] for further information where contact
not already specified.
20 MarCharity Workshop in association withChantrey Vellacott – second in a series:"Trustees Responsibilities – What YouNeed to Know". Venue: Royal Society ofMedicine, Chandos House, 2 Queen AnnStreet, London W1G 9LQ
22 MarSeminar - Charities Act 2006: "Using theNew Act". Venue: 30 Ely Place, LondonEC1N 6TD. For further details contactAvia Johnson on 020 7796 1007
27 MarEmployment Law Workshop – RecentDevelopments. Venue: Offices of StoneKing LLP, 13 Queen Square, Bath BA1 2HJ
29 MarEmployment Law Workshop – RecentDevelopments. Venue: Offices of StoneKing LLP, 28 Ely Place, London EC1N 6TD
29 MarCharity Workshop: Charities Act 2006.Venue: Wellington House, East Road,Cambridge CB1 1BH. For further detailscontact Paula Urban on 020 7796 1007
17 AprSeminar: Charities Act 2006: "Using theNew Act". Venue: 30 Ely Place, LondonEC1N 6TD. For further details contactAvia Johnson on 020 7796 1007
19 AprCharity Workshop: "Planning for FinancialStability". Venue offices of Stone KingLLP, 28 Ely Place, London EC1N 6TD. Forfurther details contact Paula Urban on020 7796 1007
24 AprEmployment Law Workshop: FamilyFriendly Employment – What you shouldknow. Venue: Offices of Stone King LLP,13 Queen Square, Bath BA1 2HJ
26 AprEmployment Law Workshop: FamilyFriendly Employment – What you shouldknow. Venue: Offices of Stone King LLP,28 Ely Place, London EC1N 6TD
1 MayIndependent Schools Workshop inassociation with Old Mill CharteredAccountants. Venue: Bailbrook House,London Road, Bath BA1 7JD
16 MayCatholic Charity ConferenceVenue: Church House Westminster
16 MayCharity Workshop in association withChantrey Vellacott – third in a series:"Trustees Responsibilities – What YouNeed to Know". Venue: Royal Society ofMedicine, Chandos House, 2 Queen AnnStreet, London W1G 9LQ
24 MayCharity Workshop: "InternationalCharities". Venue offices of Stone KingLLP, 28 Ely Place, London EC1N 6TD. Forfurther details contact Paula Urban on020 7796 1007
29 MayEmployment Law Workshop: EmploymentStatus – Employee, Worker or Self-Employed. Venue: Offices of Stone KingLLP, 13 Queen Square, Bath BA1 2HJ
31 MayEmployment Law Workshop: EmploymentStatus – Employee, Worker or Self-Employed. Venue: Offices of Stone KingLLP, 28 Ely Place, London EC1N 6TD
2007
EVENT FULL
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