Impact of Covid-19 on governance and execution of documents – considerations for housing associations

As the world moves into the state of dealing with a pandemic, we are seeing more clients concerned about how the spread of coronavirus may impact their ability to continue their business. Specifically there have been concerns about the ability to 1) have deeds executed, and 2) hold board meetings. The following note is drafted assuming that the client is a registered society. 

All options are subject to compliance with the rules of the society and these must be checked carefully as not all of the options may be available, particularly where operating under older sets of model rules.  Even where rules permit, any revised arrangements will require suitable board authorisation and it may be necessary to provide evidence of this to relevant third parties.

Execution of deeds

Many of our clients currently execute deeds by seal, which is applied physically and then attested by one or more authorised persons. As more people are forced to self-isolate, it may not be possible to have the correct people available to attest a physical seal. So what are the other options?

Electronic seal?

Unfortunately there is not a generally recognised acceptance of the ability to use an electronic seal. Although we may see changes in the future that allow this, for the time being it is still necessary to apply a physical seal and attest it in person.

It may be possible to 'pre-emboss' seal wafers, but again this presents additional fraud risks as the physical control over the seal and what it is applied to has traditionally operated to help control the execution of documents.

Reduce the requirement to a single signatory

Most clients have the power in their rules or articles to authorise the seal to be attested by only one signatory.  The choice to require two is a fraud and risk management mechanism.  Where rules permit, clients may reduce the requirement to a single signature supplemented by some additional alternative authorisation steps such as email or other electronic affirmation of the decision to execute.

Identify additional authorised signatories

This is also a straightforward option, but requires careful consideration as to who ought to be authorised.  Clients have given careful consideration of their current authorised signatories to reflect good practice in fraud and other risk management and must be careful to ensure suitable protections in any extended regime.

If clients do not currently have a deputy secretary, this may be an appropriate time to consider making such an appointment.

Alternative execution

A seal is not the only way a registered society can execute a deed. A deed can be executed by having two board members, or one board member and the company secretary sign the deed.

Although this alternative must involve the board in the execution of the deed, the benefit is that the signatures can be electronic. This includes signing documents using software such as DocuSign.

Bodies that require 'wet' signatures

Although a deed can legally be executed by two board members, or one board member and the company secretary, signing electronically, some bodies do still require a 'wet' signature.

For example, the Land Registry has until now required 'wet' signatures and would not accept documents executed electronically.  However, the Land Registry has now published revisions to its Practical Guide 8 which now states that it will accept "Mercury signatures" until further notice. In effect this allows an organisation to print just the signature page, sign just that page and then scan it and combine it to the deed as a single electronic document. Whilst this will still require a physical signature on the signature page, it does avoid the need for having to print the entire document which will avoid some bulk printing which we know is an issue in the current climate.

Powers of Attorney

An additional solution, and one that can be used in combination with the above, is the use of a power of attorney. Under a power of attorney an individual or a corporate body (such as a registered society) can grant a power to a person or specified people to allow them to execute documents on their behalf.

A power of attorney could extend to authorisation of another corporate body such as a firm of solicitors.

A power of attorney does though itself need to be executed as a deed if authorising execution of deeds. Therefore clients will need to put this in place before any difficulties with executing deeds start to arise. 

Any power of attorney should be accompanied with suitable authorisation mechanisms.

Holding board meetings

Housing associations may be concerned about their ability to hold board meetings as more people are forced to self-isolate or simply as social interaction becomes discouraged.

The first thing to do is to check your rules to see whether they permit the holding of meetings by electronic means. Assuming that they do, you can choose to hold a meeting by, for example, a video or telephone conferencing facility that allows all the participants to talk to one another. Although the ability to hold meetings electronically is a common provision in newer versions of rules, some of the older versions may not allow this.

In addition, please note that an exchange of emails between board members does not constitute a meeting. However, your rules may allow the board to take decisions outside of board meetings and this could include by email written resolutions. The rules should be checked carefully to check how they govern written resolutions and in particular to see what majority of board members is required to make a decision in writing, since the rules can require a higher majority than at a meeting.

As with the execution of deeds, early consideration should be given to whether there are appropriate mechanisms in place to allow meetings to take place and resolutions in writing to be passed electronically.

Annual General Meetings

In thinking about the process for producing and filing accounts and annual returns for 31 March 2020 housing associations are not only grappling with problematic assets and liabilities (e.g. pensions) and potential auditors' statements in their reports, but also with some out of date provisions in the rules relating to AGMs.

There is no statutory requirement for a company or registered society to hold an AGM at all, but older sets of model rules require one to be held and for the accounts to be laid before the AGM as part of the annual report. Worse, the wording of the relevant rules requires at least some of the members to be present "in person" and makes no provision for the remainder to attend through electronic means such as a telephone conference or video conferencing app only for proxies. Even with the lockdown being partially eased it is still quite likely that the holding of a traditional AGM with the members present "in person" will not be compliant with the government guidance on social distancing by the time that the AGM needs to be held.

In order to address this, The Corporate Insolvency and Governing Act 2020 was introduced which allows certain corporate bodies to hold meetings fully electronically during a certain period (currently extended to 31st Match 2021). Housing associations may also want to amend their rules or articles of association to enable meetings to be held in a more modern manner after that period expires.

Many housing associations that have restricted their membership to the current board members have gone further than this by removing the requirement to hold an AGM altogether. The FCA requires housing associations doing so to demonstrate their commitment to openness and transparency in other ways, but we have helped numerous housing associations to register such changes.

Of course, any such constitutional changes will themselves take time to come into effect and will need sufficient support from the membership. In the current environment we expect RP members to be open to modernisation of these provisions and they may even be open to a wider updating of provisions in the RP's rules if any other changes are required.

Rule changes

If your rules do not permit flexibility on the holding of meetings or passing of resolutions in writing by electronic means or on the execution of documents then the rules could be amended to allow this.  Rules can be amended by a resolution of the shareholders registered with the Financial Conduct Authority.  The resolution to amend the rules can itself often be made in writing if it is not possible or considered advisable to hold a general meeting.

Filing Timings

In terms of filing requirements, Companies House has announced that companies are able to apply for a three month extension to their deadline for filing annual accounts in order to mitigate the possibility of fines for late filing caused by Covid-19. Our advice is that companies should apply to take advantage of that flexibility. For registered societies, the FCA has stated that it will not take any action where returns due up to 30th June 2020 are delayed by up to three months and that it will review the position again in June 2020. This period has subsequently been extended to 30th April 2021.

For housing associations, the Regulator of Social Housing has now issued a letter outlining flexibilities that it is applying in relation to its regulatory approach. This includes pausing all in-depth assessments, extending the submission deadline for Statistical Data Return and Local Authority Data Return and delaying the requirement for the submission of the Forecast Financial Return.

Please though also note that loan agreements will often have covenants relating to providing certain information and filing documentation within certain deadlines. Therefore, even though Companies House, the Regulator of Social Housing and the FCA may have relaxed their requirements, organisations may still be in breach of loan covenants and need a separate waiver from their lenders in respect of those requirements.

Additional considerations

Whilst a key priority is going to be making sure that deeds can be executed for specific projects that are ongoing, consideration should also be given to the impact of COVID-19 on wider business operations.

It would now be an opportune time to review delegated authorities and consider whether bank mandates and contract expenditure thresholds should be reviewed or how appropriate emergency powers are in the current climate. Societies will not want to amend their requirements too flexibly to allow for easy fraud, but those requirements and thresholds must at least be kept under frequent review in light of the availability of key individuals during this time.


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