For any charity, its governing document, or 'rulebook', underpins everything it does. It sets out the charity's purposes, how it is run, and the powers available to its trustees / board. Yet such documents are often drafted when a charity is first established and may not be revisited as the charity, and the legal and regulatory landscape around it, evolves.
Over time, provisions can become outdated, restrictive, or inconsistent with current law and guidance. It is therefore good practice for trustees / directors to review and update the governing document periodically. This note highlights some key areas to consider and outlines how changes can be made.
Different forms of charity and their governing documents
Charities in England and Wales can take a number of legal forms – charitable companies, charitable incorporated organisations (CIOs) and unincorporated charities, such as charitable trusts and charitable unincorporated associations – each with its own governing document and its own rules for how that document may be amended. The process for making changes will therefore depend on the form that charity takes, as well as the terms of its existing governing document. Trustees and directors, as applicable, have a responsibility to act in accordance with the charity's governing document, and it is important that it remains fit for purpose as the charity develops.
Key areas worth reviewing
There are a number of reasons why a governing document may no longer reflect current needs – whether through changes in the law or Charity Commission guidance; growth or change in the charity's activities; or provisions that have simply become unworkable or outdated in practice. Set out below are some suggested areas worth reviewing:
- Charitable objects: Do they accurately reflect what the charity does today? Objects that are too narrow may restrict the charity's activities; too broad and they may create compliance difficulties. As the charity's work evolves, the objects should keep pace.
- Powers: Does the constitution give trustees / directors sufficient powers to carry out the charity's work effectively – including, for example, powers to invest, borrow, enter into contracts, and employ staff?
- Trustee / Director appointment, retirement and removal: Are the processes clear, workable, and reflective of modern governance practice? This includes considering whether quorum requirements and decision-making procedures remain appropriate for the size and structure of the board, and whether trustee benefits and remuneration provisions are consistent with current law and Charity Commission guidance.
- Membership provisions: If the charity has members, are their rights, voting thresholds, and the processes for membership changes clearly set out and still appropriate?
- Communications and meetings: Does the constitution make provision for electronic communications and remote or hybrid meetings? Many older governing documents do not, which can create practical difficulties.
- Dissolution: Are the provisions dealing with winding up clear, and do they ensure that assets are applied for charitable purposes if the charity comes to an end?
- Legislative references and compliance: Does the constitution contain outdated references to legislation that has since been repealed or amended? Are the charity's governance arrangements consistent with current Charity Commission guidance and best practice?
Making updates and how we can help
The process for amending a governing document will depend on both the legal form of the charity and the terms of its existing constitution. For charitable companies, amendments to the articles of association will generally require a special resolution approved by at least 75% of the charity's members. For CIOs, amendments must be submitted to the Charity Commission.
Certain changes are known as "regulated alterations" and will require the prior written consent of the Charity Commission before they can take effect. These include altering a charity's purposes and changing the dissolution provisions. Before making changes, trustees / directors should also give appropriate thought to consulting with the charity's members, beneficiaries, and other stakeholders where this is relevant.
If you would like help reviewing or updating a governing document, please do get in touch and we would be happy to discuss how we can help.
