When a company is registered at Companies House, the purpose of the business and the rules about how it should operate must be outlined in a governing document called the articles of association. A charity may need to take the form of a company if there is risk of financial liability from controlling substantial assets, employing staff and/or engaging in charitable purposes that involve commercial risks.
If a charity is set up as a company, it will adopt a memorandum and articles of association. These constitutional documents will state that the company is being set up without share capital and for non-profit purposes. To make any changes to a charitable company’s governing documents, you must obtain approval from at least 75% of the company’s members (guarantors/trustees) by passing a special resolution at a general meeting. However, there are certain ‘regulated alterations’ that also require written consent from the Charity Commission before a resolution can be passed.
Approving changes to the articles
Unlike companies limited by shares that are set up with the intention of making a profit for the benefit of its members (shareholders), a charitable company will be set up as non-profit limited by guarantee. This type of company does not have absolute freedom to alter its statement of objects (a description of the company’s purpose) or the administrative powers and provisions that are set out in its articles of association.
Any significant changes to a charitable company are limited by the requirements of section 198 of the Charities Act 2011. Approval must be granted by the Commission for certain types of changes relating to objects, dissolution provisions, and trustee benefit provisions. These changes are defined as ‘regulated alterations’ and they require the consent in writing of the Commission before the resolution making the alteration can be passed by the charity.
What are regulated alterations?
‘Regulated alterations’ refers to changes to the articles in areas of fundamental importance, which fall into three broad categories:
- Any change to the statement of the objects of the charity – this is a description of your charity’s purposes.
- Any change to what happens to the charity’s property upon being wound up.
- Any change which authorises funds of property to be used to benefit the directors or members, or people or organisations connected with them.
When the commission has agreed to the changes and the company’s members pass a special resolution, a company officer (director or secretary) must send a copy of the resolution giving effect to the change and a signed copy of the articles as altered to Companies House within 15 working days of the resolution being made.
Where a charitable company amends its statement of objects, these amendments will only come into effect once they are registered at Companies House. A charitable company can only start acting under the new objects after this registration date.
Notifying the Charity Commission
The Commission also has a duty to maintain an accurate and up-to-date register; therefore, the trustees have a legal duty to inform the Commission about any changes (regulated or not) at the same time as notifying Companies House. An online form should be used, which should state the following:
- What the changes were.
- Evidence that changes were properly made.
- The date the special resolution was passed.
- Where the charity’s statement of objects has changed, the date these changes were registered at Companies House.
The amended articles can be attached to this online form and the charity’s entry will be updated on the Register of Charities. With the exception of changes to the statement of objects, an amendment will take effect from the date the special resolution is passed by the company’s members. In cases where the articles state that no consent is required from the Commission, the company members can agree to make any changes that are not classed as regulated alterations.
Notifying Companies House
To inform Companies House about changes to the articles, a company officer should file a copy of the new articles and resolution online via WebFiling. Alternatively, 1st Formations free Online Company Manager can be used to upload and file these changes electronically. Existing customers can access this service with a username and password. Non-clients can create a free online account to import an existing company. In all cases, your unique Companies House authentication code will be required.