Augustus Della-Porta reports on clarification recently provided by the Charity Commission on the procedure for changing a charity's objects.

Under section 64 of the Charities Act 1993, charities that are companies are obliged to seek prior written Charity Commission consent for certain alterations to their constitutions. These ‘regulated alterations’ include any amendment of the objects clause, dissolution clause and any provisions authorising a benefit to be obtained by a trustee or member of the charity. Obtaining consent is important because failure to do so results in such changes being ineffective. Recent changes to company law have thrown up issues for whether even fairly minor amendments to the objects, dissolution and trustee benefit clauses are “regulated alterations” requiring prior Commission consent.

Under provisions of the Companies Act 2006 which came into force on 1st October 2009, the majority of the provisions of the Memorandum of Association of a company such as the objects, powers and dissolution provisions, are now treated as forming part of the Articles of Association (the Memorandum effectively becomes a historical document). Charitable companies making changes to anything originally in their Memorandum or Articles of Association must make some changes to the format of their constitution. They can either file the Articles with the Memorandum attached as a schedule or reformat the Articles by including the majority of the provisions of the Memorandum within the Articles. Many charitable companies are doing the latter to ensure that they have one single constitutional document to refer to in future.

Whichever option is followed will almost certainly lead to some cosmetic changes, for example changing the numbering of paragraphs within the constitution, changes to crossreferences within paragraphs and changes to terminology such as “Clause” to “Article”. Although these changes do not alter the meaning of the provisions, for charities this has given rise to some uncertainty as to whether any ‘cosmetic’ changes such as these amount to a “regulated alteration” requiring prior written consent from the Commission.

Until recently Commission guidance only partially addressed this in relation to changes to objects clauses. The Commission, in response to a letter from Bates Wells & Braithwaite, has now addressed this issue more fully and has clarified that minor amendments to the objects and trustee benefit clauses will not be “regulated alterations” provided there is no change to the meaning of the clause. Changes to objects and trustee benefit clauses which are purely cosmetic will, therefore, not need consent.

However, the answer is not so simple in relation to dissolution clauses. The Commission letter states that there are two possible interpretations of section 64 in relation to dissolution clauses and that, while it is prepared to accept the interpretation that cosmetic changes do not require consent, this interpretation is not beyond doubt. The Commission advises that on a practical level, a charity may consider it is unnecessary to apply for specific consent for a cosmetic change to a dissolution clause if there are no other regulated alterations, although the safest option is, of course, to seek consent. Where a charity is seeking consent for other regulated alterations, the Commission advises charities to seek consent from the Commission to put the matter beyond doubt.

Augustus Della-Porta is a solicitor at Bates Wells & Braithwaite