Charities & Not-for-Profit Update: Getting to Grips with Your Governing Document
06 March 2018
All charities and not-for-profit organisations should have a governing document. Trusts are governed by their trust deed. Companies are governed by their constitution, also known as Memorandum and Articles of Association. Unincorporated associations are usually governed by a set of “rules” or a constitution.
Charity trustees must understand and carry out the objectives of their organisation as stated in their organisation’s governing document. It is important to act in accordance with the terms set out in the document. Charity trustees should also be aware that these terms may limit or restrict the activities the organisation engages in.
We set out below the most important provisions to be aware of.
Principal object or purpose of the organisation
You should know what the stated principal object of your organisation is and you must ensure that all activities of the organisation are carried out in furtherance of that object. The governing document should accurately reflect the current principal object of the organisation. If it does not, consider updating it.
Number of members, directors or trustees and how they are appointed
The governing document sets out who the members/directors/trustees of the organisation are and how they are appointed. Check to ensure that any specific rules in this regard are being adhered to. These include maximum / minimum number, method of appointment, terms of office, retirement provisions, among others. This can help to ensure that, at all times, the organisation has validly appointed members/directors/trustees.
The governing document will set out the quorum, or minimum number, of members/directors/trustees who must attend meetings. Know the quorum and ensure that the required number of persons are present at all meetings.
How much notice must be given of meetings? How should meetings be convened? What business can be dealt with at meetings? The answers to each of these questions also lie in the governing document. You should be familiar with each of these issues in order to ensure that meetings are validly held and to ensure all decisions taken at meetings are valid.
Know who is entitled to vote at meetings and how many votes each person has at a meeting. Can a person appoint a proxy to vote in their place? Must voting be conducted by ballot for certain matters, or is a show of hands sufficient? Is the chairperson of your organisation entitled to a casting vote? The time to find the answers to these questions is now, rather than when a contentious issue arises during a vote. Again, it is important to refer to the governing document.
How to amend your governing document
Your governing document is a living document and should work for the better running of your organisation. If something is not working, consider changing it – in accordance with the rules of the governing document.
Charities are required by the Charities Regulatory Authority to include certain clauses in their governing document. If amending the governing document, you must ensure that the most up-to-date wording is included. Charities must also ensure that, where changes to the governing document require the prior approval of the Authority, these changes are approved in advance by the Authority.
Your governing document contains important rules about your organisation’s purpose, its members/directors/trustees and how the organisation is to be governed. You should ensure that you read the governing document regularly and understand its provisions. You should also ensure that the rules contained within the governing document are appropriate for your organisation and are adhered to.
If your organisation does not have a governing document, and you would like our assistance drafting one, we would be happy to help. Similarly, if you would like assistance with interpreting your governing document, or amending it, please feel free to contact a member of our Charity and Not-for-Profit team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.