OTHER CHAPTERS
I. SETTING UP AN ORGANISATION
Ch.1: Trusts and unincorporated associations
Ch.3: Charitable status, charity law & regulation
Ch.4: The objects clause
Ch.5: The governing document
Ch.6: Setting up an organisation
Ch.7: Registering as a charity
Ch.8: The organisation's name
Ch.9: Branches, subsidiaries, partnerships & mergers
II. GOVERNANCE & MEMBERSHIP
Ch.10: Members of the organisation
Ch.11: Members of the governing body
Ch.12: Officers, committees & sub-committees
Ch.13: Duties & powers of the governing body
Ch.14: Restrictions on expenses, remuneration & benefits
III. RUNNING AN ORGANISATION
Ch.15: The registered office and other premises
Ch.16: Paperwork requirements
Ch.17: Meetings & decision making
Ch.18: Legal agreements
Ch.19: Organisational & personal liability
Ch.20: Insurance
Ch.21: Financial difficulties & winding up
IV. EMPLOYEES, WORKERS, VOLUNTEERS & OTHER STAFF
Ch.22: Employees and other workers
Ch.23: Rights, duties & the contract of employment
Ch.24: Model contract of employment
Ch.25: Equal opportunities in employment
Ch.26: Taking on new employees
Ch.27: Pay & pensions
Ch.28: Working time & leave
Ch.29: Disciplinary matters, grievances & whistleblowing
Ch.30: Termination of employment
Ch.31: Redundancy
Ch.32: Employer-employee relations
Ch.33: Employment claims & settlement
Ch.34: Self-employed workers & other contractors
Ch.35: Volunteers
V. SERVICES & ACTIVITIES
Ch.36: Health & safety
Ch.37: Equal opportunities in provision of goods & services
Ch.38: Confidentiality, privacy, data protection & freedom of information
Ch.39: Intellectual property
Ch.40: Publications & publicity
Ch.41: Campaigning & political activities
Ch.42: Public gatherings & entertainment
Ch.43: Food & drink
VI. FUNDING & FUNDRAISING
Ch.44: Funding & fundraising: General rules
Ch.45: Fundraising activities
Ch.46: Tax-effective giving
Ch.47: Trading companies
Ch.48: Contracts & service agreements
VII. FINANCE
Ch.49: Financial procedures & records
Ch.50: Annual accounts, reports & returns
Ch.51: Auditors
Ch.52: Corporation tax, income tax & capital gains tax
Ch.53: Value added tax
Ch.54: Investment & reserves
Ch.55: Borrowing
VIII. PROPERTY
Ch.56: Land ownership & tenure
Ch.57: Acquiring & disposing of property
Ch.58: Business leases
Ch.59: Property management & the environment
IX. BACKGROUND TO THE LAW
Ch.60: How the law works
Ch.61: Dispute resolution & litigation
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UPDATED INFORMATION FOR CHAPTER 2:
VOLUNTARY SECTOR LEGAL HANDBOOK
This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.
These websites for each chapter update
the 2nd edition of The Voluntary Sector Legal Handbook by Sandy Adirondack and James Sinclair Taylor (Directory of Social Change, 2001). The websites are not intended as a comprehensive update and should not be treated as such.
To order a copy of The Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking
. It costs £50 for voluntary organisations or £80 for others, plus 10% p&p. We expect the third edition to be published in 2007.
The information here covers the law applicable to England and Wales. It may not apply in Northern Ireland and/or Scotland. These news items are not a full or definitive statement of the law and are not intended as a substitute for professional legal advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be taken by the author.
Chapter 2
COMPANIES AND OTHER INCORPORATED STRUCTURES
COMPANY LAW
COMPANIES ACT 2006
Updated 19/3/07.
The huge Companies Act—the longest-ever piece of legislation in the UK, with 1300 sections—received royal assent on 8 November 2006. The Act repeals and either restates or changes about two-thirds of existing company legislation, and adds a lot of new law as well. And 1300 sections is not the end of it—there are 16 schedules, and much of the detail will be in regulations made during 2007 and 2008. The Act applies throughout the UK but a few provisions apply differently in Northern Ireland and/or Scotland.
For web addresses for the Act and explanatory notes, see above. For the Companies Act provisions that are in effect from January 2007 and affect voluntary sector companies, see Company communications. The DTI's consultation documents on the implementation timetable and regulations for the rest of the Act are at www.dti.gov.uk/consultations/page37980.html. The consultation runs from 28 February to 31 May 2007, except for comments on political donations and expenditure which should be in by 1 May.
It is still unclear how some of the changes will affect existing companies, and it is too soon to say which resolutions companies will need to pass or which procedural changes they will need to make.
Be wary of the some of the summaries of the Act that are available. Some do not distinguish adequately between the requirements for private companies (which the vast majority of voluntary sector companies are) and public companies. When dealing with private companies, they may not distinguish adequately between companies limited by shares and companies limited by guarantee. And within companies limited by guarantee, they may not distinguish adequately between charitable companies, community interest companies, and companies which are neither charities nor CICs. For example, much is being made of the fact that companies will be able to amend their objects to have unrestricted objects, allowing them to do anything legal. But this provision will not apply to charitable companies, and may not apply to some CICs.
Provisions that are not yet in effect and are likely to affect voluntary sector companies are listed below. This is not a comprehensive summary but I hope includes the main points applying to companies limited by guarantee. It does not cover companies limited by shares.
Please note that this is only a very brief summary. If you are interested in or concerned about specific provisions, please look at the Act itself and the explanatory notes, or consult your organisation's solicitor, or wait until detailed guidance and regulations are published.
Unless indicated otherwise, all of these changes will apply in the same way to charitable companies and CICs as to ordinary companies limited by guarantee.
COMPANY FORMATION
Expected 1 October 2008
The rules for forming a company will be simplified, with online incorporation and, for the first time, a full set of model articles for companies limited by guarantee (ss.7-20).
COMPANY CONSTITUTION
Expected 1 October 2008
For new companies, a memorandum of association will be used only for setting up the company. All operational provisions, including the objects, will be included in the articles of association. For existing companies, most of the provisions in the memorandum will be treated as if they were in the articles (ss.8, 17-20, 28).
All new companies will be assumed to have unrestricted objects, unless the articles specifically restrict them. Charitable companies must have restricted objects, and some community interest companies may choose to do so (s.31).
Anything in the articles will be able to be amended by special resolution. But certain amendments by charitable companies will continue to require prior consent from the Charity Commission (s.21).
Any company will be able to designate parts of the articles as entrenched provisions, which can only be amended if certain conditions are met or certain procedures are complied with. These conditions or procedures have to make it harder to change the articles than with a special resolution, but they cannot completely prohibit amendment. The entrenchment provisions could be used, for example, by a non-charitable not-for-profit company which wants to entrench its not-for-profit provisions so they cannot easily be changed (ss.22-24).
The concept of a company constitution is being introduced. This includes not only the articles (or the memorandum and articles of existing companies) but also certain resolutions that are specified in the Act as resolutions affecting a company's constitution. Such resolutions will have to be sent to the registrar of companies, and every copy of the articles issued by the company will have to be accompanied not only by these resolutions, but also by copies of enactments (legislation) affecting the articles, and any alterations made to the articles by a court or by another authority such as the Charity Commission. The accompanying materials do not have to be provided if those provisions have already been incorporated into the articles (ss.29-30, 32-36).
An example of a resolution affecting a company constitution would be a resolution allowing information required under the articles or company law to be provided to company members via a website (see Company communications).
NEW REASON FOR OBJECTING TO A COMPANY NAME
Expected 1 October 2008
A person who has goodwill in a name will be able, in some circumstances, to object if someone registers a company with a similar name (ss.69-74).
COMPANY NAME
Expected 1 October 2008
The Business Names Act 1985 will be repealed and replaced by the Companies Act (ss.1192-1208). It will be possible to change the company's name without a special resolution if the articles allow for this (ss.77-81).
ACCESS TO REGISTER OF COMPANY MEMBERS
Expected 1 October 2008
The register of company members (members of the organisation) will have to be open for inspection every working day. The current right to close it to the public for up to 30 days per year will no longer exist.
The public will have a right to inspect the register of members and to be provided with copies only if they are doing so for certain purposes which will be specified in regulations; the rights will not be absolute as they now are. Anyone who wants to inspect or be provided with a copy of the register of members will have to provide their names and addresses, the purpose for which the information will be used, and, if the access is sought on behalf of others or the information will be disclosed to anyone else, similar details for them. The company can apply to the court if it thinks the information is not going to be used for a proper purpose (ss.116-120).
REMOVAL OF FORMER MEMBERS FROM THE REGISTER
Expected 1 October 2008
Entries for former company members can be removed from the register after 10 years, rather than the current 20 (s.121).
MEMBERS' RIGHTS
Expected 1 October 2007
The articles will be able to include provisions allowing a company member to nominate someone else to exercise or enjoy the rights of company membership, such as the right to notice of general meetings (s.145).
MINIMUM AGE FOR COMPANY DIRECTORS
Expected 1 October 2008
Company directors will have to be at least 16 years old. They can be appointed before this, provided the appointment does not take effect until they are 16 or provided the appointment is for specified reasons that will be set out in regulations. Any director who is under 16 when the minimum age provision comes into effect will automatically cease to be a director. The register of directors will have to be amended accordingly, but Companies House will not have to be notified (ss.157-159).
DIRECTORS' ADDRESSES
Expected 1 October 2008
All directors will be able to use a service address (i.e. an address where legal papers may be served), rather than their private home address, in the register of directors and in the company's public records at Companies House. The service address can be the company's registered address or another address. All companies will have to keep a register of directors' residential addresses but unlike the register of directors, this will not be open to the public (ss.240-246).
GENERAL DUTIES OF DIRECTORS
Expected 1 October 2007, except conflict of interest duties expected 1 October 2008
For the first time there is a statutory statement of the duties of company directors. These are:
- to act within powers;
- to promote the success of the company;
- to exercise independent judgment;
- to exercise reasonable care, skill and diligence;
- to avoid conflicts of interest;
- not to accept benefits from third parties;
- to declare interest in a proposed transaction or arrangement
(ss.170-181).
The second duty, to promote the success of the company, generally means for the benefit of the members (shareholders in a company limited by shares). But for charitable companies, non-charitable voluntary sector companies and community interest companies—where the purpose of the company is not to make money for shareholders—"promoting success" means success in achieving the company's purposes. In promoting the success of the company, directors have to consider the long-term implications of their decisions, and have to take into account the interests of employees, suppliers, customers and the environment (s.172).
There are detailed requirements for declaring an interest in an existing transaction or arrangement (ss.182-187) and for transactions between the company and a director (ss.188-226). These duties apply differently in charitable companies.
The directors' statutory duties reflect common law duties, but in some cases use different terminology which could lead to problems in interpretation.
MINUTES
Expected 1 October 2007
There will be a new requirement for minutes of directors' meetings to be kept for at least 10 years (s.248).
CONNECTED PERSONS
Expected 1 October 2007
The definition of "connected person" will be extended to include the director's parents, children or step-children of the director who are over 18 years old (those under 18 are already included under section 346 of the 1985 Act), persons with whom the director lives as partner in an enduring family relationship, and children or step-children of the director's unmarried partner if they live with the director and are under 18 years of age (ss.252-253).
DERIVATIVE CLAIMS
Expected 1 October 2007
A new provision for derivative claims will allow a company member to bring a claim, on behalf of the company, against one or more directors for failure to comply with their statutory duties as directors. Before such a claim can proceed, the member will have to obtain consent from the court (ss.260-264).
COMPANY SECRETARY
Expected 6 April 2008
Private companies (which the vast majority of voluntary sector companies are) will no longer have to appoint a company secretary. But the duties of the company secretary will still have to be carried out, either by a director or directors or by a person or persons authorised generally or specifically to do so by the directors (s.270).
RESOLUTIONS AND COMPANY MEETINGS
Expected 1 October 2007
Private companies will no longer have to hold an annual general meeting or other general meetings, unless company members want them or where there is a resolution to remove a director or auditor before the end of their term (ss.281-287). However, for many voluntary sector companies it will still generally be good practice to hold AGMs. AGMs and other general meetings will require only 14 days' notice, instead of 21 days as currently required for AGMs and general meetings where a special resolution is being proposed.
Instead of being made at general meetings, decisions by company members will be able to be made by written resolution. These will no longer require 100% agreement by everyone entitled to vote. The requirements for written resolutions will be the same as for resolutions passed at a general meeting, i.e. more than 50% of the vote for an ordinary resolution and at least 75% for a special resolution. Where the company allows electronic communications, agreement can be given electronically. Unless the articles specify otherwise, there will be a cut-off period 28 days after the resolution is circulated; if the resolution does not have enough votes by the cut-off date, it will not be passed (ss.288-300).
New rules for proxies will give every company member a statutory right to appoint a proxy for general meetings, even in the articles explicitly say that proxies are not allowed. This could have a significant impact on voluntary sector companies, especially those with a large membership (where there could be a lot of additional admin) and those which value face-to-face decision-making at meetings (which could be distorted by the use of proxies). Proxies will be allowed to vote in meetings on a show of hands as well as on a poll (written vote) (ss.324-331).
The Act includes detailed provisions for general meetings (ss.301-335). One such provision is that where a company gives an electronic address in a notice calling a meeting, any document or information relating to proceedings at the meeting—such as proxies—may be sent by electronic means to that address unless the notice specifies otherwise (s.333).
Records of written resolutions and general meetings will have to be kept for at least 10 years, rather than throughout the life of the company and beyond as at present (ss.355-359).
ACCOUNTS AND REPORTS
Expected 6 April 2008, except ss.417 & 463
There will be a new duty on company directors not to approve the company's annual accounts unless they are satisfied the accounts give a true and fair view of the company's (or the group's, in the case of group accounts) assets, liabilities, financial position and profit and loss (s.393).
The directors' report must, except for small companies, include a business review setting out how the directors have complied with their duty to promote the success of the company (s.417 - expected 1 October 2007).
Private companies will no longer have to lay their annual accounts and reports at an AGM and send them to members 21 days before the AGM. Instead, the accounts and report or summary financial statement must be sent to all members for whom the company has a current address, and to certain other people, no later than the date the company has to file the accounts at Companies House or, if earlier, the date when the accounts are actually delivered to Companies House (ss.423-429). For many voluntary sector companies it will still be good practice to send out the accounts before an AGM or other general meeting, and to present the accounts at the meeting.
The accounts will have to be filed at Companies House within nine months (reduced from 10 months) after the end of the relevant accounting reference period. If the relevant accounting reference period is the company's first and is a period of more than twelve months, the filing deadline is nine months from the first anniversary of the incorporation of the company, or three months after the end of the accounting reference period, whichever is later (s.442).
In effect from 20 January 2007: A director is liable to the company for loss it suffers as a result of an untrue or misleading statement in the directors' report (but only if the director knew or was reckless as to whether the statement was untrue or misleading), or loss arising from the omission from the report of anything required to be included (but only if the director dishonestly concealed a material fact). Under this provision, a director cannot be held liable to any other person (s.463).
Commentators call this provision a safe harbour because directors will not be liable to the company if they include in their report information about, for example, future plans which do not come to fruition and thus cause a loss to the company, nor will they be liable for losses suffered by third parties, such as investors in a commercial company. The safe harbour provisions do not apply to statements that are in a document other than the directors' statutory report, nor do they exempt the directors from criminal liability or civil penalties.
AUDIT
For provisions relating to the audit of charitable companies see audit of charitable companies below).
AUDITORS' TERM OF OFFICE
Expected 1 October 2007
Where a private company has an auditor, their term of office will generally run from 28 days after circulation of the accounts (see above) until the end of the corresponding period the following year. This will apply even if the auditor is appointed at a general meeting where the company's accounts are laid. Unless the company decides otherwise, an auditor will be deemed to be re-appointed at the end of their term of office (ss.485-488).
AUDITORS
Expected 6 April 2008
Where the audit is carried out by a firm rather than an individual, the firm's senior statutory auditor (a new position) must sign the audit and his or her name must be on all copies of the audit report circulated by the company (ss.503-506).
New provisions will allow for liability limitation agreements under which a company and its auditor can agree to limit the auditor's liability to the company. Such an agreement cannot be for more than 12 months, and will be valid only if it is fair and reasonable (ss.532-538).
COMPANY RECORDS
A company will be able to keep its records electronically provided the records can be printed out on paper. Procedures must be put in place to protect records on paper (unless they are in bound books) and electronic records from falsification. If the appropriate regulations are made, it will be possible for records that have to be accessible to the public (such as the register of directors) to be kept somewhere other than the company's registered office (ss.1134-1138). These provisions will come into effect along with the provisions for the specific records.
Charities Act 2006: Not yet in effect
CHARITABLE INCORPORATED ORGANISATION
Updated 22/3/08. This information updates s.2.2 in The Voluntary Sector Legal Handbook 2nd edition.
The Charities Act includes in schedule 7 details of the new legal structure of charitable incorporated organisation (Welsh equivalent=SEC). This was expected to become available in summer 2008 but the draft regulations and model constitutions are not expected to be published for consultation until May 2008, and the structure is not expected to become available until late 2008 or early 2009.
The whole point of the CIO was to create a structure with charitable status that has the advantages of legal personality and limited liability, without the burdens of company law and the confusions of dual registration with — and dual accountability to — the Charity Commission and Companies House. However, the reform of company law (see Companies Act 2006) may mean that the charitable company structure ends up being simpler to operate than the CIO structure. The standard advice remains that an unincorporated charity that needs the advantages of incorporation should look at becoming a charitable company now, rather than waiting for the CIO to become available.
Schedule 7 of the 2006 Act inserts new ss.69A-69Q and a new schedule 5B into the Charities Act 1993. The provisions in schedule 7 will be expanded in regulations. The main provisions in schedule 7 are:
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New s.69A
CIOs must have a constitution, a principal office in England or Wales, and one or more members. Members may be either not liable to contribute to the assets of the CIO if it is wound up, or liable to contribute up to a maximum amount each.
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s.69B
The constitution must include name, purposes, whether the principal office is in England or Wales, liability of members, eligibility and procedure for membership, eligibility and procedure for trustees, use of the CIO's property on dissolution, and such other matters as will be specified in regulations. The constitution must be in the form set out in the regulations, or as near to that form as possible.
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s.69C
The CIO's name must appear on specified documents, and if the name does not include "charitable incorporated organisation", "CIO" or the Welsh equivalent, the fact that it is a CIO must also appear.
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s.69D
It is an offence, punishable by a fine, to issue or sign, or authorise to be issued or signed, a document that does not have the CIO's name and status when it should do. A person who signs or authorises a document to be signed without the necessary information can be personally liable for the cheque, order etc if it is not honoured by the CIO.
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s.69E
Sets out the basic procedures for registration with the Charity Commission and when the Commission must or may refuse registration. The details will be set out in regulations.
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s.69F
Any property vested in the applicants for the charitable purposes of the CIO becomes, on registration, vested in the CIO.
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s.69G
Charitable companies and charitable industrial and provident societies can apply to be converted to a CIO, but not if they are exempt charities or if they have a share capital and some of the shares are not fully paid up. (At the moment all IPSs are exempt charities, but when schedule 5 of the Charities Act 2006 comes into effect, many IPSs will cease to be exempt — see registration of exempt charities.) The existing company or IPS must pass a resolution in a specified form and provide specified documents to the Charity Commission. Where the converting organisation is a company limited by guarantee, the amount of the guarantee (the amount the company members must contribute if the company is wound up) must be included in the CIO constitution. But if the guarantee amount is £10 or less, the guarantee is extinguished when the company converts to a CIO, and there is no need to include a guarantee in the CIO constitution.
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s.69H
Sets out how the Commission will consult on applications for conversion, and when it must or may refuse an application for conversion.
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s.69I
Sets out procedures for the registrar of companies or the Financial Services Authority to cancel registration of the company or IPS when it has been registered as a CIO.
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s.69J
Provides for regulations to be made about conversion of a community interest company (CIC) into a CIO.
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ss.69K-69L
Set out the procedure for two or more CIOs to amalgamate into one new CIO (but there is no provision for a charitable company or IPS to merge with a CIO, or for two companies or IPSs to become a CIO by merger).
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s.69M
Sets out the procedure for a CIO to transfer all of its property, rights and liabilities to another CIO.
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s.69N
Provides for regulations to be made about winding up CIOs, their insolvency, their dissolution, and revival and restoration to the register following dissolution.
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New schedule 5B to the 1993 Act
Sets out provisions some of which will, in due course, form the basis for the model CIO constitution. These include powers, duties of members and trustees, personal benefit and payments, internal procedures, and constitutional amendment.
It was originally proposed that the CIO would be available in a two-tier format (members and trustees) suitable for a membership organisation, and a single-tier "foundation" format where a membership is not required. The Act allows only for a two-tier structure, but new s.69B(6) makes clear that the members and trustees can be the same people. This is the same as in charitable companies.
One of the interesting differences between a CIO and a charitable company is that the directors of a charitable company, as charity trustees, must act in the interests of the company/charity when they are acting as directors/trustees, but when they are acting as company members (i.e. in decisions at general meetings) there is no obligation to act in the interests of the company/charity. Under para.9(a) in the new schedule 5B, the duty to act in the interests of the charity will apply to CIO members as well as trustees.
COMMUNITY INTEREST COMPANIES
Updated 30/4/06. This information updates s.2.3 in The Voluntary Sector Legal Handbook 2nd edition.
At long last, the new structure of community interest company (CIC) for social enterprises became available from 1 July 2005. A social enterprise is defined as a business with primarily social objectives, whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profits for shareholders and owners. Some of the main points about CICs are:
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CICs register with Companies House as a company limited by guarantee or a company limited by shares, then apply for CIC status to the new Regulator of Community Interest Companies (similar to the current process, where an organisation registers as a company limited by guarantee and then applies to the Charity Commission for charitable status). The CIC Regulator must be satisfied that the organisation meets a "community interest" test and will genuinely operate for the benefit of the public.
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CICs are subject to the general framework of company law but have additional rules, such as producing an annual community interest company report with information relevant to CIC status.
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A CIC must have "Community Interest Company" or C.I.C. as part of its name. "Limited" cannot be used in its name.
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CICs do not have charitable status, even if their objects are wholly charitable, so they are not entitled to the tax reliefs and rate reliefs that charities get. Some people are campaigning for CICs to be entitled to the same reliefs.
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A charitable company based in England or Wales (but not in Scotland) can convert to a CIC, but only if the Charity Commission agrees that it is in the charity's interest (this may not be very likely, given the loss of tax and rate reliefs). The Charity Commission and the CIC Regulator's memorandum of agreement, intended to ensure a "seamless approach" for charitable companies seeking to become CICs and vice versa, is at www.charitycommission.gov.uk/tcc/memocic.asp.
CICs have an asset lock which prevents assets from being used for purposes that are not for the benefit of the community. This means, for example:
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Profits and other assets cannot be distributed to members of the CIC, except in very limited circumstances. This provides protection against demutualisation. (Under general company law there is nothing to stop the members of non-charitable companies, even those set up for community benefit, from passing a resolution to distribute the company's assets to themselves.)
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A CIC can pay its directors, provided the payment is reasonable.
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A CIC can borrow money, but there is a limit, set by the Regulator, on how much interest it can pay.
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A CIC set up as a company limited by shares can issue shares. But there is a cap, set by the Regulator, on the level of dividends and on how much of the CIC's assets can be paid as dividends.
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A CIC's assets can be given or sold at below market value only to another asset-locked body (such as a charity or another CIC). In other situations the assets can be sold only at market value.
The CIC website at www.cicregulator.gov.uk contains guidance notes, model governing documents for a company limited by guarantee and company limited by shares, model community interest statements, and other information. The memorandum and articles are in different versions for a CIC with a large membership (a body of company members in addition to the company directors) and for a CIC with a small membership (usually where the company members are the same people as the directors). Information is also available by ringing 029 2034 6228.
The CIC structure is useful for charities' trading subsidiaries; for organisations that are going to earn all or most of their income through trading (charging for goods or services) and do not have charitable objects; or organisations that are going to earn all or most of their income through trading and have charitable objects, but do not want the limitations of charitable status and are willing to forgo the tax and other advantages of charitable status. Although it is possible for charitable companies to convert to CICs, specialist advice should be taken before even thinking about this, because of the loss of relief from corporation tax, capital gains tax, stamp duty and inheritance tax; loss of mandatory 80% rate relief; loss of ability to benefit from tax-effective giving; and loss of other advantages of charitable status.
The Companies (Audit, Investigations and Community Enterprise) Act contains the basic CIC provisions in Part 2 (ss.26-63). It is at www.opsi.gov.uk/acts/acts2004/20040027.htm, with helpful explanatory notes at www.opsi.gov.uk/acts/en2004/2004en27.htm. The Community Interest Company Regulations 2005 are at www.opsi.gov.uk/si/si2005/20051788.htm.
CHANGES IN INDUSTRIAL AND PROVIDENT SOCIETY LAW
Updated 30/4/06. This information updates ss.2.4, 4.7.2, 5.4.18 and 16.1.2 in The Voluntary Sector Legal Handbook 2nd edition.
The Co-operatives and Community Benefit Societies Act 2003 changed industrial and provident society law to bring it more into line with company law. From 1 April 2004 the very strict I&PS rules voiding (invalidating) all acts outside the I&PS's or committee's powers were eased. From the same date, where the name of a charitable I&PS does not include the word "charity", "charitable" or the Welsh equivalents, the fact that it is charitable must be stated on business letters, notices, advertisements, cheques, orders, invoices, receipts etc. From 20 October 2003 I&PSs no longer need to have a seal. The Act is at www.opsi.gov.uk/acts/acts2003/20030015.htm, and explanatory notes are at www.opsi.gov.uk/acts/en2003/2003en15.htm.
From 6 April 2006 non-charitable community benefit industrial and provident societies can pass a special resolution to amend their rules, "locking in" assets so they cannot be distributed to members, but must always be used for the benefit of the community. The new provisions do not apply to charitable community benefit I&PSs, which are already subject to an asset lock under charity law, and registered social landlords. The Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 are at www.opsi.gov.uk/si/si2006/20060264.htm.
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