MORTGAGES AND CHARITIES ACT 2006

Last month’s legal update highlighted some of the problems which arise under section 38 of the Charities Act 1993. Section 27 of the Charities Act 2007, which attempts to deal with these problems, was brought into force with effect from 27 February. 

As a result:

• Mortgages relating to grants are subject to the same provisions as those relating to loans. This has the curious effect that the financial advice must address the ability of the charity to pay back the grant where neither the grant-giving body nor the charity anticipate that this will ever happen.
• A mortgage securing an arrangement that is neither a loan or a grant will not require Charity Commission consent if the charity trustees take advice on whether it is reasonable for the charity trustees to undertake the relevant obligations, having regard to the charity’s purposes.
• Existing mortgages can secure new loan agreements provided financial advice is taken in accordance with the section prior to the Charity entering into the loan agreement.

The new rules should save charities considerable time and expense.

Applications to the Charity Commission will rarely be necessary with respect to the mortgage itself. An application will still be needed if (for example) there is some restriction on the charity’s power to mortgage.

Charities will also need to ensure that they follow the required procedures before charging property to secure loans or grants.

For further information, please contact:
JAMES MCCALLUM on 020 8394 6481 or mccallumj@russell-cooke.co.uk

 

CHARITIES ACT IMPLEMENTATION

The first order bringing parts of the Charities Act into force has been published.

The most relevant changes are:

• The ability for trustees to purchase indemnity insurance with the charity’s money where it is in the charity’s best interests, subject to safeguards.
• A new power for the Commission to determine the membership of a charity.
• An obligation for charities to provide copies of the most recent annual report on request (subject to a reasonable fee).

The provisions also include:

• A number of changes to the structure and power of the Charity Commission.
• An expansion of the definition of ‘connected person’ to include business partners.
• Interim changes to the registration threshold for small charities. A further Order will be issued increasing the threshold at which charities must register from £1,000 to £5,000 gross annual income while enabling voluntary registration below that threshold.

For further information, please contact:
SHIVAJI SHIVA on 020 8394 6486 or shivas@russell-cooke.co.uk

 

SELF-EMPLOYED AND CONTRACT STAFF

A recent case emphasised the potential costs of treating workers as self-employed it if turns out they are actually employed.

In the past, HM Revenue & Customs (HMRC) has given credit for tax actually paid by the contractor on a self-employed basis. In the case of Demibourne v HMRC an individual who had paid tax on a self-employed basis for 10 years was subsequently held to be an employee. The HMRC recovered PAYE from the employer and did not give any credit for tax previously paid by the employee.

Contracts with consultants and other self-employed staff should require them to be responsible for their own tax and to indemnify the employer for any liability that arises. However, enforcing such clauses is often difficult. It is safest to assess the status of such relationships at the outset and keep them under regular review.

For further information, please contact:
JANE KLAUBER on 020 8394 6483 or klauberj@russell-cooke.co.uk

 

EMPLOYERS’ POTENTIAL LIABILITY FOR EMPLOYEES USE OF MOBILE PHONES WHILST DRIVING

The use of hand held mobile phones whilst driving has been outlawed since 1 December 2003. Offenders are subject to an initial £30 fine which may be increased to a maximum of £1,000 if the matter goes to court. From 27 February, drivers caught with a hand held phone will also automatically get three penalty points on their licence.

The law not only applies to drivers but to anyone who “causes or permits any other person” to drive while using a hand held mobile phone. Employers may be made liable if their employees are caught holding a mobile phone whilst driving on company business. The Department of Trade and Industry have said that employers would not be liable just because they supplied a telephone or rang an employee who was driving. However, liability may arise if employers fail to:

• forbid employees to use hand-held phones whilst driving; and
• take reasonably effective steps to prevent employees using such phones on company business.

Employers should consider the following to avoid liability and comply with their health and safety obligations to provide a safe system of work:

• implementing a policy on mobile phone use which is made known to all employees
• carrying out risk assessments
• providing employees with hands-free kit

Guidance from The Royal Society for the Prevention of Accidents, including a sample policy can be found at:
http://www.rospa.com/roadsafety/info/workmobiles.pdf
You should note that the draft policy includes a ban on all mobile phone use while driving, which goes beyond the requirements of the law.

For further information, please contact:
JAMES SINCLAIR TAYLOR on 020 8394 6480 or taylorj@russell-cooke.co.uk

 

COMPANIES ACT 2006 AND PROXY VOTING

The new Companies Act 2006 will change the law relating to proxies.

When the relevant provisions come into force, all members of companies limited by guarantee will have the automatic right to appoint a proxy to attend, speak at, and vote at, general meetings of the company in their place. This will apply even if the company’s articles prohibit the appointment of a proxy.

A member with a particular agenda may take advantage of this change in the law by inviting less active members to appoint him as their proxy. This could significantly effect voting results.

Charitable companies should think about whether this is likely to be a problem within their organisation and, if so, take steps to deal with it. One option is to invite members to appoint the Chair as their proxy, to vote as she sees fit.

Alternatively, companies with large memberships may wish to re-structure their membership to reduce the risk of a minority of members having disproportionate influence. Charities may benefit from having a small number of members and a larger category of “supporters” who receive information about the charity, attend annual conferences, possibly pay a subscription, but do not have the right to vote at general meetings.

The approach that a charity should take to a restructuring of this kind will depend on its relationship with its members. It will require the approval of the current members and is likely to need a consultation process.

Other points to consider:

When the law changes, all notices of general meetings will need to enclose a statement informing the members of their right to appoint a proxy.

A member holding multiple proxies will be permitted to vote once on a show of hands but must demand a poll in order to cast multiple votes. Companies should be prepared to deal with poll votes at meetings and have any necessary voting cards available.

At the time of writing it is not known when this change in the law is going to come about, but it is expected before October 2008.

For further information, please contact:
TAMSIN PRIDDLE on 020 8394 6438 on priddlet@russell-cooke.co.uk

 

 

FORTHCOMING EVENTS:

CONFERENCE: Governance for the Arts – Limited availability BOOK NOW

Friday, 23 March 2007, Directory of Social Change, London NW1 2DP

We are holding a full day conference on legal and financial issues for arts organisations ‘Governance for the Arts - Setting the Tone for the 21st Century’. For the brochure and booking details, see:
http://www.russell-cooke.co.uk/downloads/Governance_for_the_arts.pdf
or call DSC on 08450 77 77 07

 

SEMINAR: Employment Law Update

Tuesday, 13 March, 2007, 8 Bedford Row, London WC1, 5.30 - 7.30 pm

A review of legal developments in the last six month and prospective changes including the new TUPE rules, age discrimination developments relating to atypical workers, grievance and disciplinary procedures and the payment of holiday under the Working Time Regulations.

To book contact Liz Bovell on 020 8394 6491 or bovelle@russell-cooke.co.uk

 

SEMINAR: Companies Act 2006 – The Implications for Charitable Companies

Monday 26 March 2006, DSC, 24 Stephenson Way, London, NW1 2DP, 4.45-6.30pm

 A review of the key implications of the new Companies Act for charitable companies including changes to the duties of company directors; company secretaries; electronic and website communications; passing resolutions and the conduct of general meetings.

For further details and booking form please see:
http://www.dsc.org.uk/charityevents/pdfs/compsmall.pdf
or call DSC on 08450 77 77 07

 

DIARY DATES:

Annual Trustee Conference

Thursday, 21 June, the Royal Society of Arts, London

Employment Conference

Thursday, 28 June, DSC, London NW1 2DP

Full details will be available shortly. To register your interest, contact:
Rhonda Chang on 020 8394 6493 or changr@russell-cooke.co.uk

 

RECRUITMENT:

The Charity Team is seeking to recruit an Assistant Solicitor to join our busy team. For details, see: http://www.russell-cooke.co.uk/other_recruitment.htm

 

OTHER EVENTS:

For a full list of forthcoming events see the Charity Team’s web-site at:
http://www.russell-cooke.co.uk/serv_charities_events.htm

The Charity Team
Russell-Cooke Solicitors, 2 Putney Hill,
Putney, LONDON
SW15 6AB

Tel: 020 8789 9111
www.russell-cooke.co.uk

 

This material does not give a full statement of the law. It is intended for guidance only, and is not a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by Russell-Cooke.

© Copyright: Russell-Cooke, January 2007

To subscribe to this monthly legal update please visit http://www.russell-cooke.co.uk/serv_charities_intro.htm and fill in the online request form, or send an email including your name and email to, charitylegalupdates@russell-cooke.co.uk

An archive of past updates can be found at http://www.russell-cooke.co.uk/serv_charities_updates.htm

If you would like to reproduce some or all of our updates in your own publication, contact Shivaji Shiva on 020 8394 6486 or e-mail on shivas@russell-cooke.co.uk