De-regulatory Measures for Constitutional Changes

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07 April, 2017

The Housing and Planning Act 2016 (HPA) introduced a number of de-regulatory changes relating to the constitutional consents regime, disposal consent regime, the Disposals Proceeds Fund and introduction of various notification requirements all of which are due to come into force on 6 April 2017. The Homes and Communities Agency (HCA) has outlined its approach regarding constitutional changes and what happens during the transitional period.

What is changing?

The constitutional consents regime required Registered Providers of Social Housing (RPs) to obtain the regulator's consent prior to embarking on changes affecting its structure. This was facilitated through the 'In Principle' consent process where guidance was given by the HCA and 'Formal Consent' resulting in the HCA's authorisation to constitutional changes. The HCA could also impose conditions such as obtaining consent of lenders. In the context of a non-charitable RP seeking to become charitable under the existing regime seeking consent may have had to be repeated in cases where the Charity Commission required changes to the objects after consent from the HCA had been granted.

Within the context of the constitutional consents regime, the HPA removes:

  • the requirement for RPs to obtain consent from the HCA in relation to the following:
    • Registered society restructures (including amalgamations, transfers of engagements, and conversion of registered societies into companies);
    • Conversions of registered companies into registered societies;
    • Changes to objects and other changes to governing documents for registered companies and registered societies; and
    • Company arrangements and reconstructions
  • The requirement for the Charity Commission to consult with the HCA before granting consent to a registered charity's change of objects.

What are the new requirements?

For constitutional changes, the new requirement is notification of changes rather than seeking consent. The notification requirement operates differently for different structures.

Non-profit RP companies are required to notify the HCA in relation to the following:

  • Arrangements and reconstructions;
  • Conversions into a registered society; and
  • Change of articles.

For a company the notification requirement to the HCA would also arise in relation to any of the following:

  • Any voluntary arrangement under Part 1 of Insolvency Act 1986;
  • Any order under section 899 of Companies Act 2006; and
  • Any order under section 900 of the Companies Act 2006.

Non-profit registered societies are required to notify the HCA in relation to the following:

  • Restructuring;
  • Dissolution; and
  • Change of Rules

The notification requirement with regard to dissolution of a registered society to the HCA must be completed prior to the Financial Conduct Authority registering this event.

RPs that are registered charities are required to notify changes of objects.

The HCA will also make decisions regarding eligibility for registration of any 'new body' as defined in the HPA resulting from restructures of an RP which may include:

  • conversion of a company into a registered society or vice versa,
  • a transfer of engagements between registered societies;
  • a registered society conversion to a company;
  • an amalgamation of a registered society with a company; or
  • a transfer of engagements from a registered society to a company.

The HCA has indicated that new bodies arising from these restructures would be eligible for registration, although there will also be registration criteria for those bodies seeking designation as non-profit on the register.

The requirement for a RP to notify the HCA regarding change of company name or registered address continues under the HPA.

Further changes that can affect an RP

The HCA has a new statutory obligation regarding designation of RP on its register. This requires the HCA to re-designate an RP if it thinks that it has become profit making.

Whereas the HCA's power to appoint board members and managers has been amended enabling it to make board member and manager appointments where there has been a breach of any legal requirements.

Transitional arrangements

Any changes which an RP is seeking to register prior to 6 April 2017 will require the consent of the HCA. Such consent can only be given if plans are sufficiently advanced without too many uncertainties.

If consent has been sought prior to the new notification regime coming into force and the HCA has indicated that it is minded to grant it but such consent is not granted in time, if the change goes ahead after 6 April 2017 only the notification requirement will apply.

However, where consent has been sought and the HCA has indicated that it minded to grant it subject to conditions but this does not take place before 6 April 2017, the HCA expects boards to satisfy themselves that such conditions are met even though consent will not be granted as it will no longer be a requirement. Further, the HCA has said that it may look at how the RP has handled the restructure decisions and where it has concerns and it will regard this as evidence as to the RP's compliance with regulatory standards.

With regard to changes on the register, where the changes does not take place prior to 6 April 2017, the HCA has indicated that a registration decision may need to be taken and RP need to ensure they are able to meet the constitutional requirements in the revised registration criteria.

RPs should carefully consider where they are with any on-going changes or any decisions likely to be taken which affect their constitutional documents to ensure compliance with the new notification regime. For those RPs which are in the process of restructuring meeting any existing conditions is particularly important as failing to do so is likely to be looked into by the HCA in relation to compliance with regulatory standards. If you have any questions about an on-going process or forthcoming change please contact Daniel Milnes.

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