01 June, 2020
The coronavirus pandemic is presenting the housing sector with complex issues as urgent decisions need to be made by decision-makers. In these unprecedented times, RPs are exploring changes to the way in which decisions are taken to reduce the risk of infection while ensuring that executives, directors and trustees are able to perform their roles and support their colleagues.
For the housing community, these governance issues are proving to be testing. Boards of directors or trustees have overall responsibility for the RP's management, including its response to the pandemic and ensuring effective plans are in place to cover any further disruptions. The board's role is one of strategy and governance oversight including on health and safety, data protection and other key issues. How a board meets to fulfils its decision-making obligations is dependent not just on practicalities but also on the powers granted to it by way of the RP's governing document.
From a practical perspective, simple precautions are required. According to a 2010 Charity Commission study the average age of a charity trustee in the UK is 57 and the average age of a non-executive director of a FTSE 100 is 62 years. The organisation therefore, even though lockdown restrictions are being slowly lifted, there remains a need to consider how a board might meet without it being physically present in the same room.
Article 9 of the Model Articles for both companies limited by shares and those limited by guarantee state that in giving notice of a meeting, the notice must indicate "if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting." Therefore, assuming the entity has adopted the model articles without amendment to this article, there is no requirement for directors to be present in the same room for a meeting to take place. Voting in such situations would be relatively simple as a yes or not vote which could easily be cast via the telephone.
Problems do arise however for entities incorporated prior to 2006, who have not amended their articles, and mutual societies registered with the FAC whose are governed by documents are potentially silent on these issues. For these organisations there is a need for the governing document to be reviewed before guidance can be provided. For older organisations which may be based on older constitutional wording it is necessary to assess whether that remains limiting or has been overtaken by later legislation.
RPs may also need to consider whether in fact it is necessary to convene a board meeting at all. As an alternative, where the meeting is merely to resolve upon something (without needing to discuss the matter) there is always the option of doing so by way of written resolution instead. We would recommend that RPs seek legal advice to determine whether matters can be resolved by way of a written resolution.
An RP also needs to consider provision for meetings of its membership. A short-term solution to the current issues faced would be to stage a virtual meeting. As a result of section 360A of the Companies Act 2006, provision for UK companies to hold virtual meetings has been in existence since August 2009.
Existing articles, however, are likely to refer to the "place" of the meeting and the requirement for members being able to see and hear each other. Therefore, in anticipation of a virtual AGM or EGM, the organisation would be required to amend its articles to ensure that a virtual meeting can take place. Any amendment to the articles would also need to provide for adjournment should the technology fail. The mechanism for amending articles to include such provision would though require consideration.
Whether a provision for virtual meetings has been included into the governing document of an unincorporated entity would require a review of the governing document and potentially interpretation of relevant articles.
The Corporate Insolvency and Governance Bill had it first reading in parliament on 20 May 2020. The bill contains proposed temporary changes on members' meetings which are likely to affect the housing sector.
While the details may change as the bill progresses through parliament, as introduced, it would enable any housing provider which is either a charitable company or mutual society (as well as its trading subsidiaries) to take advantage of various relaxations of the rules which would normally apply to their members' meetings and AGMs.
Assuming the bill is passed in its current form, entities required to hold a general meeting is between 26 March and 30 September 2020 inclusive, would not need hold the meeting at a particular place, voting could be conducted via electronic or other means and, fundamentally, the meeting could be held without a quorum of participants having to be together in one physical place.
However, in its current form the bill would restrict a members' rights in relation to such meetings so that, while members will continue to have a right to vote by some means, they would not have the right to attend in person, participate other than by voting or to vote by particular means. For providers who value the input of their members this provision might prove to be a step too far.
Another relaxation would be the ability to postpone an AGM until 30 September 2020 (this might be further extended). The bill in its current form would ensure that the trustees of a charitable entity would not be held to be in breach of the constitution if the AGM were to be subsequently held outside of the time frame prescribed by the entities constitution. For those entities regulated by the Charity Commission, their guidance suggests that to demonstrate good governance a need for the board to record any decision to delay is required.
However, how this would affect key decision making which is required to take place at an AGM is open to interpretation. Whether trustees should remain in post until the AGM requires consideration and, again, those regulated by the Charity Commission are advised to seek guidance on this aspect.
For more information contact Jonny Hutchings in our Housing & Regeneration department via email or phone on 01257 240821. Alternatively send any question through to Forbes Solicitors via our online Contact Form.