The Regulator for Charities in England and Wales

CC36 - Changing your Charity’s Governing Document

(Version March 2008)

Contents

Guidance for the trustees, secretaries and advisers of charities, on making changes to a charity’s governing document.

Acknowledgements

The Charity Commission is grateful to the consultancy Campbell Tickell for its help with drafting this publication.

A. Introduction

A1. What is this guidance about?

This guidance is aimed at trustees who are considering amending their charity’s governing document. It summarises how such changes can be made.

A2. ‘Must’ and ‘should’: what we mean

In this guidance, where we use 'must', we mean it is a specific legal or regulatory requirement affecting trustees of a charity. Trustees must comply with these requirements. To help you easily identify those sections which contain a legal or regulatory requirement we have used the L symbol graphic symbol next to the short answer in that section.

We use should for items we regard as minimum good practice, but for which there is no specific legal requirement. Trustees should follow the good practice guidance unless there’s a good reason not to.

We also offer less formal advice and recommendations which trustees may find helpful in the management of their charity.

A3. Previous guidance

This guidance replaces Amending charities’ governing documents: Orders and Schemes (CC36) to take into account the provisions of the Charities Act 2006 and to present the guidance in a new and accessible format.

A4. Scope of this guidance

This guidance provides a general introduction and overview to trustees who are considering an amendment to their charity’s governing document.

Some of the subjects covered are complex, and covered by different laws and regulations relating to different kinds of charity. You should not rely on this guidance to be an accurate or full description of legal matters affecting your charity.

Nor is the guidance intended to replace advice from a charity’s own professional advisers. The trustees should consider whether they need to consult their professional advisers whenever they propose to make an amendment to their governing document. Advice may also be obtained from the Commission.

This guidance is written for trustees of all types of charity, whether they are companies, trusts or associations. There are some differences of approach between these types of charity and we have indicated the key ones.

Note that this guidance is not about changing the type of legal form that a charity takes. For example, if trustees of an unincorporated charity want to change their charity into a company, that is a separate matter not covered here. The relevant information for such changes is in our Registration Pack.

A5. Using this guidance

The key to success when making changes to a governing document is an understanding of the powers available to your charity and how and when they can be used. Reading section B (which gives an ‘at a glance’ summary of the factors) and section C2 (which goes into the factors in more detail) will help you to gather the information you need to help you identify what powers apply and how to use them. The rest of section C provides more detail on the powers available in the most common situations. There are some situations where the only way to make the change is by applying to us for a Scheme and section D takes you through this process.

The structure of this guidance follows the standard form adopted by the Commission. Under each heading, we ask a selection of the relevant questions that trustees may raise. Generally we give a concise summary answer (‘The short answer’), and then go on to provide further explanation and background (‘In more detail’).

The guidance also points readers to sources of further information and forms, most of which are available via our website.

A6. Terms and definitions

The following terms are used throughout this document, and should be interpreted as having the specific meanings given.

  • (The) 1993 Act The Charities Act 1993 as amended by the Charities Act 2006.
  • Charitable company A charity which is registered as a company with Companies House. It will usually have a memorandum and articles of association as its governing document and it has its own legal identity.
  • Governing document Any document which sets out the charity's purposes and, usually, how it is to be administered. It may be a Royal Charter, trust deed, constitution, memorandum and articles of association, will, conveyance or Scheme.
  • Income This is the charity’s gross annual income from all sources.
  • Operational Guidance Guidance written primarily for our staff. We are committed to conducting our work as openly as possible, and as part of this, we have placed much of our written guidance on charity law and practice on our website.
  • Purposes To be a charity, an organisation must have purposes which are exclusively charitable in law. The purposes of a charity will usually be defined by what its governing document says about what it is set up to do and how its funds are to be used if it is wound up.
  • Scheme In this document the term ‘Scheme’ refers to a Scheme made by the Commission, normally under section 16 of the 1993 Act. It is a legal document that changes, replaces or extends the trusts of a charity. It may be a fully regulating Scheme, covering all aspects of a charity’s administration and purposes and replacing the previous governing document, or it may be a Scheme that adds to or alters some part of the governing document.
  • Trusts These are the provisions which at any given time regulate the purposes and administration of the charity (whether those provisions take effect by way of trust or not).
  • Trustees Charity trustees. Charity trustees are the people who are responsible for the general control and management of the administration of the charity. In the charity's governing document they may be called trustees, managing trustees, committee members, governors, or directors, or they may be referred to by some other title.
  • Unincorporated charity Usually a trust or association. Unlike a charitable company, these do not have their own separate legal identity.

We use the terms change and amendment to cover any type of alteration to a charity’s governing document, including deletions, additions and rewording.

B. Governing document amendments at a glance

When a charity is formed, its purposes and the rules for how it should operate are set down in a governing document.

Founders aim to ensure that a governing document serves the charity well for the foreseeable future, and allows for changing circumstances. However it is likely that, with the passage of time, new needs and unforeseen eventualities will develop and that the governing document may need updating to reflect these changes.

In these circumstances it is the duty of trustees to seek to change the governing document in order to ensure the charity’s continuing effectiveness. How they do this depends on the nature of the change, the structure of their charity (company or unincorporated charity), the size and, where the powers provided by statute cannot be used, the terms of their governing document. For example:

  • All charitable companies can amend their memorandum and articles of association. There are certain ‘regulated alterations’ which require our approval (see C6).
  • All unincorporated charities with incomes of £10,000 or less can change their governing document, even if there is no power to do so in the governing document (see C4). Generally speaking the Commission’s involvement is only needed where the changes involve the charity’s purposes or powers which will result in a benefit for the trustees or people connected with them.
  • Trustees of unincorporated charities with incomes of more than £10,000 can change the powers they have to administer the charity and related procedures. If the governing document provides specific powers, the trustees can also change the charity’s purposes (see C4 and C5).

Where none of these options is applicable or available, trustees will need to apply to us for a Scheme (see section D). Schemes can also be made by the High Court, although this is likely to be an expensive option.

Whatever the procedure for making the change, trustees of registered charities must keep us informed of all changes to a governing document so that the Register entry for their charity is up to date. It is also essential that changes are made carefully and after due deliberation: invalid changes, or changes that do not have the desired effect, can create confusion and could potentially harm a charity.

C. Choosing the right option for changing your charity’s governing document

This section sets out the main factors which apply to changing a governing document, including the circumstances in which trustees can change it themselves, and when they will need to ask for our help or approval.

C1. Why is it important to review and update a charity's governing document?

The short answer

Keeping the governing document under review helps to ensure that it is up to date and properly reflects what the charity does and how it operates. Trustees are accountable for administering their charity in accordance with its governing document and this becomes difficult where its provisions are out of date.

In more detail

If the charity's purposes or administrative procedures become outdated or inadequate, the trustees should amend them. In our research report Milestones : managing key events in the life of a charity (RS6) we give a number of examples of the difficulties that can be caused if a governing document is not fit for purpose. For example:

  • it can become difficult to be sure who are the correctly appointed trustees;
  • disputes can be harder to settle if the governing document is inadequate; and
  • trustees might find that their plans go beyond what is allowed by the governing document, with the result that they risk being in breach of trust.

C2. Can a governing document be amended?

The short answer

A charity’s governing document can be amended by its trustees if there is a clear power allowing this. Certain powers are available in the Charities Act 1993 and the Companies Acts and many charities also have specific powers of amendment in their governing documents. Whatever the source of the power, there will almost certainly be conditions that must be met when using it. Where the change which the trustees wish to make is not covered by these powers, trustees can apply to us for a Scheme.

In more detail

If trustees think that a change to the charity's governing document is needed, they should consider whether they can introduce the change themselves.

Many governing documents contain a power of amendment. Trustees should check whether their governing document contains such a power, whether the amendment that they want to make is allowed by that power, and whether consent to the amendment is required from us or from another third party.

If the trustees cannot make the amendment under a power in the governing document, they may be able to use one of the powers that are available in law. Different powers are available to unincorporated charities and to charitable companies. The first step is to check which of these structures applies to your charity. For unincorporated charities, there is then a further distinction which depends on whether their income is more than £10,000.

Having established this, the following are the most common options for change:

  • Trustees of unincorporated charities with an income of not more than £10,000 a year have the power to change both their administrative provisions and their purposes (see C3 and C4) themselves, although changes to purposes must be referred to us before they can take effect. This power does not enable trustees to make changes which would have the effect of benefiting themselves or connected persons.
  • For those unincorporated charities with an income of more than £10,000 a year, trustees can also change the administrative provisions themselves (see C3), but changes to the charity’s purposes will require either a suitable power in the existing governing document (see C5) or a Scheme from us (see D1). Changes which would have the effect of benefiting the trustees or connected persons will either require our approval or a Scheme.
  • In the case of charitable companies (see C6), directors have the power to change the administrative provisions themselves, but ‘regulated alterations’ will need our prior consent.
  • Further information: look in the ‘Apply for it’ area of our website for our guidance ‘Unincorporated Charities: Amendments to Governing Documents’ (CSD 1342A) and, in particular, the flowchart which guides trustees of unincorporated charities through a series of questions and answers and associated steps to take. See also Operational Guidance OG47, ‘Alterations to Governing Documents: Charitable Companies’. For guidance relating to benefits to trustees and connected persons see Payment of Charity Trustees (CC11).

C3. Unincorporated charities : can trustees change administrative provisions?

The short answer

Yes. Trustees of all unincorporated charities have the freedom to make changes to their administrative powers and procedures to improve how their charity is run. Certain limits and conditions apply when using the power.

In more detail

Trustees of unincorporated charities have a ‘statutory power’ - the power granted to them by the 1993 Act - to change the administrative powers and procedures of their charity. Some charities will already have this power in their governing document but this does not prevent them from using the statutory power if that provides greater flexibility.

What the power allows. In broad terms, it allows trustees to make changes to the powers and procedures in their charity’s governing document relating to the administration of their charity. This includes, for example, powers to change a charity’s name, to borrow or invest money and to co-operate with other charities, as well as procedures relating to membership, the appointment of officers and the management of meetings.

Limits: Whilst the statutory power allows changes to many aspects of a governing document, trustees cannot use it to alter their charity’s purposes (or to give themselves a power to change the purposes), to spend capital held as permanent endowment or to authorise payment to themselves or related parties.The power cannot be used to change provisions giving third parties rights to nominate trustees. The power should also not be used to amend powers which the trustees can only exercise with the consent of a third party unless the charity trustees have the agreement of the third party to that amendment or the third party has ceased to exist. Where the third party is not willing or is unable to consent to such a change, the Commission is willing, if satisfied that the change is expedient in the interests of the charity, to make a Scheme to effect the change.

Important safeguards: Trustees must pass a resolution to approve a change under the statutory power. This may be at a properly constituted meeting, or by any other method allowed by the governing document for such resolutions. If the charity has a membership that is separate to the trustees, a further resolution must be approved by the members of the charity. Where trustees use an amendment power contained in their charity’s governing document, they must comply with any conditions and limitations that it imposes. In all cases trustees of registered charities must send a copy of the resolution to us and notify us of the date it was passed in order to keep the charity’s entry on the Register up to date.

Seek advice and guidance: Governing documents exist for as long as the charity does, so trustees should take care in drafting changes. It can be helpful to look at the model governing documents on our website to see if any of the clauses they contain can be used, at least as a starting point, in drafting the changes for the charity’s governing document. It is also important that trustees do not act beyond their legal powers. It can harm a charity if changes are made that are legally invalid, or do not have the required effect.

C4. Small unincorporated charities: can trustees change their purposes?

The short answer

Yes, trustees of unincorporated charities with an income of £10,000 or less can change their charity’s purposes. They do this by resolution which takes effect 60 days after we receive a copy of it, unless we object, request further information or require publicity to be given. This should be a considered step that trustees take to ensure the effectiveness of their charity. The power to do this is in the 1993 Act: if the charity’s governing document contains a power that is easier to use (because, for example, it can take effect without having to wait for 60 days) then the trustees are free to use that power instead.

In more detail

The Charities Act 1993 enables smaller charities to change their governing documents more easily. This includes a power that allows trustees of charities with an income of £10,000 or less to change their charity’s purposes themselves.

This is a power that should be exercised carefully, since a charity’s purposes communicate the true character of the charity and are intended to endure: it is only when this ceases to be the case, perhaps because society has changed, that trustees might consider the appeal or relevance of their charity’s purposes. For example, a charity set up to assist victims of a disaster that happened fifty years ago would need to re-examine its purposes when the number of people still needing help reduces. The charity could (for instance) consider extending its work to cover people affected by other disasters in the same area or country or to relieve need and suffering regardless of the cause.

Any new purposes should serve the charity’s interests well and must be as similar in character to the old ones as is practical in the circumstances. They must also be exclusively charitable in their wording.

To amend the purposes, trustees must pass a resolution by at least two-thirds of those who vote, and send a copy to us with the reasons for passing the resolution. Unless we object or request further information or publicity, the resolution will automatically take effect 60 days after we have received it.

For further guidance and a model declaration form to send to us, look in the ‘Apply for it’ area of our website or contact us.

C5. Larger unincorporated charities: can trustees change their purposes?

The short answer

Trustees of unincorporated charities with incomes of more than £10,000 can change their charity’s purposes themselves only if the governing document provides them with that power. Trustees of unincorporated charities without such a power will need to ask us for a Scheme (see section D).

In more detail

Trustees of these charities will need to check whether the charity’s governing document gives them the power to make the desired changes and, if so, the procedure they must use.

Such amendments usually require a decision of the trustees and / or a resolution of the members of the charity, but the governing document itself will set out these requirements.

Even a wide power to amend will usually provide, either expressly or implicitly, that any amended object has to be exclusively charitable. The terms of such a power must be strictly observed.

The governing document may indicate that approval to a proposed amendment is required, whether from members or from another organisation, such as the Commission or a local authority or founder. Where the Commission’s consent is required, we will apply a similar test to that applied in considering whether to give consent to a change of purpose by a charitable company. In all cases, the trustees of a registered charity must send a copy of the resolution making the change and a copy of the revised governing document to us and notify us of the date of the change so that we can keep the charity’s Register entry up to date.

Further information. Look at the ‘Apply For It’ pages on our website which include guidance on changes to governing documents and forms to tell us about the changes.

C6. Charitable companies : can directors change the memorandum and articles of association?

The short answer

Yes, although our prior consent will be required if the memorandum and articles say that changes of any kind demand it, or if the change is a ‘regulated alteration’.

In more detail

Unless the memorandum and articles of association say that our consent is required for all proposed changes, directors of charitable companies are free to make any changes which are not regulated alterations.

‘Regulated alterations’ refers to changes to the memorandum and articles of association in areas of fundamental importance which require our prior consent. These fall into 3 broad categories:

a) any change to the objects clause (whether a material change to the objects themselves or the wording);
b) any change to what happens to the charity’s property on winding up;
c) any change which authorises the charity’s funds or property to be used to benefit the directors or members, or people or organisations connected with them.

Regulated alterations require the consent in writing of the Commission before the resolution making the alteration is passed by the charity.

Alterations generally require a special resolution in order to come into effect: in practice, this normally means obtaining members’ consent at an Annual General Meeting or an Extraordinary or Special General Meeting. Where any change is approved, the company must send a signed copy of the resolution giving effect to the change and a copy of the memorandum and/or articles as altered to us and the Registrar of Companies. The law requires this information to be sent to the Registrar of Companies within 15 working days of it being made. Sending the information to us at the same time will ensure the trustees meet their obligation to keep their charity’s entry on the Register up to date.

Further information. Operational Guidance on our website gives detailed guidance on the conditions and requirements – look at ‘Alterations to Governing Documents: Charitable Companies’ (OG47) and the application form which can be used to apply for our approval to regulated alterations.

C7. Must trustees inform the Commission of changes to the governing document?

L symbol graphic

The short answer

Yes, trustees must keep us informed of such changes if their charity is registered.

In more detail

The law requires trustees of registered charities to tell us about changes to their charity’s governing document so that the Register of Charities can be kept up to date.

Trustees must send details of changes to us, and include:

  • what the changes were;
  • evidence that changes were properly made; and
  • when the changes were made.

Charities will find it helpful to consult the ‘Apply For It’ section of our website, in particular the sub-section entitled ‘Changes to your charity’s governing document’, where forms and guidance to assist with this process are provided.

D. Amending a governing document by Scheme

This section describes how changes can be made where no power is available in the governing document or in law. It involves seeking a Scheme from the Commission under the 1993 Act.

D1. What is a Scheme?

The short answer

A Scheme is a legal document, in this context made by us, usually under section 16 of the 1993 Act. It can add to, replace or amend any or all of the provisions in a charity’s governing document.

In more detail

There are simpler ways to make changes to a governing document than using a Scheme (see section C). We only offer to make a Scheme where no other simpler and quicker method of changing a charity’s trusts is available.

In practice a Scheme is most likely to be used where the trustees have no power to make the changes themselves. This would largely cover changes which involve updating the purposes of an unincorporated charity with an income of more than £10,000 or introducing changes for any unincorporated charity which might benefit the trustees or connected businesses or individuals.

With very few exceptions we can only use our power to make Schemes where trustees ask us to. In making a Scheme we will always work closely with the trustees and their advisers to agree its scope and wording.

The 1993 Act sets out the key procedural requirements for making a Scheme and these are described in D3 – D5.

Schemes can also be made by the High Court but this is usually an expensive option.

D2. When might the Commission change the purposes of a charity by Scheme?

The short answer

The 1993 Act (section 13) sets out the circumstances in which we can change a charity’s objects by Scheme.

In more detail

Under the 1993 Act we can make a Scheme to change the objects of a charity when the current objects:

  • can no longer be carried out, or not in the way laid down in the governing document;
  • have been fulfilled, or adequately provided for in other ways (for example, out of public funds);
  • do not provide a use for all of the charity’s income or property;
  • use outdated definitions of areas, places, or classes of people;
  • have ceased to be charitable in law;
  • have stopped being a useful way of using the funds or property (for example, providing for very small payments or gifts of food or fuel to beneficiaries);or
  • where two or more charities with similar objects want to merge but do not have the legal power to do so.

In agreeing new purposes, we must apply the legal doctrine of ‘cy-près’ – Norman French for ‘close to’ - to ensure that they take account of the spirit (or underlying intention) of the existing objects and of current social and economic circumstances.

D3. What is the procedure for applying for a Scheme?

The short answer

Trustees should discuss their needs with us and request a Scheme once it is agreed that this is the best approach. Formal application for a Scheme is normally made by trustees acting as a body. We will decide on the terms of the Scheme in consultation with the trustees and, where appropriate, other people who may be affected by it.

In more detail

The need for a Scheme will normally emerge from discussions between a charity's trustees, advisers or senior officers and ourselves over proposed amendments to a governing document. We may be able to provide trustees with an example of the type of Scheme that we think would be suitable. If that is not possible we will explain the most important features of our proposals in a letter, or in more complex cases we may need to meet with trustees to discuss our proposals.

Once the broad outlines have been agreed, we will invite the trustees to apply formally for a Scheme. The application will normally come from trustees acting together as a body at a properly constituted meeting. Either of these approaches may be adopted:

  • all trustees present sign the application;or
  • all trustees present resolve to authorise one or more people, who do not have to be trustees, to sign on their behalf.

If trustees are unable to achieve a quorum, we may accept an application for a Scheme made by such number of the trustees as we consider appropriate in the circumstances.

Once we receive the formal application we will prepare a detailed draft of the Scheme and send copies to the trustees for their comments and agreement. We are responsible for making the Scheme and for its content.

D4. How does a Scheme come into effect?

The short answer

Generally, once we have agreed the contents of the Scheme with the trustees we will ‘seal’ the Scheme so that it comes into effect. Where we think it would be helpful to seek wider views, comments and objections we will require the Scheme to be publicised before we decide whether to seal it.

In more detail

Many draft Schemes will be judged by us and by trustees to be unlikely to be the source of controversy or challenge, and will therefore be sealed without any requirements for publicity. Trustees are consulted at the beginning of the Scheme process about whether they are aware of opposition to it or controversy that is likely to arise. The vast majority of Schemes will not be contentious.

In potentially contentious cases, trustees are expected to have carried out a consultation of their own (most likely with supporters, beneficiaries and others with an interest in the charity) before applying for a Scheme. In many cases this will avoid the need for publicity at a later stage.

In some instances – where there is an anticipated high level of public controversy, for example - public notice may be necessary or desirable. In the event of publicity being required, the Commission can choose the length of notice period and where publicity should be given. When the publicity period is complete, we must consider any representations made in response to it. If we decide that changes are needed we will tell the trustees and agree a final draft of the Scheme. If we do not see a need for any changes, the draft Scheme will go forward as drafted. We will then bring the Scheme into effect by sealing it.

D5. What happens after a Scheme is sealed?

The short answer

The sealed Scheme should be kept safely with the charity's other important papers, and a copy should be given to every trustee. Trustees must publish any notices received from us in accordance with our instructions.

In more detail

Once the Scheme is sealed, we will send to the trustees the sealed Scheme and additional copies of it. Where the Scheme has made changes to the title to the charity’s land there will usually be a short delay whilst HM Revenue and Customs confirm that no stamp duty is payable.

We must display a copy of the Scheme at our offices for a month – in practice, we do this by publishing it on our website. If the charity operates only in a local area, we may also direct that the Scheme should be displayed publicly at a convenient place but this is likely only if there have been significant objections before the Scheme was made.

Depending on the effect of the Scheme, an appeal against it may be brought by a broad range of parties, including the Attorney General and any person interested in the charity. With the exception of the Attorney General, any of these parties must bring their appeal within three months, although appeals of this kind are very rare.

Trustees should keep the sealed Scheme safely with the charity's other important papers. A copy of the Scheme should be given to every trustee.

D6. How long does it take to make a Scheme and what does it cost?

The short answer

A Scheme can often be completed within a few weeks of first identifying the need for one. Where it is difficult to reach agreement and / or there are objections, the process can take much longer. The main costs are those incurred by the charity itself, for example in staff time or fees if they choose to use a professional adviser. We do not make any charges for a Scheme.

In more detail

It is difficult to say how long it takes to make a Scheme because every case is different. Much may depend on, for instance:

  • how complicated the Scheme is;
  • how quickly the trustees can meet to consider the draft Scheme at different stages; and
  • whether any major objections are received in the event of our requiring publicity for a draft Scheme.

The completion of more complicated Schemes, and in particular those which attract adverse representations, may take several months.

We do not make any charge for our work in creating a Scheme. The main costs to the charity, therefore, may be those of:

  • its own staff time working on the Scheme;
  • professional advice sought in connection with the Scheme; or
  • the cost of publishing notices if they are needed (see D4).

If a charity requests further copies of a Scheme, we may make a charge to cover the cost of photocopying and postage.

E. Further information

Other Commission publications

For further information you may find it useful to refer to the following Charity
Commission publications:

Our website is also a useful source of information. The 'Apply For It' section contains forms and further detailed guidance about making changes to governing documents and the 'Publications and Guidance' area includes Operational Guidance covering a wide range of issues, including :

Mae’r rhan fwyaf o’n cyhoeddiadau ar gael yn Gymraeg. Am wybodaeth ar y cyhoeddiadau sydd ar gael ffoniwch Comisiwn Elusennau Uniongyrchol ar 0845 300 0218.

To obtain copies of any of the above publications you can either:

  • view and print from our website
  • e-mail us
  • telephone Charity Commission Direct on 0845 300 0218 (08:00 – 20:00 Monday – Friday and 09:00 – 13:00 Saturdays) or 0845 300 0219 for Typetalk users
  • write to Charity Commission Direct, PO Box 1227, Liverpool, L69 3UG