Charities could expose themselves to avoidable legal risk if they hold annual general meetings online during lockdown when their constitutions do not allow for them.
David Dunsire, Corporate Consultant in our Charities and Third Sector team, says the situation is not straightforward as organisations - some of whom will be on the frontline of the nation’s response to the coronavirus pandemic - try to work as best as possible amid social distancing.
An unconstitutional AGM could raise serious questions about decisions made - although the approach that must be taken will depend on a charity’s legal status.
David said: “Constitutions typically expressly allow for virtual trustee meetings to be held but not virtual AGMs.
“If the constitution prohibits electronic members’ meetings then it is not possible to proceed unless you change the constitution first, which will also be difficult at present. In this case, the best advice would be to defer until social distancing restrictions are relaxed, then hold a traditional AGM.
“If the constitution specifically permits electronic members’ meetings there are no problems - and, on balance, if a constitution is silent on electronic general meetings, you should be able to proceed with a virtual AGM.”
Charities which are companies limited by guarantee should be able to hold AGMs electronically.
But for a Scottish Charitable Incorporated Organisation (SCIO), the picture is less clear.
While SCIOs are unlikely to have express rules set around electronic members’ meetings, the Office of the Scottish Charity Regulator (OSCR) has said it is happy for charities to hold virtual meetings even if their governing document is silent.
Regulations covering SCIOs mean an AGM must be held, but constitutions rarely specify when. This means it should be possible to postpone meetings for a few months.
Whether charity leaders decide to postpone or proceed with a virtual AGM, that decision - and the reasons for it - should be recorded.
David added: “The widespread use of virtual meetings has undoubtedly been an eye-opener for all businesses. Charities, who are always cost conscious, will have seen the benefits and are likely to continue with these when we get back to normal.
“It would be advisable for all charities to check their constitutions now and amend them to specifically permit virtual members’ meetings.
“However, the purpose of the AGM is more than to just consider accounts or reappoint trustees. It is a vital way that charities communicate with members. It would be a pity if the benefits of having a physical platform were lost to the cost saving of holding all meetings on a virtual basis.
“Needs must at present, but the benefits of people physically meeting in the same room and engaging should not be underestimated.”
The practicalities of how online meetings are run - including procedures for voting and proxies for those unable to attend - should be set out in advance.
