Amending a governing document

Earlier this month, the latest phase of the Charities Act 2022 was brought into force. This includes further harmonisation of the rules that apply when a charity is looking at amending a governing document, the idea being that the rules should be broadly similar for all charities, regardless of the legal form they take.

Some schools are established by Royal Charter, and the rules for them were slightly modified back in October 2022. However, the majority of independent schools have been set up as companies limited by guarantee and, for them, the rules have changed with effect from 7 March 2024.

The principle remains that a school can amend any part of its Articles of Association by passing a special resolution, but there are certain types of amendment that require the consent of the Charity Commission before they can take effect. Before this most recent change, these “regulated alterations” were those which:

  1. add, remove or alter a statement of the charitable purposes of the school (so that even a slight updating of terminology would be caught),
  2. change what the Articles say will happen to any remaining assets of the school when it is wound up;
  3. would authorise any benefit to be received by the governors/trustees or members or persons connected with them.

The first change to note is that an amendment to the statement of a school’s charitable purposes will now only require the Commission’s approval if it actually alters those purposes.

The second change to note is that the Commission is now required, when asked for approval to a regulated alteration, to apply the same criteria that it has to apply when considering requests from charities structured as trusts or as charitable incorporated organisations. For schools set up as companies, this represents (in theory at least) a tightening of the rules. Before 7 March, the Commission had a relatively relaxed policy on approving changes to the purposes of a charitable company, and this involved being satisfied that:

  • the new purposes are exclusively charitable;
  • the decision to make the change is a rational one in the circumstances of the school;  and
  • the new purposes do not undermine or work against the previous purposes.

Under the new rules, the Commission must consider the following factors when deciding whether or not to approve a change to a school’s charitable purposes:

  • the purposes of the school when it was established;
  • the desirability of securing that the school’s proposed purposes are, so far as reasonably practicable, similar to the existing purposes; and
  • the need for the school’s purposes to be suitable and effective in the light of current social and economic circumstances.

There are a couple of further points that schools will need to bear in mind when amending a governing document:

  • When applying to the Charity Commission for approval of any regulated alteration, schools will be required not only to explain the reasons for making the changes but also to tell the Commission whether the change could be controversial or of public interest. The Commission may, in some cases, require the school to give public notice of the proposed changes and can also give public notice itself. The decision will then be made in the light of any responses to that public notice.
  • The rule changes outlined above relate only to charitable companies, and not to any permanently endowed assets that the school may hold, nor to special trusts such as scholarship or prize funds or to any linked charitable incorporated organisations (CIOs). Similar rules will apply to them, but with some slight variations.

How Moore Barlow can help

If you are thinking about amending a governing document or updating your Articles of Association, members of our Schools and charities team will be happy to guide you through the procedures and, if necessary, help you to obtain the approval of the Charity Commission.