A new Companies Act and and a new Charities Act were passed in 2006, but not all of the provisions of either Act came into force immediately: they are being phased in over several years.

The Companies Act 2006 is radically changing company law, especially for private companies. New provisions include:-

• There is no longer any need to hold general meetings, unless the members want to; virtually all members' decisions can be made by written resolution.
• If a general meeting is held, it is now obligatory to permit proxy voting, whatever the articles may say.
• There is longer any requirement for a private company to appoint a company secretary.
• A minimum age of 16 for directors will be introduced (which was the case anyway in Scotland).

Some of the effects of the Charities Act 2006 are:-

All charities must pass a public benefit test to become registered or to remain registered.The Charity Commission summarises the public benefit test within two key principles:

Principle 1: There must be an identifiable benefit or benefits.

(1a) It must be clear what the benefits are

(1b) The benefits must be related to the aims

(1c) Benefits must be balanced against any detriment or harm

Principle 2: Benefit must be to the public, or section of the public.

(2a) The beneficiaries must be appropriate to the aims

(2b) Where benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted:

- by geographical or other restrictions; or

- by ability to pay any fees charged

(2c) People in poverty must not be excluded from the opportunity to benefit

(2d) Any private benefits must be incidental

For financial years starting on or after 1st April 2008, charities must include a report on public benefit in their annual reports. Click HERE for the Commission's guidance notes.

The Act introduces the Charitable Incorporated Organisation (CIO) as an alternative form of incorporation to the traditional company limited by guarantee with charitable status. The CIO keeps being deferred, however, and we are not now expecting it to become available until perhaps early 2009.

A useful summary of the main provisions of the Charities Act 2006 will be found HERE.