Governing your organisation

Contents

This page includes links to government guidance, and practical suggestions to help trustees lead their voluntary organisation effectively. This page is primarily aimed at trustees and senior leaders, be they paid staff or volunteers.  

Run meetings

Meeting size

• During national lockdown, if you can, you should hold trustee or member meetings online or by telephone.  If you cannot do this, you can hold trustee or members’ meetings in person, if this is necessary for providing voluntary or charitable services. 
• If meeting in person, you should ensure that you follow covid secure guidance. For detailed information on meeting safely, read the Coronavirus (COVID-19): Meeting with others safely (social distancing) on GOV.UK.
• Whether you are meeting in person or virtually, you need to ensure that your meeting is quorum.  Quorum is the number of people required to attend a meeting in order for decisions to be made.  The quorum number should be stated in your governing document.  For more information, read the Charity Commission’s guidance on charities and meetings.

Hosting virtual meetings 

• The Corporate Insolvency and Governance Act 2020 means that if you are a charitable company or a Charitable Incorporated Organisation (CIO),you can host your AGM or other members’ meetings (not trustee/director meetings) online, even if this is not authorised by your governing document. These relaxations apply until 30 March 2021.
• You must make sure that the decision to use these provisions is recorded in the minutes and that all other meeting requirements are met. See Bates Wells’ guidance on the Corporate Insolvency and Governance Act 2020.
• For other types of meetings or any other type of charity, you should check whether your governing document allows you to hold meetings online or by telephone.
• Generally, if there is no such clause in your governing document and you decide to hold meetings online or by telephone, the Charity Commission will understand. You should record this decision and that you have done this to demonstrate good governance.  Read the Charity Commission guidance on holding meetings online or by telephone 
• An alternative may be to amend your governing document to formally allow meetings to be held in this way.  Read the government guidance on how to make changes to your charity’s governing document.

Postpone, adjourn or cancel meetings

• If you need to postpone, adjourn or cancel your AGM or other meetings as a result of covid-19, you need to make sure that you follow any rules in your charity’s governing document that allow for postponement, adjournment or cancellation. 
• If there are no rules in your governing document, but you decide that this is still the best course of action for your charity, you should record the reasons for this decision to demonstrate good governance. For further information see the Charity Commission guidance on postponing or cancelling meetings  
• The Corporate Insolvency and Governance Act 2020 allowed AGMs to be postponed until 30 March 2021.  

Making decisions 

Your trustee duties 

• At this time, trustees will be facing difficult decisions.  There probably won’t be one right decision but a number of reasonable ones.  
• When making decisions, you should record the decision and how it was reached.
• When making decisions as a trustee, you must: 

• Act within your powers.  Check your governing document or articles of association.
• Act in good faith and only in the interests of your charity.  Don’t allow personal interests or views to override the interests of the charity.  
• Make sure you are sufficiently informed.  Read board papers and ask for the relevant information.   
• Take account of all relevant factors and ignore any irrelevant factors 
• Manage conflicts of interest.  Read our sample conflict of interest policy 
• Make decisions that are within the range of decisions that a reasonable trustee body could make 
• For more information, watch our webinar Making decisions in tough times (broadcast 11 June 2020) 
• The Charity Commission have a created a short guide on making decisions at a charity.
• For more in depth guidance on how you should approach making decisions that affect your charity, read the Charity Commission’s guidance on charity trustees and decision making.
• Bates Wells has developed guidance for trustees to help them comply with their legal duties during covid-19.

Make good decisions

• Organisations are having to make different types of decisions.  McKinsey’s 7S model can help you think about the types of decisions you may be having to make.  
• Under times of stress, science suggests that our decision making capability is reduced.  
• It can be helpful to break down the decision making process. Some key questions to consider:: 

• What decisions do you need to take? Be clear about the exact decisions you need to make 
• What is the time-frame? How urgent is the decision? This will help you prioritise your decision making
• What information and data is required to make the decision? This might be for example financial and or evaluation data.  
• Can you collect this in a meaningful and appropriate way? If not, you may have to make decisions based on imperfect information and data.   
• Who needs to be involved and how will it be communicated? Make sure that the right people are involved in making the decision.  Decisions will need to be communicated to staff and or volunteers.  Think about how you are going to do this.  
• Tools to help you make better decisions include: 
• our scenario planning guidance will help you assess uncertainties in your external environment and plan how you are are going to respond.
• tools for Tomorrow is a practical guide to strategic planning for voluntary organisations.

Report a serious incident 

• The Charity Commission requires charities to report serious incidents.
• If a serious incident happens in your charity, you need to make sure there is a prompt, full and frank disclosure to the Commission. 
• To find out what is a serious incident and whether or not you should report it, read the Charity Commission guidance on how to report a serious incident in your charity. 
• The Charity Commission has recognised that the pandemic has resulted in some unprecedented challenges and scenarios that were not envisaged.  
• To help you decide if you need to report an incident that is relevant to the pandemic, the Charity Commission has produced a supplementary examples table 
• You should still exercise judgement in deciding whether an incident is significant in the context of your charity.  In making this decision, you should take account of your staff, operations, finances and reputation. For more detailed information, read the Charity Commission’s guidance on reporting serious incidents to the Charity Commission during the coronavirus pandemic.

Manage board dynamics 

• The behaviour, culture and overall performance of your board is critical to your charity’s success. This is clearly outlined in the principle of board effectiveness in the  Charity Governance Code 
• During times of uncertainty and increased anxiety, board dynamics may become more difficult to manage and relationships between individual trustees may deteriorate.  
• To help manage this, here are some good practice suggestions around building good board relationships:

• Make sure that all trustees are clear about what is expected of them by law and in practice. During times of crises, expectations may change. Be clear about these. 
• Ensure that a culture of mutual respect and trust is encouraged. This can be supported by re-visiting or developing a board code of conduct.  
• Continue to make time for team building activities, both formally and informally. This will help you to get to know each other better and to work well together as a team
• Provide individual trustees with opportunities to review how they feel about their role and their relationship with other trustees. This provides an opportunity for issues to be addressed early. You can do this with individual trustee performance reviews
• Being aware of the amount of support versus the amount of challenge you offer each other and your executive (paid or unpaid).  You want to aim for a supportive environment where individuals feel comfortable to challenge each other in a constructive way.  This will allow for scrutiny of decision making.
• If you are finding it difficult to resolve disputes amongst your trustees, read our guidance about managing trustee disputes. The Association of Chairs also has guidance on working through difficult board relationships 
• To find out more about what you can do to support your board through covid-19, watch our webinar Board leadership: Supporting your charity though the next phase of the coronavirus pandemic (broadcast on June 2020) 

Financial governance and solvency

Financial governance 

• In order to assess and monitor the overall financial position of your charity during the covid-19, the Charity Commission outlines some important steps it expects you to take.
• As a trustee, you have overall responsibility for effective governance and the implementation of proper financial management. This may well also involve paid staff or volunteers. The Charity Commission outlines key elements of the trustees’ role in effective management and financial control.
• You need to be clear about how your charity’s funds can be used.  Some funds can be used for all of a charity’s purposes and some will have restrictions on use, placed on them by their donors.  
• Sayer Vincent’s guide on reading charity accounts explains fund accounting and how different types of funds can be used.
• You also need to be clear about what your charity’s balance sheet is telling you about your charity’s financial position. 
• Your charity’s balance sheet should tell you whether the charity has sufficient assets to meet its actual and contingent liabilities at a particular date    
• Balance sheets are normally prepared on the basis that the charity will continue as a going concern for the foreseeable future.  
• If you are finding it difficult to plan and make decisions with a high level of financial uncertainty, read our guidance on scenario planning to help you to think and plan for different outcomes.
• If your charity can no longer operate as a going concern, you will need to assess the basis of valuation when assessing your charity’s solvency.  For more information, read the Charity Commission’s guidance on financial management and the role of trustees.

Financial reporting 

• The Statement of Recommended Practice (SORP) – making body has published guidance for trustees and those who prepare charity accounts looking at the potential impact of the control measures to contain covid-19 on financial reporting by charities
• In your Trustees Annual Report additional disclosure around the impacts of Covid-19 is likely to be required.  
• A fall in the valuation of investments may have an effect on the valuation of your defined pension benefit schemes.  
• The financial reporting ramifications from investments and pensions should be reflected in the financial statements and fully explained in your Trustees Annual Report. 
• Any disclosure on significant judgements and estimates will need to be detailed and updated.  
• Any changes in underlying assumptions and sources of estimation uncertainty will need to be explained.  
• You will need to consider your going concern basis and any associated material uncertainties.  This may have an impact on the: 

• audit report
• narrative for financial reporting 
• accounting policy disclosures in the accounts.
• Both adjusting and non-adjusting events will need to be considered.  For more information about post balance sheet events note, read Haysmacintyre’s article on covid-19: charity financial reporting questions
• If you are unclear about how covid-19 has affected financial reporting requirements for your charity, seek professional advice. The Charity Finance group offer training, resources and specialist support.  
• For more in-depth guidance: 
• Crowe have produced guidance on financial reporting issues for charities.
• Grant Thornton have produced an in-depth insight report into the impact of Covid-19 on financial reporting in the charity sector.
• If you expect there to be a delay in submitting your annual return or financial statements then contact the Charity Commission 

Facing financial difficulty 

Consider merger or collaboration 

• If your charity is or might be facing financial difficulty, a merger or some form of collaboration could be an option
• A merger is where two or more organisations formally come together.  
• There are different forms of collaboration such as an informal alliance, a collaboration agreement or setting up a joint venture.  
• The main consideration for these should be whether this will improve outcomes for beneficiaries by helping an organisation better achieve its aims.  
• Find more information about mergers on our guidance pages. Find more information about collaboration on our guidance pages. 
• The Charity Commission has guidance and a checklist on mergers and collaborative working.
• Charities in search of partners for collaboration or merger can use the Charity Commission’s register of charities to find potential partners.
• Bates Wells, the charity and non-profit specialist legal firm, has launched its new decision tool for voluntary organisations facing financial difficulty, and who are unsure of the next steps to take. You can also look at Bates Wells’ brief guide to collaborative working.  

Check for and manage potential insolvency 

• There is no statutory definition of ‘insolvent.’  
• In practice there are two separate tests for insolvency.  Failure of either might be an indication of insolvency

• The charity cannot pay its debts as they fall due for payment
• The value of its liabilities exceeds the value of its assets
• To find out more about these tests and signs of potential insolvency: 
• read our guidance on financial difficulty and insolvency
• read the Charity Commission’s guidance on what is insolvency
• In June 2020 the Corporate Insolvency and Governance Act 2020 made some temporary changes to insolvency and corporate governance law. To find out more about the changes to insolvency law see Bates Wells guidance.  
• Secondary legislation means that many of these changes will now continue until either December or the New Year.
• If you are dealing with potential insolvency, you should seek professional advice at an early stage in order to rectify your position.  When obtaining professional advice, you should:  
• meet more frequently with your board 
• keep a record of key decisions and why they were made 
• keep a record of any other arrangements.  
• Charity Commission guidance outlines what steps you might consider taking if insolvency is a possibility.

Manage insolvency and potential closure 

• If you think your charity is facing insolvency, you should: 
• contact your charity’s auditor or professional accountant in the first instance. Your charity’s auditor or professional accountant may be able to recommend an insolvency practitioner. If not, you can approach an independent insolvency practitioner. The Insolvency Service website includes a database of insolvency practitioners
• be clear about whether or not your charity can continue to operate. This will depend on your charity’s precise circumstances. Section 4.3 of the Charity Commission’s guidance explains in what circumstances a charity can continue to operate when apparently insolvent.
• A new statutory instrument means that the Pension Protection Fund, a statutory public body, will be allowed to represent trustees of charitable incorporated organisations and community businesses in insolvency discussions to help secure their pension schemes.
• If there is no alternative but to close your charity, read our guidance on closing your charity or voluntary organisation which outlines the key steps you need to take and the processes you need to be aware of to close your organisation.