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Governance for Organisations

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Frequently Asked Questions

What does insolvent mean?

How often should we have board meetings?

What counts as a meeting?

We are facing a crisis, what should we do?

Should I still report an incident to the Charity Commission?

What should we do if our AGM is planned during this crisis?

Can we work outside of our charitable purposes to say offer out our empty rooms to the NHS?

Can we lift restrictions on designated funds?

Can we use some of the money from endowments?

Will our insurance cover us?

Is a grant a contract?

What do we need consider with contracts?

Can Force Majeure help?

What is frustration of contract and does it apply in this crisis?

 


What does insolvent mean?

Being insolvent means that you have more debts than you can pay.  This does not mean that you are going into liquidation as it is possible to trade out of it.  However if you are insolvent you need to take steps now to mitigate the chances of that happening.

 

How often should we have board meetings?

Normally you may meet monthly, bi-monthly or quarterly but in the current crisis you may consider the need to hold meetings more often, perhaps weekly or even more often.  You need to keep an eye on the evolving picture, what it means for your organisation and what difficulties you anticipate may face you in the coming weeks or months.  Information is the key to making good decisions.  Ensure you have everything to hand including financial reports, grants and contracts, staffing and services details.  Consider the certainty of what will happen and the potential risks if things do not happen as you anticipate.  Follow the Charity Commission guidance for good decision making HERE

 

What counts as a meeting?

If all parties can hear and see each other, then the courts have defined this as legally being a valid meeting, unless your governing document says otherwise.  This means that you are able to hold Board meetings by online video conferencing.  There are a number of applications available including Zoom, Skype and Microsoft Teams.

If your governing document doesn’t have a clause to allow virtual or telephone meetings, it may be advisable to update it to reflect this.  If you do not have a clause and/or you are unable to amend it, the Charity Commission have stated that they will understand if you have to do this but should record this decision.  They are more interested in organisations making good and timely decisions than the process, provided everything is recorded and all other rules in your governing document such as quorums are met.

 

We are facing a crisis, what should we do?

Get a crisis team together.  This should ideally this should be a small group including finance/treasurer, your chief officer if you have one and anyone involved in HR.

  • Meet regularly
  • Pull together a projected cash flow and keep an eye on it. 
  • Read all contracts (see further guidance in relation to contracts) to assess your obligations and determine what the current crisis means in relation to those. 
  • Have very early conversations with landlords, your banks your funders and any contracting parties that you owe money to. 
  • Consider restricted funds and endowments and whether it is possible to release these for general cash flow purposes. 
  • Create a crisis plan, consider how every activity done by your organisation is impacted and what this means for your organisation as a whole. 
  • Take professional advice as this may protect you if you are insolvent and is worth the financial outlay. 
  • Record all decisions well so that you can demonstrate good governance.

 

Should I still report an incident to the Charity Commission?

Yes, all serious incidents need to be reported.  You should be thinking of financial, staff, operational or reputational incidents and following the governement guidance HERE.

 

What should we do if our AGM is planned during this crisis?

If you can and your constitution allows it, you can hold an AGM by video.  If you can’t and this impacts your final reports, annual returns and accounts being filed on time, then you should let the Charity Commission know.  Otherwise you should be postponing your AGM for now in guidance with current recommendations regarding social distancing and preparing your reports in the normal timeframe.

 

Can we work outside of our charitable purposes to say offer out our empty rooms to the NHS?

Check your governing document in the first instance as you may have wider purposes than you think.  If you consider your activity to be outside of your charitable purposes then you may be able to lawfully trade to achieve your goal in the greater good i.e. charging a nominal fee for your rooms.  Be careful that your decisions don’t result in significant losses however or you could be held personally liable.

 

Can we lift restrictions on designated funds?

Funds are sometimes restricted or designated by the Board and so can be unrestricted at any time.  Grant funders also may have the power to relieve obligations to send monies into your cashflow.  You are able to lift restrictions if there are genuinely needs if the monies are relatively small.  Otherwise the Charities Commission needs to give permission.

 

Can we use some of the money from endowments?

This is sometimes acceptable but needs Charities Commission approval and there may some obligations to recoup at a later date.

 

Will our insurance cover us?

It is unlikely that many insurers will cover for Covid-19 and business interruption policies are not usually intended for extensive pandemics.  Read what your policy says in detail and get in touch with your insurer if you are considering making a claim.   Most policies expect notification as soon as reasonably practicable otherwise your claim will be void.

 

Is a grant a contract?

Yes it is.

 

What do we need consider with contracts?

  • Read all contracts in detail, noting obligations and deadlines
  • Consider how the current restrictions are going to impact on parties and if you can do what you agreed to do
  • Think creatively about alternative ways of fulfilling your contract.  Can you do something online or another way?  If not, record in detail what the problems are and if it is a partial or full impact. 
  • Look for termination clauses and if you have a specific termination or a no-fault termination.
  • Finally consider what will happen if the contract ends, what are the impacts on your organisation, what has been paid out already and what happens to any materials or assets gained during the contract.

 

Can Force Majeure help?

Force Majeure applies when circumstances beyond the reasonable control of parties mean that the contract cannot be fulfilled.  It is not defined in law and only applies if the contract specifies the current situation i.e. pandemic or disease. 

 

What is frustration of contract and does it apply in this crisis?

Frustration of contract applies when an unforeseen event means that the obligations of the contract cannot or are impossibly able to be fulfilled.  Impossibility is a high threshold and something no longer being commercially viable or attractive or the need to postpone are not valid reasons.  Reasonable expenses already incurred can be claimed but otherwise the contract is effectively dissolved.