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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3493
Experience:  Solicitors 2 years plus PQE
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My question relates to a charity registered as limited by guarantee.

Customer Question

My question relates to a charity registered as limited by guarantee. The charity provides community transport and volunteering services; over the last couple of years has extended to successfully take on transport contracts from the county council to run a number of subsidized local bus services. The last date that the AGM should have been held was 28 Feb having been deferred several times. It was arranged for 26 Feb but cancelled on that day, a notice put on the venue stating that it had been cancelled awaiting advice from the charity commission. There has been no further information provided in response to questions to the trustees. It is believed that the chair and treasurer have queried the validity of how members are registered and vote in order to prevent the appointment of new trustees. Six (I am not one) had registered to stand and all received a solicitors letter stating that advice was being sought from the charity commission in relation to their eligibility to stand.. The process is that those attending the AGM optionally pay £1 which makes them paid up members for the year and they have voting rights at the AGM. This has been the practice for 12 years and I believe it is a common practice amongst charities. The charity commission have been approached by the potential trustees but have only responded by saying its a trustee dispute and look at the guidelines, these don't seem to provide any positive assistance. There are currently 4 trustees only the chair and treasurer active. Several other trustees have resigned over the last 1q2 months. The charity commission have said that resigned trustees are still legally trustees until the AGM appoints new ones and/or confirms the existing ones.

The underlying reason for the action by the chair and treasurer is that they want to retain control, dismiss the current CEO (who is now on sick leave with stress) and create an organisation of only paid staff running contract transport because it makes money. The new potential trustees are all significant business people with a cross section of expertise who want to retain the current charities aims and objectives.

Can you offer any advice regarding the cancelled AGM, the AGM voting process and how to get an AGM arranged. Also how to deal with the chair and treasurer who refuse to communicate or have a meeting with the potential trustees, refuse to allow a detailed examination of the accounts and now refuse to allow the CEO on the premises because she is on sick leave and she knows that if she did return they would suspend her.
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.
Hi

Thank you for your question and welcome to Just Answer.

Is the charity a company limited by guarantee?

Kind regards

AJ
Customer: replied 3 years ago.

Hi


Yes the charity is limited by guarantee

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

I am sorry for the further question but I really need to know whether the charity is incorporated or unincorporated.

You say it is a charity limited by guarantee can I therefore assume it is incorporated?

Kind regards

AJ
Customer: replied 3 years ago.

Hi


Sorry I should have been more explicit


It's incorporated

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

That makes the situation very straight forward. Can you have a look at the Articles of Association and tell me what they say about calling an AGM, I will then explain to you how to force an AGM under the companies act.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 3 years ago.

 


Below is the section in the articles of association in relation to the AGM


 


The previous AGM was held Nov 2011 and as the mems and arts state the AGM must be held within 15 months of the previous one then 28 Feb 2013 was tghe latest date to have held it.

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

There is a provision under the Companies Act 2006 s.303 where by members of the company can force the company to call a general meeting of the company (note this is the same as an AGM).

You would need support of at least 10% of the voting members.

Who is currently opposing the AGM? Is it the directors?

Kind regards

AJ
Customer: replied 3 years ago.

There are five directors (trustees) remaining, one is virtually inactive. The directors cancelled the AGM on the day it was due to be held.


The list of voting members isn't available, the directors appear to have taken it. The CEO (currently on sick leave with stress) went into her office to get a copy and was confronted by the deputy CEO and treasurer in a bullying manner and told that she wasn't allowed into the office as she was on sick leave; this was followed up with a letter from the chair saying that she was not to enter the office as she was on sick leave.This was witnessed by 2 former chairs who had accompanied her to the office.


All current voting members weren't contacted to be told the date of the 26 Feb AGM, only a selected few were emailed with the date; previous practice was that all members were contacted and sent details of the AGM.

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

The membership list should be available at companies house. You can download it for a couple of pounds.

What voting percentage do you hold?

Kind regards

AJ
Customer: replied 3 years ago.

Hi


 


Each paid up member has one vote; membership is for one year; i.e. until the following AGM. Members pay £1 at the AGM to become voting members.


The list has never been sent to companies house. I take it that it should have been each year? The company secretary (trustee) has never done that and it's never been spoken of as a requirement. Does this apply to charities which are incorporated with limited liability?


 


Thank you for being so helpful.


 


John

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

If you are a member yourself under s116 of the Companies Act 2006 you actually have the legal right to request a copy of the register of members free of charge. This maybe of use if they have failed to file a list of members with the annual return.

If you have the support of 10% of the voting members you can force the directors to call a general meeting under s303.

As an absolute worst case scenario you can apply to court under s306 to force the directors to call a general meeting.

Can you tell me a bit about what the meeting is required for?

Kind regards

AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3493
Experience: Solicitors 2 years plus PQE
Alex J. and 3 other Law Specialists are ready to help you
Customer: replied 3 years ago.

Hi


 


Thank you very much for the guidance


The reason for pursuing this is because there are only effectively 4 trustees/directors and the direction of the charity over the last 12 months has been driven by the chair and treasurer who are running the charity for their own satisfaction and brought in a deputy CEO who was supposed to manage the contract transport operation. The intention was supposed to be to generate additional funding to support the volunteer activities and project work relating to the disadvantaged in society. However their intentions have become evident, that is to drop the volunteering and project work and eventually become a contract transport operation operating subsidized bus services. As the volunteering etc doesn't "make money" they see it as not relevant. Their intention is to get rid of the current CEO and make the deputy the new CEO.


The current CEO has an excellent reputation in the county for the work the charity has done over the last 10 years and as a result 6 prospective new trustees have put themselves forward for election at the AGM, not me, unfortunately I work away during the week. There is a broad range of expertise covered by them - a senior manager in the NHS, a representative from Adult Education, a senior manager of an estate group who is also chair of a housing association, an events consultant with international experience and 2 previous chairs of the charity. The intention is that the charity retains its current aims and objectives and the current CEO who has the reputation in the county to maintain its position as the leading provider of volunteering, community transport and funded project work.


The existing chair and treasurer are obviously aware , hence the sudden cancelling of the AGM and attempts to make the current members voting system not applicable or legal.


 


Kind Regards


John

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

I am going to review this now. Do you mind if I respond to you in the morning?

Kind regards

AJ
Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

The situation is the that the current CEO knows he is going to be removed at the next meeting and wants to effectively stop this at all costs?

How many of the members actually support his proposal?

Kind regards

AJ
Customer: replied 3 years ago.

Hi


 


Yes, the chair and treasurer, it appears,want to be able to announce that the current CEO has "resigned" or "had to retire" with the deputy CEO taking over and that the current aims and objectives are under review to put the charity into a better financial position; i.e. only take work that makes a satisfactory profit.. The treasurer is the prime driver; he is an accountant running his own small accountancy practice and now acts as though it's his company.


From their actions to date they want to force a retirement on health grounds (the CEO is currently on sick leave with severe stress caused by their actions) or force a resignation to avoid the embarrassment of being sacked; the deputy CEO has been overheard talking about unsatisfactory performance of the CEO.


Its difficult to be specific about numbers of members because the situation has been kept as discreet as possible by those who are aware to avoid adverse publicity for the charity. The reputation of the CEO is such that 90% of those who are known to likely attend the AGM would support the appointment of the new trustees and the current CEO. The new trustees would form the majority on the board which is why the current four trustees, particularly the chair and treasurer, are trying to prevent them being put forward and delaying the AGM until they've found a way.


 


Prospective trustees have to be nominated prior to the AGM; can the chair and treasurer now come up with new additional nominations for the AGM when a new date is published?

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

At the next General Meeting they can propose whatever they like but the members would still have to approve it.

Can you tell me what the provisions say regarding the appointment of directors?

Kind regards

AJ
Customer: replied 3 years ago.

Hi


 


There is provision for the directors to appoint an additional person who is also a member; I assume that this applies after an AGM when the new board is appointed and would have to be with the consent of the majority of the Board.


The only other reference to directors appointments in relation to nomination at the AGM. The existing 4 active directors have nominated themselves which will have to be voted on.


 


John


 

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

Just so I have understood this correctly, is the CEO also a director or is he only a trustee for the charity?

Kind regards


AJ
Customer: replied 3 years ago.

Hi


 


The CEO is an executive director appointed by the Board; not trustee status.


 


Kind Regards


John

Customer: replied 3 years ago.

Sorry should also have said that the CEO is appointed an executive director with no voting rights.

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

Your options really are:
1. Force the board to call a General meeting using 10% of he voting members in support and then you will need 50% of the members to remove the CEO; or
2. Apply to court to have a general meeting called on the basis that company constitution is being breached and the members are being unfairly prejudiced.

Option 1 really is the best way to go. If you can download the Annual Return or demand a copy of the members list under the Companies Act you can find out who the other members are.

I look forward to hearing from you.

Kind regards

AJ

P.S I apologies for any typos I am on the IPAD and sometimes autocorrect gets the best of me.
Customer: replied 3 years ago.

Hi


Thank you enormously for your help.


You've given me the way forward and I'll be pursuing it.


I've discussed it with the others and your advice is appreciated by all.


If this is an example of how you work then you have a great career ahead of you.


 


Kind Regards


John

Expert:  Alex J. replied 3 years ago.
Hi

Thank you for your kind comments and feedback.

I wish you the best of luck. Please do not hesitate to contact me if you have any follow up points.

Kind regards

AJ

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