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Coronavirus - Challenging times for charities - UK

  • United Kingdom
  • Coronavirus
  • Corporate

14-07-2020

The coronavirus crisis has presented charities with an incredibly challenging set of circumstances. In this briefing we consider some of the headline legal and commercial implications for charities amid the ongoing pandemic.

Governmental support

As COVID-19 continues to affect the UK, some charities are experiencing a greater demand for their services than ever before. Many charities including care homes, social care charities, food banks and domestic violence charities are all closely involved in combatting the impact of the coronavirus. This, combined with an inevitable reduction in viable fundraising opportunities, is likely to place a considerable strain on the resources of these charities.

In early April, the government announced a £750 million support package for frontline charities in the UK to ensure that they can continue to provide services during the coronavirus outbreak. Of the £750 million, £360 million will be allocated directly to charities providing key services. The government has stated that:

  • up to £200m will go to hospices “to help increase capacity and give stability to the sector”.

Other recipient charities will include:

  • “St John’s Ambulance to support the NHS;
  • victims charities, including domestic abuse, to help with potential increase in demand for charities providing these services;
  • vulnerable children charities, so they can continue delivering services on behalf of local authorities;
  • Citizens Advice to increase the number of staff providing advice during this difficult time”

A grant pot of £370 million, will also be established to support small and medium sized charities to continue to provide services during this time of need. Of this, £60m will be allocated to the devolved administrations in Scotland, Wales and Northern Ireland, and grants in England will be administered by the National Lottery Community Fund.

This will be a welcome announcement for those charities impacted most by the current situation. Charities not involved in frontline services are also likely to miss out, and the losses to the sector during this crisis are expected to be far in excess of the amounts now being made available.

Funding concerns

As well as identifying whether they may benefit from the governmental support, once more information becomes available, charities may also wish to consider alternative methods of fundraising to offset the reduction in income from usual means. The Fundraising Regulator has issued information online about fundraising during this period.

The Charity Commission has also been publishing headline guidance for charities relating to the COVID-19 crisis, which is regularly updated with new information. This advice includes guidance for charities considering tapping into reserve funds to assist with their financial stability. In particular, the Commission notes the need for charities to consider the long term implications of such decisions and to seek professional advice where this is possible. Care is needed particularly where funds are held for restricted purposes.

The Charity Commission has published specific online guidance for charities around managing financial difficulties arising from coronavirus with sources of information for charities and an overview of key legal duties for trustees around decision-making while in financial difficulty. This includes guidance for charities facing possible closure during the crisis.

Can a charity assist with the challenges of COVID-19?

The coronavirus crisis has prompted a number of charities to consider whether their constitution allows them to assist with the ongoing relief efforts. The charitable objects of many charities may already cover the allocation of resources to help fight COVID-19, such as the prevention or relief of poverty, the advancement of health or the saving of lives and/or the advancement of education.

In the case of those charities that wish to help but whose governing documents do not allow them to assist, amendments will be required to their charitable objects. Whilst the constitutions of some charities allow trustees to amend their charitable objects, most charities will require the consent of the Charity Commission to any such changes. In its online guidance, the Charity Commission states that it will prioritise any urgent requests due to COVID-19. Care must be taken by charities to ensure that any object changes align with the ethos of the charity and do not undermine its existing purposes.

Filing accounts and annual returns

The Charity Commission has announced a pragmatic approach to the filing of accounts and annual returns amid these uncertain and unpredictable times. Whilst the Charity Commission is encouraging charity trustees to attempt to submit their annual accounts and annual returns on time, it recognises the practical difficulties caused by the current crisis and has granted trustees a degree of flexibility with regards to filing deadlines. Charities that need an extension to a filing deadline with must make the request by email to the Charity Commission as directed in their online guidance.

Charitable companies are also able to request an automatic 3-month extension online from Companies House for filing their accounts if the filing deadline has not already passed. Note that companies that have already extended their filing deadline or shortened their accounting reference period may be ineligible for an extension.

Board meetings and AGMs

The Charity Commission also recognises that it will not usually be possible in the current circumstances for trustees to hold face-to-face board meetings or to hold AGMs. Where it is proposed to hold a meeting via the internet or by telephone, trustees are advised to check whether their governing documents permit such meetings. If a governing document does not allow meetings by remote means, it may be possible to amend the governing document to introduce relevant powers or to take advantage of the flexibility which will be introduced Corporate Insolvency & Governance Bill for charitable companies.  Where amending the governing document is not possible, the Charity Commission has stated that it will understand if trustees proceed to hold a remote meeting – although any decision to do so should be documented as being taken to demonstrate good governance of the charity. In many cases, AGMS involving a wider membership may need postponing or adjourning where a virtual meeting is not permissible or viable. If there is a knock-on effect to the governance of the charity, e.g. if trustees will remain in office beyond their permitted terms of office, this should be considered at the earliest opportunity.

Other key matters

Among the other relevant issues affecting charities;

  • Contractual concerns - many charities are running into difficulties relating to supplier or service contracts. Our Commercial lawyers can advise on the management and renegotiation of commercial contracts during this difficult period, and on the possible relevance of force majeure provisions;
  • Staffing issues - staffing and staff costs are a key issue during this challenging time. Our Employment lawyers can advise on the availability of the Coronavirus Job Retention Scheme for charities, and issues arising employers in relation to the Scheme. A detailed briefing is available on this topic;
  • Property matters - our Real Estate colleagues can assist with legal issues arising from landlord difficulties, tenant issues, and the suspension of business rates introduced by the government for certain businesses, which may be relevant to charity trading subsidiaries.

As a recent example of work done to assist charities during the COVID-19 pandemic, Eversheds Sutherland has advised the Association of British Insurers on the establishment of a new fund to help support some of those hardest hit by the pandemic.  A full press release is available here.