Acting on new information

I read with interest "When charity is all in the act" (12 March, page 37), which relates to the Co-operatives and Community Benefit Societies Act 2003. But I feel it would be helpful to clarify some comments made.

The article states that is no guidance on the wording of charitable status statements, to be included on all charitable industrial and provident societies' paperwork. In fact, the Financial Services Authority issued just that in a letter to all industrial and provident societies at the end of October 2003.

Phrases such as "a charitable industrial and provident society" or "a charitable housing association" were approved. But "an exempt charity" was advised against except in legal documents.

The article also refers to scenarios where non-charitable societies acting in breach of their own rules can be forced into compliance by third parties they are contracted with. It says a special resolution to ratify actions that would be legal under the new act can be passed by a board. In fact, such ratification can only be carried by a shareholding membership voting with a 75% majority.

The article also states that a board member and the secretary, or two board members, now have executive signing power over documents without the use of a seal – but only where societies have amended their rules and no longer have a common seal.

I do not believe the latter is necessary.

Industrial and provident societies can retain their common seal but can also, as an alternative, use the new execution powers given by the act. They will simply have a choice as to how they execute documents.

In my view, no amendment is needed to the rules in order for documents to be signed as a deed without use of the seal.

The article asserts that apart from the requirement for charitable organisations to declare their charitable status, which took effect from 1 April this year, all of the provisions of the new act came into force on 20 October 2003. This is not the case.

Section 1 of the act, which allows societies to restrict use of their assets forever to purposes that are for the benefit of the community and prevents subsequent privatisation, has not yet come into force.

The governance issues referred to in the article relating to the validity of acts done outside an industrial and provident society's powers, and the ratification powers given to members and other provisions of the act relating to transactions with committee members, did not become law until 1 April.