Why are housing associations applying to become registered charities?

Many housing associations – now legally called Registered Social Landlords – are looking to convert from being a “Registered Society” with the Financial Conduct Authority (FCA) to become a charitable company limited by guarantee and registered by the Charity Commission.

What are the benefits of converting?

As a Registered Society, they already enjoy the status of being an exempt charity but lack a registered charity number, which will give them the opportunity to fundraise more effectively. The general public expect to see a registered charity number when they make donations by gift aid and leave legacies, as do many grant-makers. In order to grow and offer more services, Housing Associations need to attract funding beyond government sources.

As a charitable company, there will be extra regulation and scrutiny by the Charity Commission. Therefore associations need to be confident that this cost is outweighed by increased revenue.

What is the conversion process?

The conversion process is set out in the Co-operative and Community Benefit Societies Act 2014. The advantage of conversion is that it avoids a transfer of assets, but the process needs to be strictly followed. That process is:

Memorandum and Articles of Association for Company Limited by Guarantee are drafted and an application is made to Companies House to register the company together with a request to Companies House to hold off registration until the procedure for converting the Registered Society has been completed and a date for converting the Registered Society has been agreed (see * below).

1. Send two Notices of General Meeting (one for the First Meeting and one for the Second Meeting (see below)) to all members of the Registered Society who are entitled to vote. You must give at least 14 days’ notice of the First Meeting (the Notice for the Second Meeting should be sent at the same time as the Notice for the First Meeting).
2. First Meeting: 14 days after sending out the Notices, hold a general meeting of the Registered Society to pass special resolutions. The meeting must be attended by at least 50% of the members entitled to vote (in person or by proxy). The resolutions must be passed by 75% of those members who attend.
3. Second Meeting: At least 14 days after (but not longer than one month after) the First Meeting, hold a second general meeting to confirm the special resolutions again. The confirmatory special resolutions must be passed by at least 50% of the members who attend.
4. Within 14 days of the Second Meeting, send the FCA 3 copies of the special resolutions for registration under cover of the online form on the FCA website. The copies must be signed by the chairperson of the Second Meeting and the society Secretary. The resolutions take effect once registered by the FCA.

Once the application is complete, the FCA will register the special resolutions and send an acknowledgment. This will be accompanied by a section 126 certificate which must be completed and returned to the FCA. Once the completed section 126 certificate has been returned to the FCA, the FCA will contact Companies House* to agree a conversion date and the FCA will cancel the Registered Society’s registration and issue a certificate confirming this.

If you are considering changing your association’s status to a charitable company and have questions on the points raised in this article, please contact Robert Meakin.