Question: “Our charity is a charitable company limited by guarantee. We are selling land and we need to sign the transfer deed at short notice. As a company why can we not execute the transfer by one director signing in the presence of a witness? Why do two directors need to sign the transfer deed?”
Answer: This point often causes confusion and it arises from the separate statutory provisions which govern execution of deeds by companies under the Companies Act 2006, and the provisions regarding disposal of charity land in sections 117-119 of the Charities Act 2011.
When a charitable company enters into a transfer deed for the disposal of charity land the provisions overlap because whilst the transfer deed must be executed by the company, the statutory statement and certificate required to deal with the charity land disposal must be given by the charity trustees. (In this article we refer to the position for non-exempt charities as most of our charity clients are non-exempt charities.)
Execution by the company
Section 44 of the Companies Act 2006 sets out how a deed may be executed by a company. Traditionally, a company executed a deed by affixing its common seal in the presence of a director and the company secretary. However, in the absence of anything to the contrary in the company’s memorandum and articles of association, it is now possible for a company to execute a deed by a single director signing in the presence of an independent witness who attests the signature. This was a new method of execution brought in by the 2006 Act and is increasingly the preferred method of the execution of deeds for companies in this age of fast moving transactions.
Certificates by the charity trustees
Section 122 of the Charities Act 2011 requires that any instrument effecting a disposal of land by a charity must contain:
- a statement about the basis on which the land is held and whether or not the disposal is one which is subject to an exemption from the restrictions on disposals of charity land in the Act; and
- a certificate by the charity trustees (i.e. all of them) confirming they have the power to enter into the disposition and that either the Act has been complied with or they have obtained an order of the court or the Charity Commission.
It could be quite cumbersome for documents to be signed by several charity trustees.Fortunately, there is a useful time-saving measure in section 333 of the Charities Act 2011, which allows trustees (subject to anything to the contrary in the charity’s governing documents) to delegate authority to execute any documents that has to be signed by all the trustees to “any two or more of their body”. Any document executed in pursuance of a section 333 authority, therefore, has the same effect as if executed by the whole body of trustees. This provision is usually utilised so that two directors of a charitable company execute the transfer deed for the company and at the same time give the statutory certificates on behalf of all the trustees.
As it is not possible for this authority to be delegated to only one trustee, this explains why a transfer cannot be executed by one director signing in the presence of a witness.
It is in both parties’ interests to ensure that the correct wording is used to ensure that the transaction is valid, and the Land Registry may reject a transfer deed if the correct formalities are not observed.