Part 4

A company’s capacity and related matters

Capacity of company and power of directors to bind it

Constitutional limitations: companies that are charities
42
1
Sections 39 and 40 (company’s capacity and power of directors to bind company) do not apply to the acts of a company that is a charity except in favour of a person who—
a
does not know at the time the act is done that the company is a charity, or
b
gives full consideration in money or money’s worth in relation to the act in question and does not know (as the case may be)—
i
that the act is not permitted by the company’s constitution, or
ii
that the act is beyond the powers of the directors.
2
Where a company that is a charity purports to transfer or grant an interest in property, the fact that (as the case may be)—
a
the act was not permitted by the company’s constitution, or
b
the directors in connection with the act exceeded any limitation on their powers under the company’s constitution,
does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company’s act.
3
In any proceedings arising out of subsection (1) or (2) the burden of proving—
a
that a person knew that the company was a charity, or
b
that a person knew that an act was not permitted by the company’s constitution or was beyond the powers of the directors,
lies on the person asserting that fact.
4
In the case of a company that is a charity the affirmation of a transaction to which section 41 applies (transactions with directors or their associates) is ineffective without the prior written consent of—
a
in England and Wales, the Charity Commission;
b
in Northern Ireland, the Department for Social Development.
5
This section does not extend to Scotland (but see section 112 of the Companies Act 1989 (c. 40)).