Introduction

Nominet will be 10 years old this year, and we have grown and changed a great deal in that time.  With support from our members, tag holders, registrants and other stakeholders, our first 10 years have been a resounding success.

We are now proposing a number of changes to our constitution that we believe will help us to maintain and develop this success. This Q&A responds to the questions we have been asked regarding the changes we are recommending. But before we respond to those questions, it is important to highlight the key elements of Nominet that will not change:

.uk will continue to be our core business

We remain committed to promoting the value of .uk, to running a safe, secure and stable registry for .uk, to developing the services we offer and to serving our members, tag holders, registrants and other stakeholders.

We will still be  "not-for-profit"

We believe it is essential for us to retain our not-for-profit status and it is quite clear that the Government and other non-member stakeholders would have severe misgivings if this were to change.

We will remain a company limited by guarantee

Moreover it would be legally impossible to change the Company's present status without liquidating it.

We will not pay dividends

As a company limited by guarantee it would be illegal to pay a dividend.

We will continue to encourage registrants to use the services of our tag holders

None of the changes we propose will alter our priority of encouraging all registrations via tag holders.

We will continue to provide the best possible service to our customers and work in the interests of all our stakeholders

This philosophy is enshrined in the way we approach everything that we do and will not change.

Questions and answers

Why are these changes being proposed?

We have achieved a unique status within this industry and in many ways our original constitution has served us very well in achieving that status.  However, if we are to maintain and develop this success, we now need a less restrictive constitution. We also need new governance structures that will enable us to face the challenges that the growth and development of the industry presents and to take advantage of opportunities that we know are likely to come our way. Whether we like it or not, we are subject to competition from other registries who do not have these restrictions and will bid for these opportunities if we cannot make these changes.

With this background, the Board has conducted a review of the constitution and governance procedures of the company, both as a consequence of their duties to the membership and also to respond to an ever-growing demand from the PAB and from the membership generally that such a review should be concluded without further delay.

Why can't you just offer ENUM with the current Memorandum of Association?

At present, the main objects set out in the Memorandum of Association of the Company are very tightly drawn and would for example, restrict the Company's ability bid to act as the registry for new developments and proposals such as ENUM in the UK, or to bid if a new opportunity, like .eu, were to present itself in future.

Why is the composition of the Board being changed?

Currently the articles require that there are two executive directors (one of whom is MD and Chairman) and four non-executives.

We are recommending that the constitution of the Board change to:

• Three executive directors
• Three elected non-executive directors - to bring the members' views to the table and bring experience of actually working in the industry
• Three appointed non-executive directors (including the Chairman) - to bring specific external skills and independence
  

We strongly believe that this mix of membership-elected and wholly independent directors will provide the best possible combination of skills and experience to the oversight of our operations.

Additionally, we have to bear in mind that the legal environment has changed drastically in the last 10 years and is now subject to further change in the form of the new Companies Bill before parliament. There is a requirement that board members are able to exercise their skills in a responsible and independent way, and as such should be allowed to get on and oversee the management of the company as they see fit, subject of course to an annual review of their conduct as a Board which should be considered when they report to the members at the Annual General Meeting.

The members will still have the power to vote on all the non-executive directors as they retire by rotation at general meetings.

Finally, director elections are not very clear in our existing articles and we are proposing that they are covered more fully in the new articles.

Don't the proposals mean members have less power then they currently have?

Members currently elect two thirds of the Board of Nominet - four of the six directors on the Board. It is proposed that members would have the right to determine two thirds of the Board - by electing three and having the power to vote on another three.

In any case, the ability of members to change the whole Board through a Companies Act requisition is unchanged.

How would the Board determine that a member needed to be expelled?

The proposed new power of expulsion is largely the result of dealing with Domain Registrar Services Ltd, which was making pressure sales calls falsely claiming to be Nominet. They were the subject of a Trading Standards investigation and lots of public complaints. They were a member, and therefore used Nominet's name and logo on their site - there was no way to prevent this at the time, despite the fact that this gave their suspect business practice some considerable credence.

The criterion in the proposed articles is that in the "directors' reasonable opinion, the actions or omission of the member are likely to bring the company into disrepute, or other exceptional circumstances [apply]". If the member involved was unhappy, they could appeal and the matter will be decided by an external neutral arbitrator.

If this power had been in place since Nominet began, it is estimated that it would have only been used once in the last 10 years.

Are you going to increase prices?

We don't plan to. Our track record in the last ten years has been to reduce prices.  Registration and renewal fees for members have reduced from £100 in 1996 to the current fee of £5, introduced in 1999.

We cannot promise that we would never, ever, increase prices because that would be unwise - but we do not plan to.

It is highly unusual for a company not to have control over its prices. This restricts our ability to be responsive in our pricing. These changes are also about giving the Board the ability to react swiftly to market volatility.

Why is there a rush with these proposals?

If anything, we've been too slow in making these proposals and have been rightly criticised for this. The governance review first commenced in late 2002. Our new Chairman, Bob Gilbert, took over the task in May 2005 and made a commitment to members at the 2005 Annual General Meeting to complete the review in tandem with a strategic review of Nominet, as quickly as possible.

Many members have made input to the reviews via annual general meetings, member lunches and other meetings and have asked us to complete and implement our proposals as soon as possible. The Policy Advisory Board also urged the Chairman to put proposals to members as soon as possible.

How do members benefit from the new proposals?

There are two sorts of initial benefits for all members. Firstly, allowing Nominet to be run more efficiently and freely helps the overall aim of improving Nominet, its governance and its operations. The better run Nominet is, the better its services will be, and the more value we'll be able to deliver to members and customers alike.

Secondly, we may be able to go into new areas, such as UK ENUM, that allow you to offer new services to your customers with no new infrastructure.

What difference will changing the voting cap from 10% of the total votes to 10% of the votes cast mean?

Currently votes are capped at 10% of the votes allocated - which means that if the cap is applied to someone and they then are one of only a hundred or so members who actually vote, their vote in that election could be a high proportion of the votes cast.  We are proposing that however many votes a member has, they cannot exceed 10% of the votes actually cast.

So, smaller members may benefit because the change in the voting cap reduces the power of the largest members.

If Nominet has the power to introduce promotions etc, won't this end up favouring some businesses more than others?

No.  Nominet will not use pricing to discriminate against any group.  Whilst we are proposing that we introduce this enabling power we do not have any specific plans at present.  Any such scheme would have to be carefully thought through and developed with member input.

As there was a discrepancy between the EGM notice and original Memorandum posted on the website, does this mean the meeting has not been validly convened?

No.  There were a number of minor errors, for which we apologise, but they do not alter the validity of the notice. . As the notice convening a meeting clearly states, the version of the memorandum and articles that will be adopted are those initialled for the purpose of identification by the Chairman.  The currently posted Memorandum and Articles are those that will be initialled for that purpose.

If I have sent in my proxy form but have now changed my mind, what do I need to do?

Email Nominet_EGM_Pack@electoralreform.co.uk and your previous vote will be disregarded and a new proxy form sent to you.

What percentage of the votes cast is required for each resolution to be passed?

The changes to the memorandum require at least a 90% majority. The changes to the articles require at least a 75% majority. The proposed voting rights bylaw requires a two-thirds majority. These differing values are because of the different types of resolution, and the effect of clause 4 of our memorandum.

Why are so many changes being introduced as part of one vote?

Because we believe that so many changes are required that we need a new memorandum and articles. The way that company law works is that in order to get a new memorandum and articles you must vote to adopt them at a general meeting of the company. The numerous changes proposed all interlock and cross-refer, so it would not have been workable to offer a list of options and ask members to pick them.  We are also aware that members rightly expect the Board to be more decisive than that.

Most importantly, the Board strongly believes that all the changes proposed are in the best interests of the company, and will help us all take Nominet forward to meet the challenges ahead.