Bates Wells Briefing for Charities & Social Enterprises | 19 September 2017

Bates Wells highlights


The Law Commission has published proposals for a number of long term improvements to the Charities Act 2011. See here for a detailed summary.

Separately, DCMS has published more details of the plans to allow companies to convert to CIOs (Charitable Incorporated Organisations). See end of today’s Briefing for details.

 At a glance

NCVO has published a new guide on how to talk about charity issues that the public are concerned about.

The Local Government Association has published a report on housing older people, which includes case studies demonstrating how some local authorities have dealt with housing the ageing population.

The Data Protection Bill 2017 has now been published and has had its first reading in the House of Lords.

The Charity Commission for Northern Ireland has launched a consultation on proposed changes to the Annual Monitoring Return 2018.

 Charity Commission

New inquiry

The Commission has announced that it has opened an inquiry into Fadak Media Broadcasts (1165143) a charity with objects to advance the Islamic religion, to advance the education of the public in the Islamic religion, and to promote religious harmony. The investigation follows a serious incident report filed by the charity about a suspicion of significant unauthorised payments. An inquiry has been opened to assess whether:

  • the trustees have exercised sufficient oversight and control of the charity’s assets and whether there is any ongoing risk to charitable assets
  • the trustees are capable of discharging their legal duties and responsibilities in relation to the financial and general governance of the charity, including oversight of the charity’s staff
  • there has been any misappropriation of the charity’s assets and if so whether it is in the interest of the charity to pursue restitution

Case statistics

The Commission has published a breakdown of its statistics about the number of inquiry cases opened between 1 April and 30 June 2017. The total number of inquiries opened during this period was 8; the numbers are broken down by charity classification, beneficiary category, income, age of charity and religious classification.

It has also published similar statistics about the number of operational compliance cases opened during the same period. The total number opened was 184.

Account monitoring

The Commission has published a report as part of its Accounts Monitoring Review into concerns highlighted by auditors in their audit reports for 97 charities filing their 2016 accounts. The Commission has also published a press release commenting on the publication of the report.

After analysing the accounts, the Commission’s regulatory response for each charity fell into one of three categories:

  • No action required (51 charities) – the Commission took this approach where it was aware the issues were already being dealt with, where the issues were not of significant regulatory concern or where a more recent set of accounts was available on which to base the assessment
  • Regulatory guidance required (36 charities) – the Commission took this approach where it judged that the trustees should be able to address the auditor’s concerns and provided regulatory advice and guidance making it clear that it expected them to take action to address the issues
  • Engagement with the charity (10 charities) – where the auditor’s concerns highlighted serious failings of which the Commission was not previously aware and there was no indication that the trustees were taking action to address them.

Longer term charity law reform proposals

The Law Commission has published its final report on Technical Issues in Charity Law, including a draft Bill. The review which preceded this report considered “selected technical issues”, and was not a full review of charity law. The report makes a number of recommendations for amendments to the Charities Act 2011 – see this BWB Briefing for the detail. Though note no timetable has been given yet by Government for implementation of these recommendations.


NCVO has published a new guide on how to talk about charity issues that we know the public are concerned about. It’s aimed at anyone who may have to deal with questions on topics such as executive pay or fundraising. For example:

  • People prefer to hear about ‘the board of volunteers who run the charity’ rather than ‘trustees’ – a word that is poorly understood and which some actually had negative perceptions of.
  • Emphasising accountability helps people understand higher salaries.
  • Proactively telling people they should contact regulators with concerns reassures them that those concerns are being taken seriously.

Last week Secretary of State for Digital, Culture, Media and Sport Karen Bradley chaired the first meeting of the Inclusive Economy Partnership, which aims to get government, businesses and civil society working together to identify and develop solutions to societal challenges. The Partnership is led by an Advisory Group of 14 chief executives from a wide range of businesses and civil society organisations, including National Grid, Nationwide, O2, TechUK, NCVO and Big Lottery Fund. It is being convened by DCMS and Cabinet Office, with support from the Department for Business, Energy and Industrial Strategy. The Partnership will address issues relating to financial inclusion and capability, mental health and transition to work.


Data protection

The European Commission has published a position paper on the use of data and the protection of information obtained or processed before the UK’s withdrawal from the EU which sets out the EU’s essential principles to be presented to the UK in the context of Article 50 negotiations. The UK’s access to networks, information systems and databases established by EU law will, as a general rule, be terminated on the date of withdrawal. The UK or entities in the UK may keep and continue to use personal data or information received or processed in the UK before the withdrawal date if the conditions set out in the position paper are met. Otherwise, such data or information (including copies) should be erased or destroyed. The principles should also apply to personal data or information received or processed by the UK or entities in the UK after the withdrawal date pursuant to the Withdrawal Agreement.


The EU Commission published its eagerly awaited position paper on intellectual property rights post Brexit. Recognising that Brexit will create uncertainty for both the UK and the EU in relation to the scope of protection of certain IP rights in the UK post Brexit, the paper states that the unitary protection of certain intellectual property right, such as EU trade marks and the registered and unregistered Community design rights, should not be undermined by Brexit.


The EU Home Affairs Sub Committee has launched its Brexit: Reciprocal Healthcare inquiry. The Sub-Committee has taken evidence from the Department of Health and Nuffield Trust on the reciprocal healthcare implications of Brexit for UK citizens travelling, living and/or working in the rest of the EU, and for EU citizens travelling, living and/or working in the UK, in both the short and medium term.



A £3 million initiative led by the Government Equalities Office aims to ensure children are free from being bullied for their sexual orientation or gender identity. The programme will see primary and secondary schools across the country partnered up with organisations such as Stonewall, Barnardo’s and the National Children’s Bureau, to educate young people to accept and respect each other’s individuality in an age-appropriate way.

Plans have been announced by Education Secretary Justine Greening for a primary assessment system which focuses on pupil progress, mastering literacy and numeracy, and scrapping unnecessary workload for teachers.

Justine Greening has also confirmed details of a new fairer funding system for schools in England.

Six leading organisations, including the Teacher Development Trust, Teach First and the Institute of Physics, will share a fund worth almost £17million as part of the government’s drive to support and spread great teaching.


The Equality and Human Rights Commission has announced a new Legal Support Project which aims to increase access to justice for victims of discrimination in schools, further or higher education institutions or general qualification bodies. The funding can be used for front line advice, preparatory work or representation and the Commission is particularly interested in complaints where legal proceedings are already underway or are being considered.

Health and social care

See under Brexit above.

The Local Government Association has published a report on housing older people, which includes case studies demonstrating how some local authorities have dealt with housing the ageing population.


Also see under Health and social care above.

The Mayor of London, Sadiq Khan, has published a draft housing strategy for London.

The National Audit Office has published a report looking at whether the Department for Communities and Local Government is delivering value for money when administering homelessness policy.

Social finance

Pioneer’s Post reports on The Cordant Group, the UK’s second largest recruiter, announcement to move from a corporate to a social enterprise. With a turnover of £1.2 billion (year ending December 2016) and employing 125,000 people, the change to a social enterprise will take place over five years.

Civil Society reports on the launch of a fund which benefits from £4 million in grants from The Department for Digital, Culture, Media and Sport and £750,000 in non-financial support from Nesta. The fund will support volunteering in public services and new ways for over-50s to engage in digital social action.


The Connected Communities Innovation Fund is a partnership between Nesta and the Office for Civil Society at DCMS, providing up to £4 million in grants, alongside significant non-financial support, to “the best innovations that mobilise the time and talents of people across the lifecourse”.


See under Education, Schools above.

Data protection

See under Brexit above.

The Data Protection Bill 2017 has now been published and has had its first reading in the House of Lords. The accompanying Factsheet includes this:

“How does the Bill differ from GDPR?

The Bill is a complete data protection system, so as well as governing general data covered by GDPR, it covers all other general data, law enforcement data and national security data. Furthermore, the Bill exercises a number of agreed modifications to the GDPR to make it work for the benefit of the UK in areas such as academic research, financial services and child protection.”

ICO fines

The Information Commissioner’s Office has issued these fines:

  • A company behind a record high 146 million illegal calls about PPI has been fined £350,000
  • The company behind a taxi booking app has been fined £45,000 for breaking the law on sending unsolicited text messages.
  • A telephone services company has been fined £85,000 for calling numbers registered with the Telephone Preference Service (TPS).

Campaigning and lobbying

Civil Society Media reports the Cabinet Office has now said it has no plans to amend the Lobbying Act. See here for comment from a number of sector bodies.


Charity Finance Group has launched a free email support service for charities, particularly small organisations, to ask questions or ask for guidance on treasury or cash management issues in their charities, including issues of foreign exchange.


OSCR has published a video providing advice on drafting the Trustees’ Annual Report.

The Scottish Government is currently reviewing the water rates exemption scheme for Scottish charities that was introduced in April 2015. As part of this review, the Scottish Council for Voluntary Organisations (SCVO) has produced a short survey about the scheme; more details can be found via OSCR’s website.

Northern Ireland

CCNI has launched a consultation on proposed changes to the Annual Monitoring Return 2018.

Conversion of companies to CIOs

We reported last week that the framework to permit this is now being put in place. This DCMS summary of responses to its consultation sheds light on a range of issues:

Timetable for conversions

There will be a phased timetable for conversions, allowing smaller charitable companies to convert first, with conversions of community interest companies postponed altogether until later in 2018:

  • 1 January 2018: Charitable companies with an annual income of less than £12,500;
  • 1 March 2018: Charitable companies with an annual income between £12,500 and £25,000;
  • 1 May 2018: Charitable companies with an annual income between £25,000 and £100,000;
  • 1June 2018: Charitable companies with an annual income between £100,000 and £250,000;
  • 1 July 2018 Charitable companies with an annual income between £250,000 and £500,000;
  • 1 August 2018: Charitable companies with an annual income greater than £500,000;
  • 1 September 2018: Community Interest Companies.

To avoid a bottleneck of applications for conversion, the framework will no longer require any recent accounts and reports to be filed at Companies House before a conversion application can be made.
And to ensure that there is capacity to process applications, any additional changes which a converting charity may wish to make (for instance, a change in charity name or charitable objects) will need to take place before or after the conversion has occurred. CICs will need to apply for charitable status prior to conversion.

Anticipated take up of conversions

Some respondents to the consultation felt that small and medium sized charitable companies would be most likely to convert to a CIO. The Charity Commission anticipates that between 6,700 and 11,700 (20%-35% of existing charities) will convert to the CIO form over the next ten years. (CIOs now account for over 50% of new charity registrations).

Practicalities on conversion

The consultation response confirms the following:

  • Converting charitable companies will retain their existing charity number.
  • Any legacy to a charitable company will be payable to the converted CIO.
  • The conversion process does not trigger any trustee conflicts of interest.
  • There is no need for new data consents.
  • There will typically be limited TUPE implications, but DCMS says “it will be the duty of charity trustees or a CIC’s governing board to seek independent advice”.
  • A conversion from charitable company to CIO will not necessarily trigger an employer debt under the Occupational Pension Schemes (Employer Debt) Regulations 2005, provided the CIO agrees to take on any obligations of the charitable company and certain conditions are met. But DCMS says charity trustees should seek independent advice on pensions consequences prior to making an application to convert.
  • The consequences of conversion of a charitable company with charges registered at Companies House remain woolly. DCMS says “it is the role of a charity’s trustees to determine whether conversion is appropriate. A charitable company which has granted a floating charge must consider what effect conversion would have on the charge, and seek appropriate independent advice. Further, companies with registered fixed or floating charges that are not yet satisfied should note it is not possible to register a statement of satisfaction with Companies House following conversion (even if the charge was satisfied prior to conversion), so the charge will remain listed indefinitely. If this is an issue, the charitable company should consider how best to resolve it before submitting the application.”
  • The newly converted CIO and its trustees will be under an obligation to apply for the appropriate restriction to be entered in the title register of any land which it was already registered as proprietor, in order to bring the register up to date.
  • CIOs and SCIOs will be added to the Registrar of Companies Index of Company Names – meaning new companies cannot be registered if their name is “too like” that of an existing CIO or SCIO.

It also states that the Commission will issue guidance on the process once the regulations have been implemented.


This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of September 19, 2017.