The Law Commission report and draft Charities Bill

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 aim was  “removing or adjusting inappropriate regulation while safeguarding the public interest in ensuring that charities are properly run” and the report makes a number of recommendations for amendments to the Charities Act 2011. No timetable has yet been given for implementation of these recommendations by the Government.

  • The proposed changes include: 
    • Introducing a new statutory power for unincorporated charities to make any changes to their governing documents by resolution of the trustees, with certain amendments being subject to Charity Commission to reflect the current “regulated alterations” regime for incorporated charities (paragraphs 4.75 to 4.121)
    • Introducing a single test applied by the Commission to all requests to change objects (whatever the charity’s constitution) – with the Commission having to have regard to the purposes of the charity when it was established, the desirability of securing that the charity’s property is applied for charitable purposes which are close to the purposes being altered; and the need for the relevant charity to have purposes which are suitable and effective in the light of current social and economic circumstances (paragraphs 4.122 to 4.139)
    • Giving Royal Charter charities power to amend any provision in their Charter, subject to Privy Council consent (paragraphs 5.44 to 5.56), thereby avoiding the requirement for a Supplemental Charter.  If a Supplemental Charter is still desirable, the report suggests the Privy Council should review its policy to publicise the petition and remove the requirement to have the Charter printed on vellum (paragraphs 5.61 to 5.69)
    • For statutory charities changing their constitutions, making all section 73 schemes subject to the negative Parliamentary procedure (as some charities have been required to use the more onerous affirmative process) (paragraphs 5.115 to 5.118)
    • For failed appeals, allowing donations of up to £120 in a year to be applied cy-près without having to contact the donor (paragraphs 6.36 to 6.46) and allowing a fund that does not exceed £1,000 to be applied cy-près by trustee resolution without Charity Commission consent (paras 6.70 to 6.80)
    • For ex gratia payments, allowing decisions to be delegated by trustees (paragraphs 10.29 to 10.46), and allowing payments below certain levels to be made without Charity Commission consent with the level to be on a sliding scale depending on the charity’s income.  For charities with income over £1m, this would permit ex gratia payments up to £20,000 (paragraphs 10.5 to 10.27)   
    • Re trustees:    
      • Introducing a statutory power to pay trustees for the supply of goods (paragraphs 9.6 to 9.12)
      • Giving the Charity Commission power to authorise a trustee to retain any benefit received in breach of the constitution or to be paid, where it would be inequitable not to do so (paragraphs 9.14 to 9.38)
      • Giving the Commission power to ratify invalid or uncertain trustee appointments or elections (paragraphs 14.17 to 14.29)
    • For incorporations and mergers:
      • Repealing section 268 of the Charities Act 2011, which contains a limited statutory power to transfer property (as it will become redundant following the recommendation that all charities will be able to amend their governing documents, as that would mean they could adopt a power to merge, paragraphs 11.44 to 11.48)
      • Clarifying how vesting declarations work in relation to certain types of property (paragraphs 11.50 to 11.80)
      • Solving the technical problem for legacies under the register of mergers, reducing the need for shell charities to be retained (paragraphs 11.82 to 11.103)
      • Giving “trust corporation status” automatically to any corporate charity that administers charitable trusts (paragraph 11.118 to 11.136)
    • Extending the Charity Commission’s powers under section 42 of the Charities Act 2011 to order a change of name, to include ordering a change of working name (paragraphs 13.30 to 13.43) and giving the Commission power to delay registering a charity or entering a new name of an existing charity on the Register if there are section 42 concerns about the proposed name (paragraphs 13.45 to 13.60)
    • Introducing a reformulated definition of permanent endowment (paragraphs 8.28 to 8.33), introducing a single financial threshold for sections 281 and 282 which allow trustees to spend permanent endowment (paras 8.66 to 8.96), and giving trustees a limited power to borrow against permanent endowment (paras 8.124 to 8.145)  
    • Various relaxations of the charity land regime (Chapter 7).  The Law Commission says these should lead to costs savings of an estimated £2.8m per year. These include the following:
      • Changing the advice required on disposals of charity land by replacing the Charities (Qualified Surveyors’ Reports) Regulations 1992 with a requirement for advice on:
        • What sum to expect
        • Whether the value of land can be enhanced pre-disposal
        • Marketing of the land (or if an offer has already been made, any further marketing that would be desirable)
        • Anything else that can be done to ensure the terms are the best that can reasonably be obtained for the charity (paragraphs 7.85 to 7.175)
      • Extending the definition of designated advisers that may provide the above advice to include fellows of the National Association of Estate Agents and fellows of the Central Association of Agricultural Valuers and also qualified trustees, officers and employees, with advisers to give a personal self-certificate that they hold appropriate experience and expertise and do not have any conflict of interest
      • Removing the statutory requirement on trustees to advertise the disposal in the manner stated in the adviser’s report
      • Requiring certificates on compliance with the Charities Act 2011 requirements to be included on exchange of contracts as well as at completion (to address the “Bayoumi gap”) (paragraphs 7.224 to 7.227)
      • Stating that the Charities Act requirements are only to apply to land held by or on trust for a single charity (to address for example legacy property issues where land may be held on trust for multiple charities) (paragraphs 7.177 to 7.183)
      • Removing the public notice requirements for designated land (paragraphs 7.229 to 7.231)
      • Removing certain connected person transactions from the requirement for Charity Commission consent, including short residential tenancies to employees and disposals to wholly owned subsidiaries (paragraphs 7.185 to 7.214)
      • Requiring disposals to wholly owned subsidiaries of charities to be notified to the Charity Commission and guidance to make clear such disposals must be for the best terms that can reasonably be obtained for the charity
      • Removing disposals by liquidators, provisional liquidators, administrators, receivers and mortgagees from the Charities Act restrictions on disposals (paragraphs 7.249 to 7.252)
    • Changing court and Tribunal proceedings so that:
      • Applications for authorisation to bring charity proceedings can be made to the Court if the Commission would have an conflict of interest in giving authorisation (paragraphs 15.5 to 15.18)
      • The Charity Tribunal can give “authorised costs orders” which would be the equivalent of a Beddoes order, enabling trustees pursuing proceedings in the Tribunal to obtain advance assurance that the costs incurred can be properly paid by the charity’s funds (paragraphs 15.28 to 15.47)

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 18, 2017.