Bates Wells Briefing for Charities & Social Enterprises

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Charity
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Social Enterprise
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Updates

Bates Wells highlights

Contested legacies

Bates Wells’ Partner Leticia Jennings writes here about claims brought under the Inheritance (Provision for Family and Dependants) Act 1975 and why charities shouldn’t feel pressurised into settling. 

Social Christmas shopping

Social Enterprise UK has published a gift guide featuring around 100 products from 60 different social enterprises. 


At a glance

The government has announced that it intends to extend the temporary suspension of the use of statutory demands and winding-up petitions.

The protections from forfeiture of business tenancies under the Coronavirus Act 2020 are also being extended from 31 December 2020 until 31 March 2021.

The Charity Commission has posted a blog about the risk of a pension scheme deficit.

The recent High Court decision in Knipe –v- British Racing Drivers’ Motor Sport Charity and others has provided guidance on how to interpret legacies to misdescribed charities. 
 
The Fundraising Regulator has published the outcomes of three recent investigations and released a webinar on handling fundraising complaints. 
 
The government has announced the launch of an independent review of the Human Rights Act 1998 and whether it requires reform. 


Coronavirus – extension of the suspension of certain insolvency measures under the Corporate Insolvency and Governance Act 2020 (“CIGA”)

The government has announced that it intends to extend the temporary suspension of the use of statutory demands and winding-up petitions.  This suspension had been due to expire on 31 December, but will now run until 31 March 2021.

By way of background, CIGA:

  • Imposes a blanket restriction on presenting winding-up petitions based on statutory demands served on or after 27 April 2020.
  • Restricts a creditor from presenting a winding-up petition on the grounds of a company’s inability to pay its debts, unless they have reasonable grounds for believing that coronavirus has not had a financial effect on the company or that the debt issues would have arisen anyway.
  • Restricts a court from making a winding-up order on winding-up petitions that trigger the coronavirus test, unless it is satisfied on the relevant facts.  

The regulations effecting this extension have been laid before Parliament and will come into force on 31 December 2020.

(Note, these measures are distinct from the suspension of liability for wrongful trading, which ran from 1 March to 30 September 2020, and was reinstated for the period from 26 November to 30 April 2021.)

At the same time, the protections from forfeiture of business tenancies under the Coronavirus Act 2020 will also be extended from 31 December 2020 until 31 March 2021, under additional regulations.


Members’ meetings – Scottish Charitable Incorporated Organisations (SCIOs)

The period during which SCIOs can hold their members’ meetings virtually has been extended until 30 March 2021 under new regulations.  This is in line with a similar extension for companies, CIOs and registered societies made on 26 November. 


Coronavirus – guidance

The Department of Health and Social Care has published guidance on local authority coronavirus enforcement powers, which includes a summary of the obligations on businesses, such as the displaying of an NHS QR code in relevant premises for the collection of contact details.


Coronavirus – government funding

More than £165 million in repayable finance has been announced to support major arts and heritage institutions.   The funding has been offered to organisations including the National Theatre, Southbank Centre, English National Opera and Royal Shakespeare Company.
 
Plans for allocating the remainder of the £1.57 billion Culture Recovery Fund are also being announced. Funding, which was held back in previous rounds to allow the Government to respond to the changing public health picture, will be available for organisations that are at imminent risk of collapse before the end of this Financial Year. £300 million in grants and £100 million in loans will also be available to support organisations’ transition back to usual operating mode from April 2021. The government says further detail on the rounds will be released in due course.


Coronavirus – business interruption insurance claims

The Financial Conduct Authority has published for consultation draft guidance on proving the presence of COVID-19 for the purposes of business interruption (BI) insurance claims. Some BI insurance policies require the policyholder to prove the presence of a disease within a particular area around their premises. As part of its September 2020 decision on the FCA’s BI insurance test case, the High Court made declarations as to the types of evidence which policyholders can use to prove the presence of COVID-19, and the methodologies they may use in that process; the guidance reflects those declarations.  The FCA has confirmed that if the subsequent Supreme Court judgment on the BI insurance test case (expected January 2021) affects the content of the draft guidance, it will be amended accordingly.


Coronavirus – state aid

The European Commission has approved, under the state aid rules, a £17 million (approximately EUR20 million) UK aid scheme to compensate Scottish airports for the damage suffered due to the outbreak of the 2019 novel coronavirus disease (COVID-19) (see Commission Daily News MEX/20/2294).  The support will take the form of a relief from the “Non-Domestic Rates”, a tax on properties used for non-domestic purposes. The scheme includes a claw-back mechanism, whereby any possible public support in excess of the actual damage received by the beneficiaries will have to be paid back to the UK State. The risk of the state aid exceeding the damage is therefore excluded. The Commission assessed the measure under Article 107(2)(b) of the TFEU, which enables the Commission to approve state aid measures granted by member states to compensate specific companies or specific sectors (in the form of schemes) for the damage directly caused by exceptional occurrences, such as the coronavirus outbreak. The Commission found that the UK scheme will provide compensation for damage that is directly linked to the outbreak and that the measure is proportionate, as the compensation does not exceed what is necessary to make good such damage.


Coronavirus – impact

The Department of Health and Social Care has published evidence and analysis of COVID-19 and the health, economic and social effects of the tiered approach.


Charity Commission

Blog – the risk of a pension scheme deficit

The commission has posted a blog written by its Assistant Director of Accountancy Services, Nigel Davies, about the risk of a pension scheme deficit. This follows research carried out by the commission looking at the accounts of a sample of charities with pension deficits. The commission says that the good news is that most charities were found to be handling this risk appropriately. The bad news is that, even where the risk was being well managed, it found most charities did not report the matter in enough detail in their annual accounts and trustees’ annual report, as required or recommended by SORP.

Inquiry report

Livingstone House Mother of the Harvest Ministries (1102286)
Inquiry report
CC press release
 

The commission opened the inquiry into this Birmingham rehabilitation charity following repeated failures to submit accounting information and serious concerns about the management of the charity.

The inquiry found that the former manager directly authorised their own salary, overtime and bonus payments from the charity’s bank account. Investigators also found unauthorised payments to a former trustee and to a connected company.

The commission has disqualified the former manager of the charity and secured a voluntary undertaking from one of its former trustees that they will not act as a charity trustee or senior manager of a charity.

Amended regulatory case report

The commission has published a revised case report into former registered charity Just West Yorkshire. Three paragraphs have been removed from the original report published on 4 June 2020 after the commission considered and partially upheld complaints from parties connected to the case under its published procedures.


Charity law cases

The recent High Court decision in Knipe v British Racing Drivers’ Motor Sport Charity and others [2020] EWHC 3295 (Ch) (3 December 2020 has provided guidance on how to interpret legacies to misdescribed charities.  Matthew J held that the gift to the:

  • “British Racing Drivers’ Club Benevolent Fund” should be construed as a gift to the British Racing Drivers’ Club Motor Sports Charity, a registered charity and benevolent fund administered by the British Racing Drivers’ Club (a non-charitable unincorporated association). As the deceased had been a professional racing driver and a long-standing member of the club, and in the absence of any other candidate, the court found that he must have had this charity in mind as the beneficiary of the gift. This was a simple case of construing the words in the will in the context in which the deceased had used them.
  • “Cancer Research Fund” did not refer to a particular institution; it referred to the general charitable purpose of cancer research. As the phrase was ambiguous, the court admitted extrinsic evidence to assist in its interpretation (under section 21 of the Administration of Justice Act 1982). This showed that the name had been taken by a number of subsidiary charities of larger registered charities, but that these had now been removed from the register of charities. Four such subsidiary charities existed when the will was made but had ceased to exist by the date of death. There was no evidence that the testator had any particular charity in mind when he made his will, or that he had any strong connection to any particular cancer research charity.  In any case, the other charitable elements in the will, meant that the court had no difficulty in discerning a general charitable intention.

Governance

f you haven’t had time yet to look at the refreshed Charity Governance Code, our summary here highlights the key changes. 
 
NCVO has made available two short videos covering the new Integrity and EDI principle.


Safeguarding

See below under Health and social care.


Fundraising

Fundraising Regulator

The FR has published the outcomes of three recent investigations, two of which involved charity clothing collection bags. 

The FR has also released a new webinar on handling fundraising complaints, and its latest blog is also on a complaints theme, exploring how organisations can improve their complaint handling.

Lotteries

The government has announced a review of the Gambling Act 2005.

Legacies

Bates Wells’ Partner Leticia Jennings writes here about claims brought under the Inheritance (Provision for Family and Dependants) Act 1975, the recent case of Shapton v Seviour [2020] and why charities shouldn’t feel pressurised into settling. 


Mergers

NPC reports it has not seen a significant increase in charity mergers this year and in this blog, NPC’s Associate Director for Strategy and Leadership, Katie Boswell, explores how properly resourced mergers can help rebuild from Covid-19.


Education

The Department of Education has announced a £4.4m funding package for programmes to support vulnerable families, including a National Centre for Family Hubs that will improve families’ access to vital services across the country.
 
Ofqual has:

  • Opened a consultation to seek views about advance information for examination topics for GCSE and A Levels being released prior to the exams. Note that this consultation will run for only 10 days, closing on 20 December 2020.
  • Published a report reviewing key barriers to greater adoption of online and on-screen assessments in high stakes qualifications such as GSCEs and A Levels. The key barriers are:
    • The current IT provision in schools and colleges;
    • Insufficient or unreliable internet connections;
    • A lack of specialist IT staff in schools and colleges;
    • Difficulties in managing security; and
    • The planning involved in a large scale online move.

 
Schools defy council leader’s request to close – Schools Week reports on schools which are set to defy Greenwich Council’s orders to close and move to online learning following growth in Covid-19 cases.
 
Mass testing in London, Essex and Kent schools: Everything you need to know – Schools Week provides a useful summary of the planned mass testing programme in London, Essex and Kent secondary schools.
 
‘Forty English universities in cash trouble’ as pandemic bites – Times Higher Education reports on university’s financial problems ‘problems that could potentially breach their loan agreements with banks and see auditors declare concern about their ability to continue operating’.[Sign up required to view article].


Health and social care

The Disclosure and Barring Service (DBS) has launched a consultation about safer recruitment practices, references and conduct information in the social care and health sector. The consultation, which will be conducted in collaboration with Skills for Care, Reed Screening, Dominic Headley & Associates and VBA Consulting, will develop resources for social care employers to help them share accurate and relevant information about individuals with prospective employers and the DBS.As well as the online consultation, the DBS and its partners will host several workshops and are asking organisations within the social care and health sector to take part in a short survey.


Housing and homelessness 

Rough sleepers across England are to receive extra support to help them recover from drug and alcohol misuse.  Forty-three areas across England will receive support from a £23 million government fund designed for those with drug and alcohol support needs to get the help they need to rebuild their lives. The programme will be boosted by a further £52 million in 2021 to 2022.

As part of a £46m Changing Futures programme, the government is inviting local organisations to form partnerships and bid for a share of the funding to better support those who experience multiple disadvantages including homelessness, substance misuse, mental health issues, domestic abuse, and contact with the criminal justice system. 


Social enterprise news

Innovation and resilience: a global snapshot of social enterprise responses to Covid-19 is a new joint report by the British Council, United Nations ESCAP and Social Enterprise UK. The report outlines the findings of a survey carried out across 38 countries, involving 740 social enterprises. The report paints a positive picture of how social enterprises have dealt with Covid-19, although it also outlines challenges such as increasing inequality, with social enterprises led by women and young people facing a higher rate of closure and reporting more pessimistic feelings. For more, Pioneers Post provides commentary on the publication.


Social finance and social impact investing news

Big Society Capital has published its Impact Report for 2020. The report highlights the work done by the organisation and its partners, including the collective response to the pandemic. In its press release, Big Society Capital’s Interim Chief Executive Officer, Stephen Muers, comments on the report and highlights some key findings.
 
Resonance Launches New £20m Homelessness Social Investment Property Fund – Resonance has launched a new social impact homelessness property fund, National Homelessness Property fund 2, with an initial investment of £20 million and target fund size of £50-£100 million, with backing from a pension fund. Greater Manchester Pension Fund, Greater Manchester Combined Authority and Big Society Capital are the first investors into the fund. Pioneers Post provides commentary on the launch.
 
£1m innovation fund opens for London charities – Civil Society Media reports on the Greater London Authority’s £1m Resilience Fund, to be managed by Nesta, intended to support charities and social enterprises, as well as local authorities, in tackling some of London’s key social challenges. ‘Nesta has provided a range of possible challenges including inequality, social cohesion, the impact of Brexit, and wellbeing, but applicants can choose any issue they want to address.’


Environment

The Government has announced the first round of funding from the Green Recovery Challenge Fund.  Projects that “protect landscapes, connect people with nature and help create and retain thousands of green jobs across England” have been awarded a share of almost £40 million. The second funding round will open for applications early next year.


Human Rights

The government has announced the launch of an independent review of the Human Rights Act 1998 (HRA 1998) and whether it requires reform. 


Company Law

The Department for Business, Energy and Industrial Strategy (BEIS) has published three consultations on measures intended to reduce fraud and increase business confidence.  They are:

  • A consultation on implementing the prohibition on corporate directors, which was originally included in the Small Business, Enterprise and Employment Act 2015.  It is proposed that, alongside commencement of the prohibition, regulations be brought forward to provide for a principles-based exception to the prohibition.  Under those principles, a company may still be appointed a director provided that both (a) all of its directors are in turn natural persons, and (b) those natural person directors are (prior to the corporate director appointment) subject to the Companies House identity verification process (for more information about the proposals for this process, see here).
  • A consultation on improving the quality and value of financial information on the UK companies register.  This includes consideration of how information – particularly financial information – is submitted to Companies House, what information should be submitted, and what Companies House should do with that information. The consultation includes options for pursuing a “file once with government” approach to filing accounts, and requirements as to the format and content of those accounts.
  • A consultation on proposals to reform the powers of the Registrar of Companies.  These proposals include:
    • Introducing a new discretionary power to query and check information before it is placed on the register. The Registrar will no longer be obliged to accept documents where there is a reason to query the information provided. The power may be used, among other things, in relation to the registration of company names.
    • Extending the Registrar’s powers to amend information already on the register to make it easier to remove inaccurate information.
    • Conferring the power to require documents to be delivered by electronic means only from the Secretary of State to the Registrar.
    • Removing the requirement for companies to keep a register of directors. Views are also sought on the impact of making amendments to other company registers.

 
All three consultations close 3 February 2021.


Scotland

OSCR’s latest newsletter has been published containing a round-up of recent news stories from the Regulator.


Northern Ireland

CCNI has published a statutory inquiry report into three related charities, Karmel City Church, Karmel Trust and Make a Difference Worldwide. The charities first came to the attention of the charity regulator when the enquiries team received a report of matters regarded as alleged or actual serious incidents, including a lack of transparency about the origin and purpose of a significant donation of approximately £600,000 received by the Karmel City Church.


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 December 15, 2020.