Bates Wells Highlights
At the 12 month marker of the UK locking down, we wanted to take a moment to pause, step back and look at the bigger picture for the charity sector. We asked leading journalist Liza Ramrayka to take a look back and pull together the key challenges, solutions and lessons learned in what has been an extraordinary year. Read the full report here.
A Charities Bill looks possible this year – with the government publishing its long awaited response to the Law Commission’s report on Technical Issues in Charity Law. See summary below.
At a glance
The Supreme Court has issued its judgment in the appeals which considered whether home workers who are required to remain at home in their shift and/or residential care workers who ‘sleep in’ are entitled to the national minimum wage for time that is not spent actually performing some specific activity.
NCVO has published the results of its March survey of the sector.
The government has published a consultation “Restoring trust in audit and corporate governance”.
Coronavirus – government funding
£100 million from the National Leisure Recovery Fund has been allocated to 266 local authorities across England, to support the recovery of publicly-owned leisure centres and gyms.
The government has also:
- announced additional support for women’s football clubs -£680,000 to benefit six Women’s Super League and FA Women’s Championship clubs.
- announced that elite, national and regional ice hockey will receive an unprecedented £2.7 million of Government funding in the latest round of the Sport Winter Survival Package.
Coronavirus – COVID-status certification
The government has issued a call for evidence on whether COVID-status certification could play a role in “reopening our economy, reducing restrictions on social contact and improving safety”. COVID-status certification refers to the use of testing or vaccination data to confirm in different settings that individuals have a lower risk of getting sick with or transmitting COVID-19 to others. Such certification would be available both to vaccinated people and to unvaccinated people who have been tested. The government is looking to consider the ethical, equalities, privacy, legal and operational aspects of a potential certification scheme, and what limits, if any, should be placed on organisations using certification. The call for evidence closes on 29th March.
Coronavirus – impact on the sector
NCVO has published some of headlines from its March survey of the sector:
• 74% of respondents expect Covid-19 to have a moderate or significant negative impact on delivering their objectives next year;
• Trading income is expected to be down by 17% in the next financial year than pre-Covid levels
• 30% expect their financial position to deteriorate over the next month
• 43% indicated that their range of services has decreased since March 2020
Coronavirus – Corporate Insolvency and Governance Act 2020 (CIGA)
The Relevant Period under CIGA, which allows companies, CIOs and mutuals flexibility around holding remote general meetings, expires on 30 March 2021. The period can only be extended by primary legislation and we have heard from Government that while BEIS has been exploring whether there may be a legislative opportunity to extend the flexibility, this doesn’t look likely in the short term.
In the meantime, guidance published by the Chartered Governance Institute (ICSA) in February 2021, which we have flagged in previous alerts, may provide some comfort. This guidance from ICSA and the City of London Law Society, which is endorsed by BEIS, makes it clear that companies can hold hybrid general meetings (ie with some people physically present, and others attending remotely) even if they don’t have specific provisions in their articles, provided there isn’t anything in the articles which would preclude this. But it does recommend that companies should include specific hybrid meeting provisions in their articles. It also has guidance on calling and running general meetings in the light of the continued restrictions on gathering. And this ICSA guidance for charities, also published in February, is a how to guide for charities wishing to hold virtual or hybrid general meetings.
SME Brexit Support Fund
The UK government has announced that the £20 million SME Brexit Support Fund has opened for applications. The Fund enables eligible SMEs to apply for grants of up to £2,000 to help them adapt to new customs and tax rules when trading with the EU; they can also access practical support, including training for new customs, rules of origin and VAT processes. Further information (including eligibility criteria) and details on how to apply for a grant can be found on the Fund’s government page.
Brexit and NI Protocol: infringement proceedings
The European Commission has launched infringement proceedings against the UK by sending a letter of formal notice. The Commission believes the UK has breached the substantive provisions of the Northern Ireland Protocol, as well as the good faith obligation under the UK-EU withdrawal agreement, by unilaterally declaring its intention to delay the full application of the Protocol concerning the movement of goods and pet travel from Great Britain to Northern Ireland for operational reasons.
Government guidance: .eu domain names
The government has updated its guidance on registering and renewing .eu domain names in the UK following the end of the Brexit UK-EU transition period. From 1 January 2021, any UK registrant of a .eu domain name that could not meet the eligibility criteria for the .eu domain name had their .eu domain names suspended; however, the domain could be reinstated if the registration data were updated to meet the eligibility criteria. The update states that domain names that are not reinstated will remain suspended until 30 June 2021, and will then be withdrawn from 1 July 2021. On 1 January 2022, all the withdrawn domain names will be revoked: they will then start to be made available for registration by other entities.
National Trust regulatory case report
The commission has published reports of its inquiries into:
- Orphan Relief Fund One trustee was removed by the commission; four further trustees resigned after the inquiry opened and were disqualified by the commission for a period of 8 years.
- The Mohiuddin Trust The charity had become the subject of an internal dispute with two competing groups claiming to be its trustees following the death of the founder and spiritual leader of the charity. An Interim Manager was appointed and given specific tasks to restore the charity to effective standards of governance, management and administration, including finding new trustees to be appointed to the charity. The inquiry appointed six individuals under section 80(2) of the Act to be the new trustees of the charity. An appeal has been lodged to the First Tier Tribunal regarding the use of this power. The hearing date for this appeal is awaited.
The EIRIS Foundation is carrying out research on charity perspectives on ethical money and investing responsibly. It is keen to hear from charities either:
- Via this survey relating to its Charity Ethical Money Action Plan and/or
- Via a conversation regarding your charity’s views on responsible investment and ethical money. Contact: [email protected].
The aim is to help the EIRIS Foundation better understand current investment and money practices, and what barriers charities may face to investing or holding money in a more ethical way.
Charity law reform – Technical Issues in Charity Law
The Government has published its long awaited response to the Law Commission’s recommendations for a suite of technical charity law changes. The government says it has accepted the majority of the recommendations and will bring forward legislation when parliamentary time permits. For a reminder of the proposed changes see our summary here. The few that the government has not accepted relate to Royal Charter bodies, land transactions, the First Tier Charity Tribunal and authorisation to bring Charity proceedings.
Bates Wells partner Jamie Huard comments, “It is disappointing that the Government has not agreed to exclude wholly-owned subsidiaries from the definition of connected persons. This means that property disposals to wholly-owned subsidiaries will continue to require Charity Commission consent, with the additional delay and cost for charities in addition to the advice requirements of sections 119 and 120.
In relation to designated land, it is on balance preferable that the Government has rejected the proposal to abolish advertising proposed disposals of designated land. Deleting section 121 would have led many to assume wrongly that there was no specific restriction in relation to designated land when charities would still have been expected to consult with stakeholders. Keeping this section is likely the safest way to avoid an inadvertent breach of this requirement.”
HMRC has announced that the requirement for non-taxable trusts to register with the Trust Registration Service, introduced by the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020, in line with the EU’s Fifth Money Laundering Directive, will be deferred from March 2022 until some time in summer 2022, because the IT system isn’t now expected to open for registrations until summer 2021. Under the new regime, charitable trusts which are registered with the Charity Commission, or are not required to register with the Commission under s 30(2) Charities Act 2011 (ie exempt, excepted and small charities), do not need to register with the TRS. The position of restricted funds and assets held as nominee or on bare trust for charity is still not completely clear.
The government has reopened its call for evidence about Violence Against Women and Girls to provide an additional opportunity to feed into the consultation. You can participate by completing the public survey by 26th March.
Amanda Spielman (Ofsted’s Chief Inspector) addressed the Association of School and College Leaders Annual Conference 2021 and confirmed that full graded Ofsted inspections will not return until the new academic year. Schools Week reports that Ofsted will instead shortly announce plans to use pilots to examine how it can reintroduce the inspection framework during the pandemic, including how it inspects in line with safety measures.
Nicola Dandridge (Chief executive, Office for Students (OfS)) has written a blog post on expectations around admissions practices. She warns that universities and colleges must keep the promises they make to students during this year’s admissions cycle and not end up ‘sacrificing quality for inflated intakes’. The OfS has noted it has the power to intervene when there are issues about the teaching and support universities and colleges provide to their students.
Also see under Public procurement below
Health and social care
The Supreme Court has issued its judgment in the appeals which considered whether home workers who are required to remain at home in their shift and/or residential care workers who ‘sleep in’ are entitled to the national minimum wage for time that is not spent actually performing some specific activity. The Supreme Court agreed with the Court of Appeal that the appellant workers were not entitled to the National Minimum Wage for all the hours of their sleep-in shifts.
The National Lottery Community Fund is investing almost £18 million in the government’s ‘Changing Futures’ programme, bringing the total for the programme to £64 million. The programme helps adults facing multiple issues such as homelessness, substance misuse and domestic abuse.
The government has announced a £25 million boost for nurse training which will see nurses and other healthcare students benefit from expanded virtual training, and the launch of a new national critical care qualification for qualified nurses.
Backed by a £212 million government investment, homes are to be made available in every region of England, enabling people who sleep rough to be rehoused in secure, long-term accommodation.
Social finance and social impact investing news
Big Issue Invest and Sport England join forces to improve the lives of young people affected by Covid 19 – Big Issue Invest (BII) is investing £1.25 million from its Outcomes Investment Fund (set up with investment from Big Society Capital) into a programme that will support over 6,000 young people across 21 local areas in the UK to improve their lives, through sports and activity. This is the first time Sport England have commissioned outcomes through a Social Impact Bond (SIB) and, with more than 20 commissioners including Local Authorities and The Life Chances Fund, this is the largest number of commissioners engaged in a SIB.
Social Investment Scotland £1m loan to help Edinburgh Printmakers to ‘reopen, rebuild and reimagine’ – Pioneers Post reports on investment into the charity, which was the first open access studio in the UK and now offers one of the largest printmaking facilities in Europe, as well as providing low-cost spaces for creative use across Scotland and, in partnership with UnLtd, a funding and support programme for creative social entrepreneurs.
Social enterprise sector news
Power to Change secures £20m from National Lottery Community Fund – Power to Change (the community business funder) announced that it has secured £20m from the National Lottery Community Fund (NLCF) to continue its work. The funds will enable the organisation to remain open until at least 2026, having previously announced plans to close next year.
Liz Barclay named as Small Business Commissioner to lead crackdown on late payments to small businesses – the government has announced the new Small Business Commissioner, which may be of interest to the social enterprise sector; the role of Small Business Commissioner was created in 2016 to help small businesses secure payments owed and to develop a business culture of prompt payment.
Also see under Procurement below.
See above under Coronavirus – government funding.
Public procurement and subsidy control
Seb Elsworth: New rules on subsidy control could significantly change how public bodies fund the sector – The CEO of Access Foundation writes for Third Sector, highlighting the relevance to charities and social enterprises of the government’s proposal for the new subsidy control regime.
The Department for Digital, Culture, Media and Sport has published a transparency notice in relation to the state subsidy of £500 million being granted to support the extension of mobile coverage through the Shared Rural Network (SRN) programme. Suhan comments “it’s a good example of how Government is using (and seeking to show compliance with) the new subsidy control regime.”
UK Research and Innovation has updated its full economic cost (fEC) grant terms and conditions and training grant terms and conditions to reflect new subsidy control requirements that came into effect on 1 January 2021. Read the updated terms and conditions here.
According to a London Trading Standards report, companies using “virtual” registered offices with mail forwarding – but choosing to only be forwarded official government mail – may be putting themselves in breach of wider legal obligations. They give the example of customer complaints going undelivered due to this kind of selective mail forwarding; this risk could apply similarly to complaints to charities from the public, e.g. regarding fundraising practices.
Accounting and audit
The government has published a consultation “Restoring trust in audit and corporate governance”. It is aimed at strengthening the UK’s framework for major companies and the way they are audited. Civil Society Media reports that “ministers are “open” to the idea of applying rules to big charities which previously only applied to private firms. This would mean senior staff at charities with incomes over £100m could become personally liable for any errors in the accuracy of financial reporting, and potentially face bans or fines. The Charity Commission has already expressed strong opposition to the suggestion.”
OSCR has published a set of FAQs to help charities understand the requirements for meetings in light of the pandemic.
Maureen Mallon, OSCR’s Chief Executive, has posted this blog about the results of research on the challenges for Scottish charities brought by the pandemic.
OSCR has posted a blog by Catherine Heggie, Partnerships & Information Officer at the Electoral Commission, about their new accessible voter information resources, and other tools that charities can use to share important information, ahead of the Scottish Parliament election.
Are you aware of our crisis decision tool? If your organisation is facing financial difficulties and you’re looking for guidance on the options available, we can help.
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 March 22, 2021.