On 22 March, the government published its long-awaited response to the Law Commission’s September 2017 report, Technical Issues in Charity Law.
The Law Commission had made a number of recommendations for amendments to the Charities Act 2011, designed to make charity regulation more effective and the legal framework easier to navigate. This was not a full review of charity law – it focussed on selected technical issues.
The government has accepted the vast majority of the proposed changes, which include:
- A new statutory power for unincorporated charities to make any changes to their governing documents by resolution of the trustees, subject to a requirement that the Charity Commission approves certain amendments (including those that would require the commission’s prior consent if they were made by a charitable company or CIO).
- The introduction of a single test which the commission would apply to all requests to change objects (whatever the charity’s legal form). The test would require the commission 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.
- Giving Royal Charter charities power to amend any provision in their Charter, subject to Privy Council consent, avoiding the requirement for a Supplemental Charter.
- For failed appeals, allowing donations of up to £120 in a year to be applied cy-près (i.e. for similar charitable purposes) without having to contact the donor; and allowing a fund that does not exceed £1,000 to be applied cy-près by trustee resolution without Charity Commission consent.
- Allowing decisions about ex gratia payments to be delegated by trustees and allowing payments below certain levels to be made without Charity Commission consent. This could be particularly helpful to legacy fundraisers.
- Some changes to the rules around charity trustees:
- Introducing a statutory power for charities to pay their trustees for the supply of goods as well as services.
- Giving the Charity Commission power to authorise a trustee to retain any benefit received in breach of the constitution or to be paid for work they’ve done, where it would be inequitable not to do so.
- Giving the commission power to ratify invalid or uncertain trustee appointments or elections.
- Extending the Charity Commission’s powers to order a change of name to include ordering a change of working name; 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 concerns about the proposed name.
- The introduction of some new flexibilities in relation to permanent endowment:
- Trustees would be able to borrow from their permanent endowment by resolving to spend up to 25% of its value subject to a requirement to recoup the expenditure within 20 years.
- Trustees who have opted into the regulations governing total return investment, would have power to resolve that the permanent endowment restrictions be further released to permit the trustees to make social investments.
- Updating the requirements for the advice needed on disposals of charity land; and extending the range of advisers that may provide such advice.
However, proposed changes which were not accepted by the government and will not be taken forward include:
- Removing the public notice requirements for the disposal of designated land.
- Removing disposals to wholly owned subsidiaries from the requirement for Charity Commission consent for land transactions to connected persons.
- Reviewing the basis on which the commission’s decisions can be challenged, particularly the scope of the decisions which can be challenged in the Charity Tribunal.
- Allowing claimants the option of obtaining authorisation to pursue charity proceedings from the court rather than the Charity Commission in circumstances where the commission would face an actual or apparent conflict of interests if asked to give such authorisation.
- Removing the requirement for the Charity Commission to obtain the consent of the Attorney General before making a reference to the Charity Tribunal.
The Law Commission has been asked to update the draft Charities Bill included with its 2017 recommendations in line with the government’s response. The government says it will look to implement the changes it has accepted when Parliamentary time allows.