Following the Queens speech on 11 May 2021, it is anticipated that the proposed Charities Bill should deal with the recommendations from the Law Commission, most of which have been accepted by the government. We have looked at a few areas to highlight as follows:
Usually, a charity can amend its governing document, but the route to do this can vary dependent upon its legal form. For unincorporated charities in particular, the current regime is highly restrictive. The Charities Bill will seek to harmonise how this is done as much as is possible. An example of this would be the Charity Commission having to consider the same test for all charities wishing to make ‘regulated alterations’. These kinds of alterations would include
- Changes to a charity’s objects,
- Any clause which allows a trustee to benefit from the charity, and
- The provisions stipulating what happens to a charity’s assets on dissolution.
The Charity Commission will need to look at a three part test:
- The original purposes of the charity
- The desirability to keep the purposes close to the original purposes
- The need for the charity to have purposes which are suitable and effective in light of the current economic and social circumstances.
The Charity Commission will also be able to give public notice of proposed changes (or require trustees to do so). Please note though that for unincorporated charities there will be additional circumstances in which consent is required, including where the changes relate to permanent endowment restrictions or change constitutional rights of third parties.
Disposing of property
At the moment, for nearly all property disposals, a charity has to engage with a RICS qualified surveyor to produce a very detailed report on the property in question. The law rather inflexibly makes no allowances as between a multi-million pound complex development and the sale of a tiny strip of land to a neighbour. There are two key changes set out here that hopefully will benefit charities.
- The professionals that a charity can take advice from will be expanded to include Fellows of the National Association of Estate Agents and Fellows of the Central Association of Agricultural Valuers. Please note that if a charity has a suitably qualified person on its board or amongst its employees, it will not need to look externally at all for that advice
- The content of the report will be proportionate to the transaction and will be required to cover just four things
- the market value of the property;
- any enhancement that would improve the price;
- any marketing the adviser would recommend; and
- any other recommendation relevant to the transaction.
In addition the adviser will have to self-certify that they have the appropriate expertise and experience to provide the advice, and that they don’t have a conflict in relation to the transaction.
Ex gratia payments
As you may know, the law requires charity trustees to apply their charity’s funds in furtherance of their charitable purposes.
An ex gratia payment is one where
- trustees believe they are under a moral obligation to make a payment; but
- they are not under any legal obligation to do so; and
- they cannot justify the payment as being in the interests of the charity
The current legal position is that Trustees can only make ex gratia payments with the consent of the Charity Commission. A new statutory power is proposed to be introduced to allow trustees to make small ex gratia payments without the prior authorisation from Charity Commission and for those ex gratia payments to increase in line with the charity’s overall gross income. The new regime will also allow Trustees to delegate the decision to make an ex gratia payment to staff, albeit that they may wish to put in place reporting obligations to ensure its proper use. This will allow charities more flexibility to respond to situations where they feel morally obliged to do something without having to incur the additional expense and possible delay caused by making an application to the Charity Commission before they do.
There is nothing ground shaking or ground breaking in the proposed reforms. What they are seeking to do is to:
- Limit in some circumstances when a charity will need to engage with the Charity Commission before taking action ; and
- Try to make things a little easier for charities, for example the changes to the provisions on the disposal of property hopefully increasing the speed with which a charity can proceed with a sale and possibly reducing the costs of the overall transaction.
Please drop us an e mail or call if you need any further details or assistance and stay safe and well.