And finally… where’s the new Charities Bill?
4 September 2019
Following the publication of the Law Commission's paper "Technical issues in Charity Law", published in September 2017, charity lawyers were assured by the Law Commission that new legislation would be in place earlier this year. However, it seems that, because of ministerial changes and pressures on the parliamentary timetable as a result of Brexit the associated Bill is unlikely to resurface any time soon.
Readers may recall that, when Lord Hodgson conducted his review of the Charities Act in 2012, he said that he found that charities faced a number of historic obstacles under the current law. These unnecessary burdens on trustees act, he said, "like barnacles on a boat causing a drag when all should be plain sailing." When the new Charities Bill does eventually reappear and become law, it will remove a number of those barnacles, the aim being to help trustees to work effectively in modern day conditions. It is to be hoped that this happens sooner rather than later.
The fact that the legislation has been delayed is not all bad, however. One of the amendments that will be brought about concerns amendments to governing documents of charities. The procedure for making amendments currently depends on the charity's legal form but the Law Commission is recommending a greater alignment of the procedures for corporate and unincorporated charities. As things stand, unless an unincorporated charity has an express power of amendment in its governing document, a scheme of the Charity Commission is required to give effect to any change in the charity's purposes, and will only be granted under certain conditions. The Law Commission is proposing that unincorporated charities should be given a new statutory power to make changes to their governing documents by means of a trustees' resolution, with some amendments – such as changing the charity's purposes or authorising benefits to trustees or members - requiring the consent of the Charity Commission. If enacted, this would align the position of unincorporated charities more closely with that of corporate charities: charitable company can amend its Articles of Association by means of a special resolution, with amendments to the objects, trustee benefit and dissolution clauses constituting "regulated alterations" for the purposes of the Charities Act, requiring the prior consent of the Commission.
However, one important change which would be introduced is the criteria used by the Charity Commission to determine whether to give consent to a change in the objects of a charitable company. At present, where a charitable company needs authority to amend its objects as a regulated alteration, the test applied by the Charity Commission is fairly relaxed. Generally, consent will be forthcoming provided that the change is not inimical to or inconsistent with the original objects. However, if the Law Commission recommendations are enacted then the conditions currently applied to unincorporated charities will also be applied to charitable companies – and these conditions are more stringent. Before giving its consent, the Commission would have to have regard to: the spirit and purpose of the original objects of the charity; the desirability of securing that the objects of the company should, as far as possible, be similar to the original objects; and the need for the charity to have purposes which are suitable and effective in the light of current social and economic circumstances.
On the face of it, this alteration removes some of the inconsistencies in the treatment of different types of charity, which is generally to be welcomed. However, the effect is that it will make changing a charitable company's objects more difficult. Consequently, if your charity is a charitable company and you are considering a change of objects, you would be advised to start the process now – Brexit won't occupy parliament forever*.
* Disclaimer: we can't promise that this is true.