The Charities (Protection and Social Investment) Bill 2016 ("the Bill") received Royal Assent on 16 March 2016. In our previous article (`Changes to Charity Law The Charities (Protection and Social Investment) Bill 2015', 24-09-15) we summarised the new provisions and, in particular, the new powers to be granted to charities to make social investments and the powers granted to the Charity Commission (the "Commission").
Some additional changes were made to the Bill before its third and final reading, which are set out below.
Following the reading of the Bill in September 2015, charities faced renewed criticism over alleged aggressive fundraising practices, particularly towards vulnerable people. The public scrutiny of the practice of `legacy profiling' is one such example.
As a result, new intervention powers were added to the Bill to ensure that, if selfregulation is deemed to be failing, the Government could instead establish a statutory fundraising regulator which could require that charities:
- be registered with a regulator for the purpose of charitable fundraising;
- follow guidance or comply with requirements imposed by a regulator; and/or
- pay fees to a regulator.
The Government also included reserve powers to pass full control and responsibility of fundraising regulation to the Commission.
Disqualification of Charity Trustees
The Commission has a new discretionary power to disqualify certain people from acting as charity trustees and carrying out senior management functions within the charities. Since the Bill's previous reading, the definition of "senior management functions" was further clarified in stating that such functions had to "relate to the management of the charity".
Prior to the exercise of such powers the Commission must be satisfied that, alongside other criteria relating to fitness to act as a trustee and public interest, one or more of the specific conditions for disqualification is met. These include:
- a trustee being cautioned for offences which would trigger automatic disqualification if convicted;
- a trustee being found by HMRC to not be a "fit and proper person" to be a manager of a body or trust;
- a trustee being convicted of an offence regarding the administration of a charity;
- such act constituting a disqualifying offence if it had been carried out in the UK; and
- any other past or continuing conduct, whether or not in relation to a charity, which is damaging or likely to be damaging to public trust and confidence in charities.
In determining the period of disqualification, the Commission had to have regard to the time to the time when a conviction becomes spent in the Bill. This has now been extended in a subsequent reading to account for time when a non-UK conviction would become spent if it were a disqualifying conviction in the UK.
It has been widely accepted in the sector that this power of disqualification is very wide. Due to concerns as to the lack of guidance as to how it would be used, the Commission has released a policy paper which sets out how this discretionary power may be exercised. The Commission emphasises that such a power will only be used "when there is a clear case for doing so and that the commission clearly explain what it will take into account before using the power." Consultation will be open until 22 August 2016.
As set out in our earlier article, the Commission has been granted the power to give official public warnings to charities or charity trustees when the Commission considers there has been a breach of trust or duty or other misconduct or mismanagement. (See previous article: `The New Official Warnings, A Significant Increase in the Charity Commission's Power?', 07-01-2016)
Since the previous reading of the Bill and, due to much concern in the charity sector over the exercise of this power, the Commission was given the ability to amend or withdraw the warning completely. It should be noted however that this remains at the discretion of the Commission.
Disposal of charitable assets
In the final reading of the Bill, we saw that there was a proposal for the prevention of independent charities being compelled to use or dispose of their assets in a way which is inconsistent with their charitable purposes. This originally made its way into the Bill apparently as a way to protect housing associations (most of which are charities) from having to sell assets to tenants under the Government's extended right-to-buy scheme.
The provision was removed as the Minister for Civil Society explained in a debate on 5 January 2016:
"The clause ... was introduced into the Bill in the other place when there was concern about charitable housing associations being forced to implement the right to buy. Since then, however, we have reached a voluntary agreement with housing associations that renders the clause unnecessary, because there is no question of them being forced to dispose of their assets".