On 15 December 2016, the Charity Commission published guidance on two news powers which it has been granted under the Charities (Protection and Social Investment) Act 2016, namely the ‘official warning power’ and the ‘discretionary disqualification power’.
(1) Official warning power
The official warning power enables the commission to issue official warnings to charities or their trustees if there has been a breach of trust or duty, or other misconduct or mismanagement. This new power came into force on 1 November 2016.
The commission has increased the amount of notice it will give to charities before it issues an official warning from 14 days to 28 days, unless there are good reasons for longer or shorter notice periods in a particular case. It has also changed its plans to have a default assumption in favour of publishing the warning, saying instead that it will consider in each case whether publication is appropriate.
The guidance further reveals that the commission can issue an official warning when it considers there has been a breach of trust or duty or other misconduct or mismanagement in a charity, but which is not serious enough to warrant the opening of a statutory inquiry. The commission would normally publish a warning where it considered that doing so would be likely to help secure compliance by the trustees with their duties, protect public trust and confidence in the charity or charities more widely, be the most effective way of highlighting a regulatory issue to the wider sector, promote transparency, protect potential donors or be in the public interest for any other reason. However the guidance adds that the commission will not publish a warning if the effect could represent a risk to someone’s personal safety, contravene confidentiality requirements, risk national security, cause disproportionate prejudice to the charity and/or its beneficiaries or not be in the public interest.
(2) Discretionary disqualification power
The discretionary disqualification power takes things one step further, awarding the commission the power to disqualify a person from acting as a charity trustee or holding a senior management position in a charity. This new power came into force on 1 October 2016. In the explanatory statement the commission adds that it could also disqualify a whole trustee body where necessary. The commission says it will give at least a month’s notice to those it plans to disqualify, and give notice to other trustees at the charity as well as the public.
One of the conditions for which someone could be disqualified – “past of continuing conduct, whether or not in relation to a charity that is, or is likely to be damaging to public trust and confidence in a charity or charities” – had been heavily criticised for being too broad. The commission addresses this in its response, saying that it will consider each situation on a case-by-case basis and will have to identify how such conduct is or is likely to be damaging to public trust and confidence in a charity or charities.
Disqualifications has also been divided into three bands: a lower band (a ban of less than five years), a middle band (a ban of five to 10 years) and an upper band for the most serious cases (a ban of 10 to 15 years).