At our last private wealth seminar, we took an in-depth look at charities. A recent UK case has highlighted some of the curiosities which can arise in this context.
Back in 1927, the UK national debt reached 160% of GDP (it is currently around 85%). it appears that this state of affairs inspired one public-spirited donor to set up a charity known as “The National Fund” which he endowed with the princely sum of GBP 500,000. Papers lodged with the UK Charities Commission state that: “The aim of the charity is to create a fund, that either on its own or combined with other funds, is sufficient to discharge the National Debt.”
Although the fund has performed rather well and is now worth around GBP 350 million (a 700-fold increase), the growth in the UK national debt has somewhat outstripped the expectations of the donor. The UK national debt currently stands at over GBP 1 trillion and grew by around GBP 12 billion in 2011/12 alone. Therefore, the chances of the charity ever being in a position to pay out its trust fund is in serious doubt because the trust fund is very unlikely to ever be large enough to extinguish the entire national debt.
Faced with this position, it is doubtful whether the trust will ever be able to fulfil its charitable purpose (being “other purposes beneficial to the community”). The trustee is therefore consulting with the UK Charity Commission and Attorney General to see what can be done to change its objects to allow it to distribute some or all of its fund. Although undoubtedly an unusual case, it does show how issues with charities can be explored with a dedicated regulator, being the Charity Commission (although any change would ultimately have to be blessed by the Court). Hong Kong does not yet have such a regulator, but a recent consultation has suggested that one be introduced.