Government accepts majority of proposed reforms to charity law… but when might charities see change?

The Government’s response to the 43 recommendations made by the Law Commission in its report on Technical Issues in Charity Law published three years ago should save charities not only a considerable amount of time, but also some significant costs.

Key accepted recommendations

Practical recommendations accepted by the Government that will help many charities include:

  • giving unincorporated charities a statutory power to amend their governing documents, similar to that already in place for CIOs and charitable companies,
  • the simplification of the steps required to allow the cy-près application of funds from failed or surplus appeals,
  • the clarification of the definition of permanent endowment, and new powers to allow charity trustees:
    • to borrow from their charity’s permanent endowment and
    • to resolve that the permanent endowment restrictions be further released to permit them to make social investments with a negative or uncertain financial return, once they have opted into the regulations governing total return investment,
  • the introduction of a new statutory power to allow charity trustees to make relatively small ex gratia payments without Charity Commission consent,
  • legislative changes to make it easier to amend a charity’s governing document to allow merger or incorporation, together with further changes to make the transfer of property more straightforward, and to allow gifts by Will to be made to the new charity even when the old charity is named in the Will, which should reduce the need for charities to maintain inoperative ‘shell charities’ to capture such legacies, and
  • in relation to dealings with charity land,
    • the extension of the range of specialist advisers to provide advice in relation to land transactions
    • the streamlining of the content of expert advice on transactions
    • the introduction of a self-certification of suitability to advise and
    • the application of Part 7 of the Charities Act 2011 only where land is held by or on trust solely for a single charity.

Charity Commission - Guidance on managing a charity's finances

The response from the Government also confirms the Charity Commission “intends” to update its guidance on managing a charity’s finances to clarify the availability of charity property to creditors where a charity becomes insolvent.

This update is long overdue, and much needed. It is to be hoped it will be forthcoming soon, given the number of charities facing financial difficulties at present, and, potentially, facing insolvency in the future.

Rejected recommendations...

Significant among the recommendations rejected by the Government were that:

  • the basis on which decisions of the Charity Commission can be challenged, including in particular the rights of challenge to the Charity Tribunal, should be reviewed – which may potentially have made it easier to challenge decisions of the Commission, and
  • wholly owned subsidiaries should be excluded from the definition of a “connected person” in the context of dealings with charity land - which means that Charity Commission consent will continue to be required in relation to disposals of charity land to the wholly owned subsidiary of a charity, during a restructuring process for example.

What next?

Should we now be holding our breath for an imminent new charities bill? Probably not, as the Government has said it will look forward to implementing the recommendations “when Parliamentary time allows”, and it seems unlikely to be soon given the current circumstances.

It does, however, look like some long-awaited reforms may be a step closer now.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.


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