Trust Corporation status and changing purposes: Law Commission consulting

Following responses to a previous consultation on various aspects of charity law, the Law Commission is now consulting on two new technical points.

Trust Corporation status

If an unincorporated charity holds land on charitable trust, an incorporation or merger can be made trickier by the fact that a limited company is not able to hold land on charitable trust.

This means that after incorporation or on the merger, the land held on charitable trust must continue to be held by the unincorporated charity. The unincorporated charity cannot be wound up, and needs trustees and to be administered.

One way that this has been dealt with in the past is for the new incorporated charitable company to seek ‘trust corporation status’ as on obtaining that status, the new incorporated charity can be appointed as sole trustee for the land held by the old unincorporated charity.

Obtaining trust corporation status is not straightforward, which has the effect of increasing the costs of incorporation or merger. Therefore, the Law Commission is looking at ways to make obtaining trust corporation status simpler.

Changing purposes

Charities can need to change their purposes for a number of reasons. Sometimes the passage of time alone can mean purposes need updating. For example, a charity may have been founded to help a group of beneficiaries which no longer exists.

At present, a number of unincorporated charities can only change their purposes by applying to the Charity Commission for a ‘cy-près’ scheme, and these are only provided in very limited circumstances. In contrast, corporate charities are able to change their purposes by resolution of their members at a general meeting, subject to the consent of the Charity Commission. The Law Commission’s consultation suggests that unincorporated charities should have a similar power, again to be exercised subject to the Charity Commission’s consent.

The consultation on these two points is open until 31 October 2016. It is good to see issues being picked up from the responses to previous consultations, and any simplification of the law in these areas (subject to appropriate safeguards being put in place) will be welcomed by the trustees of affected unincorporated charities.

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