The charity sector has welcomed the changes to charity law announced in the Queen's Speech last month, which introduced the Charities Bill.
These changes, once effected, will not change the spirit of current law, but should make it simpler and more straightforward for charity trustees to take some of the day-to-day decisions often called for in the management of their charity.
Key changes in the proposed Charities Bill:
- Relaxed requirements on the disposal of property. Rather than having to engage a RICS-qualified surveyor to produce a detailed report on a property to be sold, trustees may now take advice from a wider pool of surveyors, and where the charity has a suitably qualified trustee on its board, they need not engage external advice at all. Further, the extent of the report can now be made proportionate to the size of the transaction in question, and need only cover four aspects of the property: its market value, any work that would improve the price, the marketing recommended by the surveyor and any other relevant recommendation.
- A more straightforward process to amend the charity’s governing document. Particularly for unincorporated charities, for which there are currently quite restrictive rules over how their governing document can be amended, the Charities Bill should make it easier to do this by seeking to harmonise the rules where possible. Regulated amendments (i.e. changes to the charity’s objects, trustee benefit provisions and dissolution provisions) will still require Charity Commission approval, but the Commission will apply the same test for all charities wishing to make such amendments, which should make it quicker and easier to do so.
- Greater flexibility in the use of permanently endowed funds. Currently, where a charity holds permanent endowment (i.e., funds or property to be held by the charity forever), trustees face a number of restrictions in their ability to borrow or invest using those assets. Under the Charities Bill, trustees would be permitted to borrow up to 25% of the value of their charity’s permanent endowment, and to use permanently endowed funds to make social investments with a negative or uncertain return (rather than being required to invest only for the best financial return).
- Relaxed rules around ex gratia payments. Ex gratia payments are payments by charities which do not themselves further the charity’s objects, but which the trustees feel obliged to make. A classic example is where an intended gift in a Will has failed, but the trustees feel obliged to honour the gift. Currently, trustees may only make such payments with the Commission’s consent, but the Charities Bill will permit trustees to make payments up to a certain amount without Commission approval (between £1,000 and £20,000, depending on the charity’s annual income). It will also permit trustees to delegate this decision to staff.
- The ability to pay trustees for goods provided to the charity. Currently, trustees may receive remuneration for the supply of services to their charity without Commission consent, but not for the supply of goods. Under the Charities Bill, where it is in the best interests of the charity to do so (for example, if the trustee can provide them more cheaply), charities will be able to pay their trustees to provide the goods it needs to further its purposes.
The Bill also contains a number of other helpful changes, including removing some of the legal barriers to charity mergers, permitting trustees to pay Charity Tribunal costs from the charity’s funds, and allowing trustees to spend small donations from failed appeals on similar charitable purposes.
The draft Bill can be read in full here.
As at 14 June 2021, the Charities Bill is currently at the first reading stage in the House of Lords. Should the Bill pass smoothly through Parliament, it is hoped that it will come into force in 2022.
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