In February 2022, the Charities Bill received Royal Assent and passed into law as the Charities Act 2022. The recommendations from the Law Commission formed the basis for the provisions of the new legislation and the Act is designed to give trustees more flexibility to manage charities effectively. They will not have a big impact on charities’ daily operations but simplify certain areas of regulation.
The Charity Commission entered a process of implementing the legislative changes gradually and certain changes are expected in Autumn 2023. These are detailed below:
New powers relating to the appointments of trustees
The Charity Commission will have a new power to make an order to ratify the appointment or election of a trustee where there is a defect in the process or uncertainty as to the validity of such an appointment.
Powers relating to the remuneration of charity trustees and the Charities Act
The Charity Commission will get a new power to authorise a charity trustee to retain a benefit which they have already received for work done for the charity or to order a charity to pay a trustee for work already done which was not a permitted benefit. An order can only be issued if the Charity Commission considers that it would be inequitable for the person in question not to be paid the remuneration or be allowed to retain the benefit.
The granting of this power means it is no longer necessary to apply to court in this situation.
Amending the charity’s governing document more easily and increased consistency in tests applied for changing a charity’s purposes
Most charities will be able to amend their governing documents or Royal Charters more easily (however, they will remain subject to the Commission and the Privy Council’s approval in certain circumstances, such as where changes to the charity’s objects are proposed). This will give most charities greater flexibility to respond to changes in their environment and organisational needs and will clarify the steps that charities must take to amend their governing documents.
The new Act introduces more consistency to the factors considered by the Charity Commission when a charity wants to change its purposes. Regardless of whether the charity is a charitable incorporated organisation (CIO), charitable company or unincorporated charity, the Charity Commission will consider:
- the original purposes of the charity;
- the desirability of ensuring the proposed changed purposes are similar to the original ones; and
- the need for the purposes to be suitable and effective in the light of current social and economic circumstances.
Changes to the rules on charity mergers
When a charity merges with another charity or incorporates there is often a concern that any legacies left to the merging charity will be lost as that charity will cease to exist after the merger. For this reason, following a merger, some charities chose to continue to run as a shell charity to receive legacies. This is not ideal as it creates an administrative burden and can cause confusion for executors.
The Charities Act has now dealt with this issue. If a charity named in a will is wound up and the merger is registered, the gift will be treated as a gift to the merged charity even if the Will states that the charity must still exist at the time of death. This means that it should no longer be necessary to keep shell charities in order to deal with legacy issues.
These rules will apply for any deaths after the date the provision comes into force no matter when the Will was prepared or when the merger was registered.
Any further queries?
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