Charities: amending your objects to respond to coronavirus
During this time of global health crisis, everyone wants to do what they can to help and nowhere is this more apparent than the charitable sector.
However, there is a danger that by doing this, charities may act outside the current purposes of the charity set out in their objects clause.
The Charity Commission (the Commission) are alive to this issue and have included guidance about this in their COVID-19 guidance for the charity sector. UK charity regulators have also warned independent examiners of charity accounts to be vigilant for charities spending outside their purposes during COVID-19, in guidance published earlier this month.
As trustees will be aware, it is their duty to promote the charitable purposes of their charity. If they allow charity assets to be applied for a purpose other than the specific charitable purposes it has been set up to pursue, they will have acted in breach of trust and may be personally liable for making good any loss caused to the charity as a result (even if that other purpose is charitable).
So before offering help during the pandemic, the first step is to examine the charity’s purposes as set out in the objects clause. And note it is the objects clause alone here that is relevant. Not the charity’s mission statement or what it has always done.
Charities with objects that already include the following purposes may be able to provide support to those in need because of coronavirus:
- the relief of poverty;
- the relief of need, hardship or distress;
- the relief of the elderly;
- the advancement of education or the advancement in life of young people; or
- the advancement of health.
So also may those with general charitable purposes. However, in considering what can be done, charities must be aware of any restrictions set out in the objects, such as to benefit a specific local area or class of beneficiaries.
In some cases, even though the activity proposed is very different from what the charity normally does, it will nevertheless be covered by the objects. For example, as the Commission explains in its guidance, a charity with an object to advance religion may be able to offer support as part of its pastoral work. Similarly, an arts charity might be able to relieve isolation by providing content online.
Amending your objects clause
Where the purposes in the objects clause do not cover the activity proposed, the objects clause will need to be amended and the process depends on the type of charity involved.
Small unincorporated charities with income of £10,000 or less that do not hold designated land, can change their charity’s purposes using powers in the Charities Act 2011. However, if the charity also has an express power in its governing document to change the purposes, this may be easier to use.
Larger unincorporated charities with incomes of more than £10,000 can only change the charity’s purposes themselves if the charity’s governing document provides them with that power. If that is not the case, they will need consent from the Commission to make any changes which will be done by way of a ‘scheme’.
In the case of charitable companies or charitable incorporated organisations, a change to the objects is a ‘regulated amendment’ and this always requires consent from the Commission. Any changes agreed must be registered with Companies House and only come into effect once they have been registered.
Note: in all cases described above, once the change has been finalised, the charity must notify the Commission of the change so the register entry for the charity is up to date.
Pause for thought?
Before going ahead with any change though, it is worth considering whether the charity should in fact be diverting its resources in this way. There may be other charities better placed to help. The charity should also consider the usual beneficiaries of the charity who might miss out if the resources get diluted.
As the Charity Commission says:
“Any changes proposed should be reasonable, consistent with what your charity does, and not undermine your existing objects”
Finally, if the charity does decide to go ahead with changes to its objects, it is important to check that the new activities are covered by the charity’s insurance cover. You may also need to carry out risk assessments on the activities to ensure, for example, social distancing measures and infection control can be put in place to protect staff and volunteers.
The Commission is saying it will prioritise requests to amend objects because of COVID-19 and if you need any help with this or responding to the challenges of coronavirus, please contact a member of our charity team.