The Charity Commission’s new powers over charities
The Charities (Protection and Social Investment) Act 2016 (“the Act”) received Royal Assent on 16 March 2016. The provisions in the Act have been implemented in stages and most of the Act is now in force.
The Act changes the law contained in the Charities Act 2011 and the Charities Act 1992 in four main areas.
1. Charity Commission powers
The Act provides the Charity Commission (“the Commission”) with more regulatory powers including:
- Official warnings: The Commission may issue (and publish if it wishes to) an official warning to a charity or charity trustee who it considers has committed a breach of trust, duty or other misconduct. Actions that could trigger an official warning include a breach of a charity’s governing document or making unauthorised payments.
- Suspension of trustees: The Act strengthens the Commission’s power to suspend charity trustees for misconduct or mismanagement by confirming that failure to comply with an order of the Commission or failure to remedy a breach specified in an official warning constitutes misconduct or mismanagement. The Commission can extend the period of suspension for up to twelve months while considering the removal of the trustee, provided that the total period of suspension is not more than two years.
- Range of conduct to be considered: If the Commission is satisfied that a person has been involved in misconduct or mismanagement in a charity, when considering what action to take, the Commission may take into account any other relevant evidence of that person’s conduct in a different charity or other conduct which may damage public trust and confidence in the charity.
- Disqualification of trustees: The Act grants the Commission a new discretionary power to disqualify a person from acting as a trustee or in a senior management function in relation to a particular charity, a class of charity or all charities. In order to exercise this power, the Commission must be satisfied that:
- at least one of seven statutory conditions have been met (e.g. the trustee was responsible for, knew of or facilitated misconduct or mismanagement in a charity);
- that the person is unfit to be a charity trustee; and
- making the disqualification order is in the public interest.
2. Automatic disqualification of a trustee
The Act extends the criteria in the Charities Act 2011 that automatically disqualify a person from acting as a charity trustee and extends the scope to prevent a disqualified person from acting in positions with senior management functions within a charity. Being found to be in contempt of court for making a false statement in a document verified by a statement of truth or being found guilty in the High Court of disobedience to a Commission order are examples of the new criteria.
The Act places more stringent obligations on charities that use professional fundraisers and commercial participators by extending the list of matters that must be included in fundraising agreements. These measures are designed to protect the public from intrusive fundraising practices such as placing undue pressure on a person or unreasonable persistent approaches to a person to give money or other property and unreasonable intrusion on a person’s privacy.
Fundraising agreements must now include:
- Details of any voluntary fundraising scheme, or standard of fundraising, that the professional fundraiser or commercial participator agrees to be bound by.
- Details of how the professional fundraiser or commercial participator is to protect vulnerable people and other members of the public.
- Details of how the charity will monitor compliance with the fundraising agreement.
Charities which are required to have their accounts audited must include details of their fundraising approaches in the trustees’ annual report.
4. Social investments
The Act grants charities a specific power to make social investments. This provision enables charity trustees to invest the charity’s money in investments which aim to further the charity’s objectives whilst also achieving a financial return. The power to make social investments will apply to all charities, unless expressly restricted in a charity’s governing document.
The trustees must abide by several statutory duties before making a social investment. The trustees’ duties include:
- obtaining and considering any advice which ought to be obtained about a proposed social investment;
- satisfying themselves that it is in the charity’s interests to make the social investment; and
- reviewing the charity’s social investments from time to time.
If you would like more information or advice on how The Charities (Protection and Social Investment) Act may affect you or your charity, please contact our specialist charities team on firstname.lastname@example.org.