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Institutions as charities:
automatic disqualification of
governors and senior managers

Institutions as charities: automatic disqualification of governors and senior managers

Published: 29th June 2018
Area: Corporate & Commercial
Author: Danielle Humphries

From 1 August 2018, two key changes to the automatic disqualification rules for charities are being introduced.

These changes will see an increase in the number of legal reasons disqualifying someone from acting as a charity trustee, and the application of these automatic disqualification rules to prevent people for holding certain senior management positions at a charity. Universities and colleges with charitable status will need to comply with these rules. To assist institutions with the navigation of the new rules the Charity Commission has published a guidance note on the government’s website.

As well as having an unspent conviction for offences involving dishonesty or deceptions, under the new rules a person will automatically be disqualified from being a charity trustee (i.e. governor) or holding certain senior management positions if s/he has an unspent conviction for any of the following offences (with the exception of being listed on the sex offenders register): specified terrorist offences, specified money laundering offences, specified bribery offences, the offence of contravening a Charity Commission Order or Direction, misconduct in public office, perjury or preventing the course of justice, the aiding, attempting or abetting of any of the above listed offences including offences involving dishonesty or deception, contempt of court; and/or being on the sex offenders register (this disqualification applies irrespective of whether the conviction is spent or unspent).

A person will also be disqualified under the new rules from holding a trustee or certain senior management positions if s/he disobeys a Commission Order; and/or is a designated person under specific anti-terrorism legislation.

Under the new rules the disqualifications mentioned above will apply to the following senior management positions within a charity: the Chief Executive (or equivalent) and the Chief Finance Officer (or equivalent). It is imperative that institutions understand how these positions are defined under the new rules as it is the function of the role that is vital; job title is irrelevant. These rules apply whether the position is interim, permanent, temporary or part-time.

It is important to note that the new rules do not affect the right of a disqualified person to apply to the Charity Commission for a waiver, nor does it alter the fact that a person who acts as a governor or senior manager whilst disqualified would be guilty of a criminal offence.

So what should you be doing to ensure your institution is compliant when these new rules come into force?

Firstly, you should review the structure of your institution and the new rules to confirm that it is only the governors, the CEO and the CFO (or equivalent positions) who are caught by these rules. You should also look to see whether any current governor and/or senior manager would become disqualified under the new rules and ensure the appropriate action is taken to rectify the situation either by the institution itself or the individual in question (through the application for a waiver). If you are currently recruiting for a new governor or senior manager or are looking to do so before 1 August 2018 it is important that, as part of the recruitment process, these rules changes are considered as a potentially ideal candidate could become disqualified after 1 August.

You should also review and update your pre-appointment procedures to ensure that the relevant mechanisms are in place to ensure that persons being appointed to governor or senior manager positions are not disqualified under the current and new rules. To ensure compliance with the new rules it is recommended that the institution asks governors and relevant senior managers to confirm that they are not disqualified under the current and new rules, i.e. through the signing of a declaration form to that effect.

As part of your continued compliance with the automatic declaration rules you should already have a mechanism in place to ensure that appointed governors do not become automatically disqualified under the current rules after their appointment. These procedures will need to be updated to ensure that declarations of compliance concerning the current and new disqualification rules are received from both governors and senior managers (and updated at regular intervals after their appointment). The latest recommended date to do this by is the 1 August 2018. You should also check the relevant official registers to see if someone is disqualified from acting as a trustee. For higher education institutions registered with the OfS the institution will need to notify the OfS of any changes that affect the information provided on registration and/or that impact ongoing compliance with registration conditions.

One final thing that you will need to do is review your employment and/or consultancy contracts to ensure that the institution is protected under the contract should a relevant person become disqualified and have to leave their post as a result of the new rules.

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