The next tranche of charity law reforms under the Charities Act 2022 for England & Wales are due to be implemented in March of this year.

The reforms were originally due to be implemented in the autumn of 2023 but have been pushed back on two separate occasions, reflecting their complexity and the work that is ongoing behind the scenes to ensure their implementation is as smooth as possible.

The most significant will likely be the reforms to the rules on amending governing documents. The aim of these reforms is to enable charities to amend their governing documents more easily, with Charity Commission oversight where appropriate.

 

Who it will affect & how

Unincorporated charities 

The reforms will repeal the current, limited powers of unincorporated charities to:

  • transfer property;
  • alter their purposes; and
  • modify administrative provisions within their governing documents.

These powers will be replaced with a wider statutory power that will enable unincorporated charities to amend any provision in their governing document by a resolution of the trustees (or by a resolution of the trustees and a resolution of the members, where required).

Any amendment must be in the best interests of the charity and must not result in the charity ceasing to be a charity.

Charity Commission consent will also be required for certain amendments, including (but not limited to):

  • any amendments which alter a charity’s charitable purposes;
  • any amendment which alters a charity’s dissolution provisions; and
  • any amendment which alter a charity’s trustee benefit provisions, resulting in a charity trustee or member, or a person connected to them, obtaining any benefit from the charity.

While care will need to be taken in exercising this power and in ensuring the correct process is followed, this is a momentous reform that will significantly simplify the process of amending a governing document for a large number of charities.

Charitable Companies

Under the reforms, a charitable company will no longer need to obtain Charity Commission consent to alter its objects, where the alteration does not alter the substance of its charitable purposes.

Charitable Incorporated Organisations (CIOs)

The reforms will also set out the matters the Charity Commission must consider when deciding whether or not to give consent to a proposed amendment to a CIO’s charitable purposes.

This will align the rules on making changes to a charity’s purposes for charitable companies, CIOs and, following the above reforms, unincorporated charities.

Included in the matters that must be considered, is the need for the CIO to have purposes which are suitable and effective in the light of current social and economic circumstances.

In addition to the changes to the law on amending governing documents, the reforms will also include:

  • further reforms to the rules on charity land, including changes to the general restrictions on disposing of or mortgaging charity land, so that they exclude dispositions or mortgages by a liquidator or provisional liquidator, a receiver, a mortgagee or an administrator;
  • a new power that will enable the Charity Commission to ratify the appointment or election of a charity trustee, where there is either uncertainty as to whether they were properly appointed or elected, or where there is any defect in their appointment or election;
  • a new power that will enable the Charity Commission to order a charity to remunerate a charity trustee for work carried out for, or on behalf of, the charity, where it would be inequitable for them not to be paid; and
  • provisions in relation to the handling of technical issues faced during charity mergers, including the handling of legacies and gifts to merged charities, and the vesting of permanent endowment following a merger.

If you have any questions in relation to the upcoming charity law reforms, or if you have any questions in relation to reviewing or updating your charity’s governing document, please contact us.

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Catherine is a specialist charities solicitor who advises charities, not for profit organisations, social enterprises, charity trustees and individuals wishing to establish charities. Her particular focus is on constitutional and governance matters including different legal structures and the duties and responsibilities of charity trustees.

Written By

Published: 23rd January 2024
Area: Charities

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