The central purposes of the Act are to empower the Charity Commission to combat abuse and to facilitate social investment by charities. The Act also contains provisions relating to fundraising practices.
The introduction of the Charities (Protection and Social Investment) Bill was announced in June 2014, with the aim of tackling abuse and maintaining the high level of public trust and confidence in charities. The social investment element was added following the publication by the Law Commission of its consultation on social investment by charities, and the provisions on fundraising were added as a result of the recent controversy surrounding unethical fundraising practices.
The Act applies only to England and Wales. The main provisions may be summarised as follows:
Increased Protection from Abuse for Charities and Strengthened Powers for the Charity Commission to Take Action
The Act amends the Charities Act 2011 to:
- provide the Charity Commission with powers to issue official warnings to trustees and charities where it considers there has been a breach of trust or duty or other misconduct or mismanagement and to publish these warnings
- provide the Charity Commission with the power to suspend trustees and the power to disqualify trustees in several circumstances, including where it considers that their past or continuing behaviour is likely to damage public trust and confidence in charities
- automatically disqualify individuals with criminal convictions for terrorism, money laundering, bribery, misconduct and those on the sex offenders register from acting as trustees
- prevent those who have been disqualified from being a trustee from holding a senior management role within a charity
A Specific Power for Charities to Make Social Investments
The Act amends the Charities Act 2011 to:
- provide all charities (except statutory charities and charities established by Royal Charter) with a statutory power to make social investments, which are investments that both directly further the charity’s purposes and achieve a financial return. This is in addition to any powers a charity may already have to make social investments.
- put statutory duties on charities making social investments, including considering whether to obtain advice, being satisfied that it is in the interests of the charity to make the investment (with regard to the expected benefit) and reviewing social investments from time to time.
Protection of the Public Against Intrusive Fundraising Practices
The Act amends the Charities Act 1992 to:
- place additional obligations on charities which use professional fundraisers and commercial participators in the form of extra information that must be included in agreements between charities and fundraisers or commercial participators
- extend the existing reserve powers of the Government to regulate charity fundraising and reserve the right to confer additional powers on the Charity Commission
The Act amends the Charities Act 2011 to:
- oblige larger charities to include details of their fundraising approaches in their trustees' annual reports
Not Yet in Force
None of the substantive provisions of the Act are in force. The only provision currently in force requires the Minister for Civil Society to review the Act's effect on public confidence in charities, the level of charitable donations, and people’s willingness to volunteer and to report to Parliament.
The remaining provisions of the Act will be brought into force by commencement regulations. The Government has said it will wait a year before some provisions relating to trustee disqualification are brought into force, but it is expected that the rest of the Act will be brought into force sooner.
For further information, please contact a member of our Charity Law Team.
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