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Lessons From the Charity Commission's Use of New Powers

on Friday, 21 July 2017.

In recent months the Charity Commission has started to use the new powers it gained under the Charities (Protection and Social Investment) Act 2016.

These cases serve as helpful examples of the types of circumstances in which the Charity Commission is likely to employ the new powers.

First Use of New Official Warning Power

The Charity Commission has issued its first official warning since the power to do so came into effect on 1 November. Following concerns from sector bodies about how this power would be used, it demonstrates the kind of activities trustees should ensure they are not involved in, in order to avoid risking being subject to an official warning.

The warning was issued to National Hereditary Breast Cancer Helpline on 3 July due to concerns that the trustees had committed a breach of trust or duty or misconduct or mismanagement in the administration of the charity. In particular this related to:

  • making unauthorised payments to a connected person
  • entering into an informal loan agreement with a connected person
  • improperly delegating the administration and management of the charity
  • failing to keep proper minutes and other records of decision making
  • failing to properly implement and manage financial controls.

In light of these concerns the Commission had previously issued an action plan to the charity, However, the Charity Commission had concerns that the trustees were not complying fully with the action plan.

The warning sets out a number of steps which the trustees should take in order to rectify the situation, including ensuring that appropriate consent is obtained from the Commission before payments to individuals are made as well as ensuring that all decisions are properly and adequately recorded.

The warning was published on the Commission website.

The Disqualification of a Company from Charity Trusteeship

On 14 June, in one of its first uses of the power, the Charity Commission made an order disqualifying Mountstar PTC Limited (Mountstar) from being a charity trustee for a period of 15 years, in accordance with Section 181A of the Charities Act 2011. Mountstar was the sole corporate trustee of The Cup Trust.

The Charity Commission had previously appointed interim managers to administer the charity as a result of the charity's involvement in a tax avoidance scheme involving a gift aid claim. The charity has since been wound up.

The order was made as a result of the Charity Commission finding that:

  • Mounstar was responsible for misconduct and/or mismanagement in the administration of the charity
  • Mounstar is unfit to be a charity trustee
  • it is desirable to make the disqualification order in the public interest in order to protect public trust and confidence in charities.

The Charity Commission made it clear that it wishes to send a strong message that those whose actions harm charities will be held accountable. The Commission was concerned that the actions of the trustee risked undermining public trust in charities. The Charity Commission is also considering regulatory action against the individuals who were directors of Mountstar.


For further information, please contact a member of our Charity Law team, or complete the form below.

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