Changing the objects of a charitable trust - apply for cy-près scheme or await the new Charities Act 2022 power to amend objects by resolution?

The law covering the cy-près doctrine - that allows assets dedicated to a charity to be redirected to alternative (similar) charitable purposes if they cannot be used for their original purposes - and rules around cy-près schemes made by the Charity Commission are not simple. And yet, until now, cy-près schemes have been the route that trustees have used to solve the problem in such circumstances. The process can be complex and time-consuming.

Now, though, trustees have a choice. Section 3 Charities Act 2022 will amend the Charities Act 2011 to introduce a broad power to amend any part of a charitable trust by resolution - where to do so is expedient in the interests of the charity. There are various conditions and rules around the use of the power. Furthermore, certain changes, including amending the charitable trust's objects, will require Charity Commission consent. In reaching its decision on whether to give consent, the factors that the Commission will consider are similar to the considerations for making a cy-près scheme:

• The charity's original purposes
• The desirability of securing that the purposes are so far as reasonably practicable similar to the current purposes
• The need to have purposes which are suitable and effective in the current social and economic circumstances

The Charities Act 2022 is being introduced in stages - section 3 is currently expected to be implemented in January 2024. The Commission has not yet published guidance on how the new power will work in practice, and it may well be the case that the guidance will be published at the same time as the power comes into effect.

Which route is best suited for your charity?

This does, then, leave trustees wondering which route to use to amend the purposes of a charitable trust where it is necessary to do so, and indeed where the trustees are duty-bound to do so. We are still awaiting guidance, but it is anticipated that the power to amend introduced by section 3 Charities Act 2022 will in most circumstances prove to be a simpler process than seeking a cy-près scheme. There will still, though, be circumstances in which a scheme will be necessary.

For more information to help you decide which of the two routes is best suited for your charity, please contact Shivaji Shiva in our Charities team on 0121 227 3724, or complete the form below.