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The Charities (Protection and Social Investment) Bill Awaits Royal Assent

on Thursday, 04 February 2016.

On 26 January, the Charities (Protection and Social Investment) Bill (the Bill), had its third reading in the House of Commons.

The Bill was passed, with some amendments. The House of Lords has since accepted the amendments made by the Commons.

The most significant of these changes are discussed below.

Clause 1 - Official Warnings by the Charity Commission (the Commission)

The Bill grants the Commission the power to issue a warning to:a charity trustee who it considers has committed a breach of trust or duty or other misconduct or mismanagement in that capacitya charity in connection with which it considers a breach of trust or duty or other misconduct or mismanagement has been committed

As the Bill also enables the Commission to publish the warnings it issues, this clause has raised concerns due to the broad nature of the Commission's new powers and the reputational damage a public warning may cause to charities.

The Minister for Civil Society, Rob Wilson, has insisted that the Commission's powers will be used proportionately, but the Shadow Minister for Civil Society, Anna Turley responded that this imposes 'a substantial burden of judgment on the Commission in the absence of achieving more substantial safeguards in the Bill'.

The opposition wanted a right to appeal warnings through the charity tribunal and also to prevent warnings from being published, or at least for the charity not to be identified if details of the warning are made public.

However, the only amendment that was agreed in relation to Clause 1 was to grant the Commission the power to vary or withdraw a warning.

Removal of Clause 9 - Charities are not Compelled to use or Dispose of their Assets in a way Which is Inconsistent with their Charitable Purposes

Clause 9 was seemingly designed to protect charities, particularly charitable housing associations, from being required to dispose of their assets to tenants under right-to-buy schemes.

In a lengthy debate on 5 January, Anna Turley said the clause 'states the existing legal position and…protects [charity trustees] from being compelled to undertake an action that is at odds with their charitable purposes.'

But Rob Wilson claimed that the clause was 'designed to attack…the government's manifesto commitment to extend the right to buy to tenants of housing associations, most of which are charities.' He claimed that the clause was unnecessary, as a voluntary deal had been struck with housing associations which would:

  • give housing association tenants the opportunity to buy their home with an equivalent discount to the right to buy
  • replace homes sold to tenants one for one, using the proceeds from the sale of the properties
  • provide a significant increase to the overall supply of new housing

Clause 9 was ultimately deemed unnecessary and removed by a majority vote of the Public Bill Committee before the Bill's third reading. It remains to be seen whether, as a result, charities could have less control over the disposal of assets.

Amendments to Clause 10 - Automatic Disqualification from Being a Trustee and Clause 11 - Power to Disqualify from Being a Trustee

Only minor amendments were made to Clause 10 and 11. However, these clauses have raised concern, particularly with Conservative MP, Sir Edward Garnier, who is involved in the charities Unlock and the Prison Reform Trust.

He argued that it may be difficult for charities whose work relates to the criminal justice system to appoint trustees with criminal convictions.

Anna Turley agreed that 'the detail has not been sufficiently worked through'.

New clause - Reserve Powers to Control Fundraising

This clause enables the government to impose the following requirements on charitable institutions:

  • to comply with requirements imposed by a regulator
  • to have regard to guidance issued by a regulator
  • to pay fees to a regulator
  • to be registered with a regulator for the purpose of regulating fundraising

The clause also reserves the right to confer additional powers on the Commission.

Conclusion

Fundamentally, the House of Commons agreed that the Bill 'provides a good regulatory framework for the charitable sector'. This was reflected by the House of Lords on 2 February, when consideration of the Commons' amendments took place and were agreed to. The Bill now awaits the final stage of Royal Assent, when it will become an Act of Parliament.

How the Commission's issuing of warnings will work in practice remains to be seen, but this new power is certainly something charities should be aware of, particularly due to the adverse effect public warnings can have on a charity's reputation and finances.

Trustees should be fully aware of their duties and always act in the best interests of their charity to avoid breaches of trust or duty and other misconduct or mismanagement.


For more information, please contact Laura Chesham in our Charity Law Team on 0117 314 5314.

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