The Charities (Protection and Social Investment) Act received royal assent on 16th March 2016 gives the Charity Commission new powers to tackle serious abuse of charities and gives charities greater scope to make social investments.

Main features of the Act

Official warnings by the Commission

The Act gives the Commission the power to issue official warnings to charities or their trustees where the Commission considers there has been misconduct or mismanagement or breaches of trust or duty. The Commission may also make public any warning it has issued.

Power to direct winding up

The Commission already has statutory powers to open a formal inquiry into a charity.  However the Act now provides the Commission with further powers once the formal inquiry has been opened, the most significant of which is the power to direct a charity to be wound up.

Prior to directing a charity to be wound up, the Commission will have to give public notice of its intention to do so. The notice must provide a specified period in which representations may be made and which in turn the Commission must take into account.

Automatic disqualification from being a trustee

The Act adds a new list of offences to section 178 of the Charities Act 2011 which automatically disqualifies a person from being a charity trustee. These include convictions for offences under the Bribery Act 2010, certain money laundering offences, various offences under counter-terrorism legislation and contempt of court

These new provisions will not be brought into force for at least 12 months, so that the Commission can discuss their impact with rehabilitation charities. However once they are in force, charities may need to consider changing the declarations that they ask new trustees to sign, confirming their eligibility to act in light of these changes.

Power to disqualify from being a trustee and holding a senior management position

The Commission will also have a discretionary power to disqualify a person from acting as a trustee or holding a senior management position in a charity which can last for up to 15 years.

In order to disqualify, the Commission must be satisfied that the person is unfit to be a trustee, it would be in the public interest to disqualify the person and at least one of the six conditions as listed in the Act are met. These conditions include being cautioned or being convicted overseas for certain offences or having been involved in misconduct or mismanagement of a charity previously.

Fund-raising

The Act states that certain prescribed information needs to be specified in agreements between charities and professional fundraisers. The intention is to impose an obligation on professional fundraisers to help charities ensure that the public are protected from unreasonable behaviour when approached the public for donations.

Reserve powers to control fund-raising

The Act reserves powers for the Government to give statutory backing to the setting up of a fundraising regulator. This may require charities to register with, pay fees towards, follow guidance from and comply with requirements of the regulator.

Power to make social investments

The Act expressly gives incorporated charities and charity trustees of an unincorporated charity the power to make social investments which are carried out with the intention of furthering the charity’s purposes and achieve a financial return for the charity.

Conclusion

The Charities (Protection and Social Investment) Act 2016 gives the Commission greater regulatory powers, which is not without concern within the sector and a number of sector bodies are calling for better safeguards, particularly with regard to the Commissions power to issue warnings and disqualify trustees.

The Commission as a response to these concerns, has said that it will consult on how it will implement its new powers before exercising them, which we will await to see.

Should you have any queries on how the Act could impact how your charity operates, please contact Peter Spencer or Nadeem Azhar by email or telephone 02078218211.

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