Law Commission consults on charity law

It covers a wide range of topics including charity mergers and incorporations, charity insolvency, the powers of the Charity Commission and the Charity Tribunal, the process for disposing of charity land, ex-gratia payments and the process for amending Royal Charters.

The proposals form part of the Law Commission’s ‘11th Programme of Law Reform’, published in 2011 which identified technical aspects of charity law for review. The initial list of issues focused on those believed to create uncertainty or a disproportionate regulatory or administrative burden. It was informed by the Charity Commission and by Lord Hodgson’s 2012 review of charity law (Trusted and Independent: Giving charity back to charities).

The resulting paper addresses technical challenges relevant to a wide range of charities, including:

• the procedure for changing governing documents including charitable purposes and the administrative provisions;
• opportunities for streamlining the process of updating the governing documents of charities governed by Royal Charter or Act of Parliament;
• managing failed fundraising appeals and other instances where charities need to apply funds under the cy-près principle (under which charitable funds may be applied ‘as near as possible’ to the original purposes);
• procedures for acquiring and disposing of charity land;
• payments to charity trustees for supplying goods to the charity;
• ex gratia payments;
• legacies and transfers  following merger;
• the effect of a charity trustee's insolvency on a charity's assets;
• the powers of the Charity Commission to require a charity to change its name or determine the identity of charity trustees;
• the role of the Charity Tribunal; and
• the rules on permanent endowment.

At 300 pages, the consultation paper is not short. However, it includes a remarkably clear and informative summary of a number of areas of charity law of practical relevance to many charities – and is well worth working through.

The Commission identifies areas where it would be helpful to reform the law and makes provisional proposals to that effect; in other instances it asks for views on whether reform is needed and, if so, what changes should be made. It contains almost 100 requests for feedback and also invites people responding to share their experiences of how the law works in practice.

The Commission says it has been:

‘mindful throughout of the need for a proportionate system of legal regulation for charities – a system that provides trustees with flexibility and freedom when carrying out the purposes of the charity without exposing the charity’s assets, its beneficiaries and its trustees to undue levels of risk.’

In the main the proposals made are reasonable and likely to be helpful in practice but, inevitably, there will be areas where you may feel a better balance should be struck between protecting charitable assets and giving trustees the ‘flexibility and freedom’ to achieve the charity’s aims.  If so, do respond to the consultation to help ensure that any legal changes are as helpful as possible.

Whether or not you respond to the consultation, in-house lawyers and others who are responsible for legal compliance are likely to wish to keep track of the recommendations for changes to the law.

The consultation papers can be found here together with a response form for submitting your views. The closing date is 3 July 2015.

The charities team at Anthony Collins Solicitors will be responding to the consultation and will be incorporating comments received from clients. To contribute to our response, please let us have your comments by Friday, 29 May 2015.

For more information

For more information on the proposed changes and their implications for your organisation, ask your usual adviser at Anthony Collins Solicitors, or Shivaji Shiva.