New rules from 1 August 2018
Trustees and senior managers of charities should take time to understand the upcoming new rules regarding automatic disqualification of trustees. The Charity Commission has produced guidance to help charities understand whether the changes will affect them and work out what they need to do to prepare.  
The rules which come into effect on 1 August 2018 as part of the Charities (Protection and Social Investment) Act 2016 make two significant changes, introducing more criteria for disqualification and extending the reach of these criteria to other senior roles as opposed to just trustees.

The changes

Under the current rules, a person can be barred from acting as a trustee of a charity if they have certain unspent convictions, mainly relating to bankruptcy and crimes involving dishonesty or deception. It can be a criminal offence for a disqualified person to continue acting as a trustee. However, under the new rules, the criteria for disqualification will include unspent convictions relating to terrorism, money laundering and being on the sex offenders register.

The criteria of people who are subject to these rules will also be extended to include those holding senior management positions in a charity such as Chief Executive or Chief Financial Officer. The Charity Commission has produced guidance on who will be regarded as a senior manager under the new rules as the definition of a senior manager will relate to their function, not their title. For example, a person will be regarded as Chief Financial Officer if they are responsible for the overall management of the charity’s finances and accountable to the Chief Executive or board of trustees. The Chief Executive Officer will be anyone who has overall responsibility for the day to day management of the charity and is accountable only to the board of trustees.

Those who are already disqualified under the current rules but are senior managers of a charity, will not be able to continue in their roles when the new rules come into force unless they obtain a waiver or the disqualification has ended.

Waivers

The right to apply to the Charity Commission to waive the disqualification will remain in place under the new rules. Affected charities can submit applications from 1 February 2018, and they are advised to submit them by 1 June 2018 to get a decision in time.

The Charity Commission will make decisions on waiver applications on a case by case basis. Nick Mott, deputy head of guidance and practice at the Charity Commission has explained that the reason for the new restrictions is to protect charities but recognises that there are some “whose experience and skills in running charities should not be lost”. Trustees will need to decide whether to support a colleague’s waiver application. If successful, the Commission will waive the disqualification regarding either the one charity, a class of charities or all charities.

Criticisms

Christopher Stacey, co-director of Unlock an umbrella organisation for people with convictions, criticised the rules as being “unnecessary and ineffective at protecting charities” and thinks it will cause confusion and uncertainty for charities. For many charities, the Charity Commission’s decisions on future waiver applications will determine the effect of the rule changes, and this is something that Unlock will be monitoring.

Trustees and senior staff are advised to read the Charity Commission guidance for charities regarding the new rules. Should a trustee or senior staff member have to resign as a result of a disqualification, the individual and the charity may need to seek legal advice from charity and employment law specialists.

What should you be doing?

Charities must have systems in place to identify trustees or senior managers that have become disqualified after their appointment. They must not appoint a disqualified trustee or senior manager, unless the Commission waives the disqualification. 

Charities should be reviewing all current appointments of trustees and senior managers to check whether any of them will be subject to disqualification. Anyone affected by the new rules must resign from their position before 1 August 2018. Trustees or senior staff should also be thinking about updating their charity’s recruitment and appointment systems to ensure that they reflect the new rules.

It is important to note that the disqualification rules will not prevent disqualified people from working in charities at all. They can still work in junior roles, as volunteers and any other role that is not subject to the disqualification rules.

Further information

For advice on whether your charity will be affected by the matters discussed in this article and how to prepare for the new rules, please contact Safa Murad or your usual contact in the Charities team.

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