The Charities (Protection and Social Investment) Bill 2015-16 is making a slow progress through Parliament and has had certain key provisions added to it along the way. The Bill will amend the Charities Act 2011 and is relatively short, dealing with two areas in particular: the powers (and associated duties) of charities to make social investments and, somewhat more contentiously, to grant the Charity Commission enhanced powers to deal with abuse of the various rights and benefits granted to organisations with charitable status.
Clarifying investment powers of trustees
A social (or ‘programme related’) investment has been described by the Law Commission as ‘a transaction from which [a charity] seeks to achieve both its charitable purposes … and a financial benefit’. The power to make social investments is arguably already present, and to some extent will simply be codified by the Bill. However, it will mean that those trustees who are unsure about whether they have such a power (because there is no specific express power in their governing document) should feel more confident in making such investments without relying on the usual powers to spend and perhaps invest.
New powers for the Charity Commission
The Bill as currently drafted will also give the Charity Commission increased powers to exercise control over charities’ behaviour, partly in response to concerns raised in various quarters about abuse of certain charities in relation to terrorist fundraising. One such proposed power is the ability for the Charity Commission to issue official warnings for breach of trust, misconduct or mismanagement. There are various procedural requirements circumscribing the power of the Charity Commission to issue such warnings, including a right for those concerned to make representations, but one area giving cause for concern among the charitable sector is that there is no right of appeal.
Disqualification of trustees
A list of offences (including money laundering and bribery) which will result in automatic disqualification of a charity trustee has been added. The Charity Commission will also, if the Bill is passed in its current form, have a discretionary power to suspend and ultimately remove a charity trustee where:
- it is satisfied that the person is unfit to hold the position,
- removing a trustee would be in the public interest in order to protect public trust and confidence in charities, and
- at least one of certain further prescribed conditions is met (for instance, that the person has been found by HMRC not to be a fit and proper person to be a manager of a body or trust, and the finding has not been overturned).
It will be difficult to judge the breadth of these powers or the planned scope of their application until the Charity Commission publishes further guidance but this is certainly one area which seems to be generating some concern.
Further provisions added since the original draft
Certain provisions have been added as the Bill has made its way through the two chambers and received further input from the various stakeholders, including in relation to social investments as set out above, a power to direct charities not to take certain actions and a power to prevent a disqualified trustee from holding another position of power within a charity. Measures are to be implemented to potentially supplement the current system of self-regulation to deal with aggressive fundraising (recalling, for example, the story of Olive Cooke) but only time will tell if these measures genuinely have any teeth.
Finally, it is worth noting that, in response to concerns expressed over social housing stock when the most recent ‘right to buy’ initiative was announced, the Bill contains an added provision making clear the Charity Commission’s obligation to ensure that social charities are not compelled to transfer their housing stock other than in line with their charitable objectives.
For further information please contact Rachael Taylor at rtaylor@wedlakebell.com.