Law Commission Proposes Much-Needed Changes to Charity Law

The Law Commission has published its report on the Technical Issues in Charity Law with a new draft Charities Bill.

The 350-page report, which has been a number of years in the making, recommends removing red tape while ensuring proper protections for the public. It says current laws affecting charities are bureaucratic, discourage volunteering and force charities to pay for unnecessary professional advice. In particular, the Law Commission makes 43 recommendations for reform which it believes will save charities time and money.

The Law Commission’s recommendations will now have to be considered by Government. If the Draft Bill is enacted the changes to legislation will be far-reaching.

An opportunity to remove complexity and inconsistencies

In general, the changes proposed are technical but important, with real practical consequences for charities, including the removal of some of the inconsistencies and complexity that can make charity law difficult to apply and regulate.

Some of the key changes recommended by the Law Commission are as follows:-

• giving charities more flexibility to obtain tailored advice when selling land and removing and simplifying some of the administrative procedures that need to be followed when dealing with land;
• making it easier to amend governing documents of charities that have different legal forms, including suggesting standard criteria for the Charity Commission to use when consenting to changes;
• removing barriers to mergers when a merger is in a charity’s best interests;
• providing a clearer definition for permanent endowment and increased flexibility for charities to make use of their permanent endowment, including the ability to spend up to 25% of the value of permanent endowment as long as a charity recoups the expenditure within 20 years;
• simplifying the procedures that need to be followed when a fundraising appeal has failed, by allowing trustees to redirect donations without contacting the donors in specific circumstances;
• allowing payments to be made to trustees for the supply of goods;
• enabling the Commission to authorise a trustee to retain a benefit that he or she has derived from providing a service to the charity, where that would be fair and in the interests of the charity;
• offering greater flexibility for making ex gratia payments (payments that the trustees feel morally obliged to make but which they have no legal power to make, for example where money has been left to the charity under a Will, and the testator has instructed his or her solicitor to draft a fresh Will but the new Will is not made by the time the testator dies);
• allowing charities to apply to the courts rather than the Charity Commission for consent to commence proceedings against the Commission;
• giving advance assurance to trustees that legal costs in a Charity Tribunal can be honoured from the charity’s funds; and
• extending the powers of the Charity Commission to include:
  • increased powers to prevent charities using misleading names;
  • the ability to confirm if trustees were properly appointed; and
  • increased powers to delay registering a charity.

‘The rules governing charities have to be right’

Nick Hopkins, the Law Commissioner in charge of the project, said: “Charities are a force for good and millions regularly donate to help others. But the rules that govern them have to be right. As it is, some of the technical law around charities is inefficient and unduly complex. Our reforms would help make sure charities use their time and money in the best way to support their good causes, whilst providing oversight to ensure public confidence.”

‘Sensible and timely’

Kenneth Dibble, Chief Legal Adviser at the Charity Commission, said: “[The] report by the Law Commission makes a number of sensible and timely recommendations that focus on improving the regulatory framework under which charities operate.”

“We have worked closely with the Law Commission throughout its charity law project, which supports our strategic priority of enabling trustees to run their charities more effectively and we hope will increase public trust and confidence . . . We will continue to work with government and other stakeholders to ensure that the impact of these changes are fully understood and would support government bringing forward the implementation of these proposals in the coming months,” he said.

The Law Commission’s proposals in its report follow on from previous work on charity law reform and from Lord Hodgson’s 2012 review of the Charities Act.

Lord Hodgson said: “Since the recommendations have now been consulted on extensively and are approved of by the sector, I hope the government will find time to implement them speedily.”

Contact our charity law experts today

IBB Solicitors’ specialist Charities team have extensive and long-established experience in delivering practical commercial advice to charities and not for profit organisations and those who work with them. For advice, please call us on 03456 381381 or email us at charities@ibblaw.co.uk.