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Charities BillPage 100

(ii) if appealed against, at the time when the appeal (or any further
appeal) is disposed of, and

(c) an appeal is disposed of—

(i) if it is determined and the period for bringing any further
5appeal has ended, or

(ii) if it is abandoned or otherwise ceases to have effect.

(4) The charity trustees of a charity may not purchase insurance under this section
unless they decide that they are satisfied that it is in the best interests of the
charity for them to do so.

(5) 10The duty of care in section 1(1) of the Trustee Act 2000 applies to a charity
trustee when making such a decision.

(6) This section—

(a) does not authorise the purchase of any insurance whose purchase is
expressly prohibited by the trusts of the charity, but

(b) 15has effect despite any provision prohibiting the charity trustees or
trustees for the charity receiving any personal benefit out of the funds
of the charity.

190 Power to amend s.189

The Minister may by order make such amendments of section 189(2) and (3) as
20the Minister considers appropriate.

Powers to relieve trustees and auditors etc. from liability

191 Commission’s power to relieve trustees and auditors etc. from liability

(1) This section applies to a person (“P”) who is or has been—

(a) a charity trustee or trustee for a charity,

(b) 25a person appointed to audit a charity’s accounts (whether appointed
under an enactment or otherwise), or

(c) an independent examiner or other person appointed to examine or
report on a charity’s accounts (whether appointed under an enactment
or otherwise).

(2) 30If the Commission considers—

(a) that P is or may be personally liable for a breach of trust or breach of
duty committed in P’s capacity as a person within subsection (1)(a), (b)
or (c), but

(b) that P has acted honestly and reasonably and ought fairly to be excused
35for the breach of trust or duty,

the Commission may make an order relieving P wholly or partly from any such
liability.

(3) An order under subsection (2) may grant the relief on such terms as the
Commission thinks fit.

(4) 40Subsection (2) does not apply in relation to any personal contractual liability of
a charity trustee or trustee for a charity.

(5) For the purposes of this section and section 192—

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(a) subsection (1)(b) is to be read as including a reference to the Auditor
General for Wales acting as auditor under Part 8, and

(b) subsection (1)(c) is to be read as including a reference to the Auditor
General for Wales acting as examiner under Part 8;

5and in subsection (1)(b) and (c) any reference to a charity’s accounts is to be
read as including any group accounts prepared by the charity trustees of a
charity.

(6) This section does not affect the operation of—

(a) section 61 of the Trustee Act 1925 (power of court to grant relief to
10trustees),

(b) section 1157 of the Companies Act 2006 (power of court to grant relief
to officers or auditors of companies), or

(c) section 192 (which extends section 1157 to auditors etc. of charities
which are not companies).

192 15Court’s power to grant relief to apply to all auditors etc. of charities which are
not companies

(1) Section 1157 of the Companies Act 2006 (power of court to grant relief to
officers or auditors of companies) has effect in relation to a person to whom this
section applies as it has effect in relation to a person employed as an auditor by
20a company.

(2) This section applies to—

(a) a person acting in a capacity within section 191(1)(b) or (c) in a case
where, apart from this section, section 1157 of the 2006 Act would not
apply in relation to that person as a person so acting, and

(b) 25a charity trustee of a CIO.

Part 10 Charitable companies etc.

Introductory

193 Meaning of “charitable company”

30In this Act “charitable company” means a charity which is a company.

Disclosure of charitable status by companies

194 Requirement to disclose charitable status

(1) Where a charitable company’s name does not include the word “charity” or
“charitable”, the fact that the company is a charity must be stated in legible
35characters—

(a) in every location, and in every description of document or
communication, in which it is required by regulations under section 82
of the Companies Act 2006 to state its registered name, and

(b) in all conveyances purporting to be executed by the company.

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(2) Where a company’s name includes the word “elusen” or “elusennol” (the
Welsh equivalents of “charity” and “charitable”), subsection (1) does not apply
in relation to any document that is wholly in Welsh.

(3) The statement required by subsection (1) must be in English, except that, in the
5case of a document that is otherwise wholly in Welsh, the statement may be in
Welsh if it consists of or includes the word “elusen” or “elusennol”.

(4) In subsection (1)(b) “conveyance” means any instrument creating, transferring,
varying or extinguishing an interest in land.

195 Civil consequences of failure to make required disclosure

(1) 10This section applies to any legal proceedings brought by a charitable company
to which section 194 applies to enforce a right arising out of a contract or
conveyance in connection with which there was a failure to comply with that
section.

(2) The proceedings must be dismissed if it is shown that the defendant to the
15proceedings—

(a) has a claim against the company arising out of the contract or
conveyance that the defendant has been unable to pursue because of
the company’s failure to comply with section 194, or

(b) has suffered some financial loss in connection with the contract or
20conveyance because of the company’s failure to comply with that
section,

unless the court before which the proceedings are brought is satisfied that it is
just and equitable to permit the proceedings to continue.

(3) This section does not affect the right of any person to enforce such rights as that
25person may have against another in any proceedings brought by the other.

196 Criminal consequences of failure to make required disclosure

(1) Where a charitable company fails, without reasonable excuse, to comply with
section 194, an offence is committed by—

(a) the company, and

(b) 30every officer of the company who is in default.

(2) For this purpose a shadow director of the company is treated as an officer of
the company if the failure is to comply with section 194(1)(a) and that person
would be treated as an officer of the company for the purposes of the
corresponding requirement of regulations under section 82 of the Companies
35Act 2006.

(3) A person guilty of such an offence is liable on summary conviction to a fine not
exceeding level 3 on the standard scale and, for continued contravention, a
daily default fine not exceeding 10% of level 3 on the standard scale.

(4) Expressions used in this section have the same meaning as in section 84 of the
40Companies Act 2006 (criminal consequences of failure to disclose company’s
registered name).

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Restrictions on alteration of objects

197 Alteration of objects by bodies corporate and charitable status

(1) Subsection (2) applies where a charity—

(a) is a company or other body corporate, and

(b) 5has power to alter the instruments establishing or regulating it as a
body corporate.

(2) No exercise of the power which has the effect of the body ceasing to be a charity
is valid so as to affect the application of—

(a) any property acquired under any disposition or agreement previously
10made otherwise than for full consideration in money or money’s worth,
or any property representing property so acquired,

(b) any property representing income which has accrued before the
alteration is made, or

(c) the income from any such property.

198 15Alteration of objects by companies and Commission’s consent

(1) Any regulated alteration by a charitable company—

(a) requires the prior written consent of the Commission, and

(b) is ineffective if such consent has not been obtained.

(2) The following are regulated alterations—

(a) 20an amendment of the company’s articles of association adding,
removing or altering a statement of the company’s objects,

(b) any alteration of any provision of its articles of association directing the
application of property of the company on its dissolution, and

(c) any alteration of any provision of its articles of association where the
25alteration would provide authorisation for any benefit to be obtained
by directors or members of the company or persons connected with
them.

(3) Where a company that has made a regulated alteration in accordance with
subsection (1) is required—

(a) 30by section 26 of the Companies Act 2006 to send to the registrar of
companies a copy of its articles as amended,

(b) by section 30 of that Act to forward to the registrar a copy of the special
resolution effecting the alteration, or

(c) by section 31 of that Act to give notice to the registrar of the
35amendment,

the copy or notice must be accompanied by a copy of the Commission’s
consent.

(4) If more than one of those provisions applies and they are complied with at
different times, the company need not send a further copy of the Commission’s
40consent if a copy was sent on an earlier occasion.

(5) Subsections (2) to (4) of section 30 of that Act (offence of failing to comply with
section 30) apply in relation to a failure to comply with subsection (3) as in
relation to a failure to comply with that section.

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199 Meaning of “benefit” in s.198(2)

For the purposes of section 198(2)(c) “benefit” means a direct or indirect benefit
of any nature, except that it does not include any remuneration (within the
meaning of section 185) whose receipt may be authorised under that section.

200 5Meaning of “connected person” in s.198(2)

(1) For the purposes of section 198(2)(c), the following persons are connected with
a director or member of a charitable company—

(a) a child, parent, grandchild, grandparent, brother or sister of the
director or member;

(b) 10the spouse or civil partner of the director or member or of any person
falling within paragraph (a);

(c) a person carrying on business in partnership with the director or
member or with any person falling within paragraph (a) or (b);

(d) an institution which is controlled—

(i) 15by the director or member or by any person falling within
paragraph (a), (b) or (c), or

(ii) by two or more persons falling within sub-paragraph (i), when
taken together.

(e) a body corporate in which—

(i) 20the director or member or any connected person falling within
any of paragraphs (a) to (c) has a substantial interest, or

(ii) two or more persons falling within sub-paragraph (i), when
taken together, have a substantial interest.

(2) Sections 350 to 352 (meaning of child, spouse, civil partner, controlled
25institution and substantial interest) apply for the purposes of subsection (1).

Acts requiring Commission consent

201 Consent of Commission required for approval etc. by members of charitable
companies

(1) In the case of a charitable company, each of the following is ineffective without
30the prior written consent of the Commission—

(a) any approval given by the members of the company under any
provision of Chapter 4 of Part 10 of the Companies Act 2006
(transactions with directors requiring approval by members) listed in
subsection (2), and

(b) 35any affirmation given by members of the company under section 196 or
214 of the 2006 Act (affirmation of unapproved property transactions
and loans).

(2) The provisions of the 2006 Act are—

(a) section 188 (directors’ long-term service contracts);

(b) 40section 190 (substantial property transactions with directors etc.);

(c) section 197, 198 or 200 (loans and quasi-loans to directors etc.);

(d) section 201 (credit transactions for benefit of directors etc.);

(e) section 203 (related arrangements);

(f) section 217 (payments to directors for loss of office);

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(g) section 218 (payments to directors for loss of office: transfer of
undertaking etc.).

202 Consent of Commission required for certain acts of charitable company

(1) A charitable company may not do an act to which this section applies without
5the prior written consent of the Commission.

(2) This section applies to an act that—

(a) does not require approval under a listed provision of Chapter 4 of Part
10 of the Companies Act 2006 (transactions with directors) by the
members of the company, but

(b) 10would require such approval but for an exemption in the provision in
question that disapplies the need for approval on the part of the
members of a body corporate which is a wholly-owned subsidiary of
another body corporate.

(3) The reference to a listed provision is a reference to a provision listed in section
15201(2).

(4) If a company acts in contravention of this section, the exemption referred to in
subsection (2)(b) is to be treated as being of no effect in relation to the act.

Restoration of charitable company to register

203 Application for restoration of charitable company to register

(1) 20The Commission may make an application under section 1029 of the
Companies Act 2006 (application to court for restoration to the register of
companies) to restore a charitable company to the register of companies.

(2) The power exercisable by the Commission by virtue of this section is
exercisable—

(a) 25by the Commission of its own motion, but

(b) only with the agreement of the Attorney General on each occasion.

Part 11 Charitable incorporated organisations (CIOs)

CHAPTER 1 General

30Nature and constitution

204 Meaning of “CIO

In this Act “CIO” means charitable incorporated organisation.

205 Nature

(1) A CIO is a body corporate.

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(2) A CIO must have—

(a) a constitution;

(b) a principal office, which must be in England or in Wales;

(c) one or more members.

(3) 5The members may be—

(a) not liable to contribute to the assets of the CIO if it is wound up, or

(b) liable to do so up to a maximum amount each.

206 Constitution

(1) A CIO’s constitution must state—

(a) 10its name,

(b) its purposes,

(c) whether its principal office is in England or in Wales, and

(d) whether or not its members are liable to contribute to its assets if it is
wound up, and (if they are) up to what amount.

(2) 15A CIO’s constitution must make provision—

(a) about who is eligible for membership, and how a person becomes a
member,

(b) about the appointment of one or more persons who are to be charity
trustees of the CIO, and about any conditions of eligibility for
20appointment, and

(c) containing directions about the application of property of the CIO on its
dissolution.

(3) A CIO’s constitution must also provide for such other matters, and comply
with such requirements, as are specified in CIO regulations.

(4) 25A CIO’s constitution—

(a) must be in English if its principal office is in England;

(b) may be in English or in Welsh if its principal office is in Wales.

(5) A CIO’s constitution must be in the form specified in regulations made by the
Commission, or as near to that form as the circumstances admit.

(6) 30Subject to anything in a CIO’s constitution—

(a) a charity trustee of the CIO may, but need not, be a member of it,

(b) a member of the CIO may, but need not, be one of its charity trustees,
and

(c) those who are members of the CIO and those who are its charity
35trustees may, but need not, be identical.

Formation and registration of CIO

207 Application for CIO to be constituted and registered

(1) Any one or more persons (“the applicants”) may apply to the Commission for
a CIO to be constituted and for its registration as a charity.

(2) 40The applicants must supply the Commission with—

(a) a copy of the proposed constitution of the CIO,

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(b) such other documents or information as may be prescribed by CIO
regulations, and

(c) such other documents or information as the Commission may require
for the purposes of the application.

208 5Cases where application must or may be refused

(1) The Commission must refuse an application under section 207 if—

(a) it is not satisfied that the CIO would be a charity at the time it would be
registered, or

(b) the CIO’s proposed constitution does not comply with one or more of
10the requirements of section 206 (constitution of CIOs) and any
regulations made under that section.

(2) The Commission may refuse such an application if—

(a) the proposed name of the CIO

(i) is the same as, or

(ii) 15is in the opinion of the Commission too like,

the name of any other charity (whether registered or not), or

(b) the Commission is of the opinion referred to in any of paragraphs (b) to
(e) of section 42(2) (power to require charity’s name to be changed) in
relation to the proposed name of the CIO (reading paragraph (b) as
20referring to the proposed purposes of the CIO and to the activities
which it is proposed it should carry on).

209 Registration of CIO

(1) If the Commission grants an application under section 207 it must register the
CIO to which the application relates as a charity in the register of charities.

(2) 25The entry relating to the charity’s registration in the register of charities must
include—

(a) the date of the charity’s registration, and

(b) a note saying that it is constituted as a CIO.

(3) A copy of the entry in the register must be sent to the charity at the principal
30office of the CIO.

210 Effect of registration of CIO

(1) Upon the registration of the CIO in the register of charities, it becomes by virtue
of the registration a body corporate—

(a) whose constitution is that proposed in the application,

(b) 35whose name is that specified in the constitution, and

(c) whose first member is, or first members are, the applicants referred to
in section 207.

(2) All property for the time being vested in the applicants (or, if more than one,
any of them) on trust for the charitable purposes of the CIO (when
40incorporated) by virtue of this subsection becomes vested in the CIO upon its
registration.

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Name and status

211 Name

(1) The name of a CIO must appear in legible characters—

(a) in every location, and in every description of document or
5communication, in which a charitable company would be required by
regulations under section 82 of the Companies Act 2006 to state its
registered name, and

(b) in all conveyances purporting to be executed by the CIO.

(2) In subsection (1)(b), “conveyance” means any instrument creating,
10transferring, varying or extinguishing an interest in land.

212 Status

(1) Subsection (3) applies if the name of a CIO does not include—

(a) “charitable incorporated organisation”,

(b) CIO”, with or without full stops after each letter, or

(c) 15a Welsh equivalent mentioned in subsection (2) (but this option applies
only if the CIO’s constitution is in Welsh),

and it is irrelevant, in any such case, whether or not capital letters are used.

(2) The Welsh equivalents referred to in subsection (1)(c) are—

(a) “sefydliad elusennol corfforedig”, or

(b) 20“SEC”, with or without full stops after each letter.

(3) If this subsection applies, the fact that a CIO is a CIO must be stated in legible
characters in all the locations, documents, communications and conveyances
mentioned in section 211(1).

(4) The statement required by subsection (3) must be in English, except that in the
25case of a document which is otherwise wholly in Welsh, the statement may be
in Welsh.

213 Civil consequences of failure to disclose name or status

(1) This section applies to any legal proceedings brought by a CIO to enforce a
right arising out of a contract or conveyance in connection with which there
30was a failure to comply with section 211 or 212.

(2) The proceedings must be dismissed if it is shown that the defendant to the
proceedings—

(a) has a claim against the CIO arising out of the contract or conveyance
that the defendant has been unable to pursue because of the failure to
35comply with section 211 or 212, or

(b) has suffered some financial loss in connection with the contract or
conveyance because of the failure to comply with section 211 or 212,

unless the court before which the proceedings are brought is satisfied that it is
just and equitable to permit the proceedings to continue.

(3) 40This section does not affect the right of any person to enforce such rights as that
person may have against another in any proceedings brought by the other.

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214 Offence of failing to disclose name or status

(1) In the case of failure, without reasonable excuse, to comply with section 211 or
212 an offence is committed by—

(a) every charity trustee of the CIO who is in default, and

(b) 5any other person who on the CIO’s behalf—

(i) signs or authorises the signing of the offending document,
communication or conveyance, or

(ii) otherwise commits or authorises the offending act or omission.

(2) A person guilty of an offence under subsection (1) is liable on summary
10conviction to a fine not exceeding level 3 on the standard scale and, for
continued contravention, a daily default fine not exceeding 10% of level 3 on
the standard scale.

(3) The reference in subsection (1) to a charity trustee being in default, and the
reference in subsection (2) to a daily default fine, have the same meaning as in
15the Companies Acts (see sections 1121 to 1123 and 1125 of the Companies Act
2006).

215 Offence of holding out that a body is a CIO

(1) It is an offence for a person (in whatever way) to hold any body out as being a
CIO when it is not.

(2) 20It is a defence where a person is charged with an offence under subsection (1)
to prove that the person believed on reasonable grounds that the body was a
CIO.

(3) A person guilty of an offence under subsection (1) is liable on summary
conviction to a fine not exceeding level 3 on the standard scale.

CHAPTER 2 25Powers, capacity and procedure etc.

216 Powers of CIO

(1) Subject to anything in its constitution, a CIO may do anything which is
calculated to further its purposes or is conducive or incidental to doing so.

(2) The CIO’s charity trustees are to manage the affairs of the CIO and may for that
30purpose exercise all the powers of the CIO.

217 Constitutional requirements

(1) A CIO must use and apply its property in furtherance of its purposes and in
accordance with its constitution.

(2) If the CIO is one whose members are liable to contribute to its assets if it is
35wound up, its constitution binds the CIO and its members for the time being to
the same extent as if its provisions were contained in a contract—

(a) to which the CIO and each of its members was a party, and

(b) which contained obligations on the part of the CIO and each member to
observe all the provisions of the constitution.

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