Charities (Protection and Social Investment) Bill (HL Bill 3)

1 Official warnings by the Commission

Before section 76 of the Charities Act 2011, after the heading “Powers of
Commission to act for protection of charities etc” insert—

“75A Official warnings by the Commission

(1) 5The Commission may issue a warning—

(a) to a charity trustee or trustee for a charity who it considers has
committed a breach of trust or duty or other misconduct or
mismanagement in that capacity, or

(b) to a charity in connection with which it considers a breach of
10trust or duty or other misconduct or mismanagement has been
committed.

(2) The Commission—

(a) may publish a warning it has issued;

(b) may issue or publish a warning in any way it considers
15appropriate.

(3) Before issuing a warning under this section, the Commission must give
notice of its intention to do so to the charity, and each charity trustee or
trustee for the charity, except any who cannot be found or who has no
known address in the United Kingdom.

(4) 20Any such notice—

(a) may be given by post, and

(b) if given by post, may be addressed to the recipient’s last known
address in the United Kingdom.

(5) The notice must specify—

(a) the power under subsection (1) to give the warning, and the
grounds for the warning;

(b) any action that the Commission considers should be taken, or
that the Commission is considering taking, to rectify the
5misconduct or mismanagement referred to in subsection (1);

(c) whether and, if so, how the Commission proposes to publish
the warning;

(d) a period within which representations may be made to the
Commission about the content of the proposed warning.

(6) 10Where the Commission gives notice under subsection (3) of its
intention to issue a warning—

(a) it must take into account any representations made to it within
the period specified in the notice, and

(b) it may (without further notice) issue the warning either without
15modifications or with such modifications as it thinks desirable.””

2 Investigations and power to suspend

(1) Section 76 of the Charities Act 2011 (suspension of trustees etc. and
appointment of interim managers) is amended as follows.

(2) In subsection (1)(a), for “any” substitute “a failure to comply with an order or
20direction of the Commission, a failure to remedy any breach specified in a
warning under section 75A, or any other”.

(3) In subsection (4), at the end insert “, subject to any extension under subsection
(7)”.

(4) At the end add—

“(7) 25At any time before the expiry of an order under paragraph (a) of
subsection (3) the Commission may extend or further extend the
suspension by an order under that paragraph, provided that—

(a) the order does not extend the suspension for a period of more
than 12 months, and

(b) 30the total period of suspension is not more than 2 years.””

3 Range of conduct to be considered when exercising powers

After section 76 of the Charities Act 2011 insert—

“76A Exercise of powers where section 76(1)(a) applies

(1) This section applies to any power under this Part which is exercisable
35in cases where the Commission is satisfied as mentioned in section
76(1)(a) in relation to a charity (misconduct or mismanagement), with
or without any other condition.

(2) If in such a case the Commission is also satisfied—

(a) that a particular person has been responsible for or privy to the
40misconduct or mismanagement, or

(b) that a particular person’s conduct contributed to it or facilitated
it,

the Commission may take into account the matters mentioned in
subsection (3) in deciding whether or how to exercise the power.

(3) Those matters are—

(a) the conduct of that person in relation to any other charity;

(b) any other conduct of that person that appears to the
Commission to be damaging or likely to be damaging to public
5trust and confidence in charities generally or particular charities
or classes of charity.””

4 Power to remove trustees etc following an inquiry

(1) The Charities Act 2011 is amended as follows.

(2) For section 79 (Commission’s power to remove trustees etc following an
10inquiry) substitute—

“79 Removal of trustee or officer etc for protective etc purposes

(1) Subsection (2) applies where, at any time after it has instituted an
inquiry under section 46 with respect to any charity, the Commission is
satisfied either as mentioned in section 76(1)(a) (misconduct or
15mismanagement etc) or as mentioned in section 76(1)(b) (need to
protect property etc).

(2) The Commission may of its own motion by order establish a scheme for
the administration of the charity.

(3) Subsection (4) applies where, at any time after it has instituted an
20inquiry under section 46 with respect to any charity, the Commission is
satisfied both as mentioned in section 76(1)(a) (misconduct or
mismanagement etc) and as mentioned in section 76(1)(b) (need to
protect property etc).

(4) Whether or not it acts under subsection (2), the Commission may of its
25own motion by order remove any trustee, charity trustee, officer, agent
or employee of the charity—

(a) who has been responsible for or privy to the misconduct or
mismanagement, or

(b) whose conduct contributed to it or facilitated it.

(5) 30Where the Commission has given notice under section 82 of its
intention to make an order under subsection (4) removing a person
from an office or employment, the Commission may proceed to make
the order even though the person has ceased to hold the office or
employment.

(6) 35Where an order is made relying on subsection (5)—

(a) section 81(1) (power to make supplementary provision) and
Case D in section 178(1) (disqualification) apply as if the person
was removed by the order, but

(b) the order does not affect the time when the person ceased to
40hold the office or employment.””

(3) In section 83(3) (power to suspend or remove trustees etc from membership of
charity)—

(a) for “79(2)” substitute “79(4)”;

(b) for “an officer,” substitute “a trustee, charity trustee, officer,”.

(4) In section 87(1) (supervision by Commission of certain Scottish charities), for
“79(2)(b)” substitute “79(1) and (2)”.

(5) In section 178(1) (automatic disqualification of charity trustees), in Case D for
“79(2)(a)” substitute “79(4)”.

(6) 5In Schedule 6 (appeals to tribunals), in the entry relating to an order made by
the Commission under section 79(2) in relation to a charity—

(a) in column 1, after “79(2)” insert “or (4)”;

(b) in column 2, for “79(2)(a)” substitute “79(4)”.

5 Power to remove disqualified trustee

(1) 10The Charities Act 2011 is amended as follows.

(2) After section 79 insert—

“79A Removal of disqualified trustee

The Commission may remove a charity trustee or trustee for a charity
by order made of its own motion if the person is disqualified from
15being a charity trustee or trustee for a charity (generally or in relation
to the charity concerned)—

(a) by virtue of section 178, or

(b) by an order under section 181A.””

(3) In section 82(1) (removal of trustees etc: notice), after “79” insert “, 79A”.

(4) 20In section 89(1) (orders relating to trustees etc: exceptions to publicity
requirement), after paragraph (b) insert, “or

“(c) an order under section 79A (removal of disqualified trustee),”.”

(5) In section 89(5) (notice inviting representations on order to remove), after “an
order under this Act” insert “, other than an order under section 79A,”.

6 25Power to direct specified action not to be taken

(1) The Charities Act 2011 is amended as follows.

(2) After section 84 insert—

“84A Power to direct specified action not to be taken

(1) This section applies where, at any time after the Commission has
30instituted an inquiry under section 46 with respect to any charity, the
Commission considers that any action, if taken or continued by a
person listed in section 84(2), would constitute misconduct or
mismanagement in the administration of the charity.

(2) The Commission may make an order specifying the action and
35directing the person not to take it or continue it.

(3) While an order under this section is in force, the Commission must
review it at intervals of not more than 6 months.””

(3) In section 20 (incidental powers), in subsection (3) after “84” insert “, 84A”.

(4) In section 86(2) (copy of certain orders, and reasons, to be sent to charity) and
40section 336(2)(a) (enforcement of orders of Commission) insert in the

appropriate place—

• ““section 84A (power to direct specified action not to be taken),”.”

(5) In Schedule 6 (appeals and applications to Tribunal), insert in the appropriate
place—

7 10Power to direct winding up

(1) The Charities Act 2011 is amended as follows.

(2) Before section 85 insert—

“84B Power to direct winding up

(1) This section applies where the conditions in section 84(1) are met for
15that section to apply, but the Commission is satisfied—

(a) that the charity does not operate, or

(b) that its purposes can be promoted more effectively if it ceases to
operate,

and that exercising the power in subsection (2) is expedient in the
20public interest.

(2) The Commission may by order direct—

(a) the charity trustees,

(b) any trustee for the charity,

(c) any officer or employee of the charity, or

(d) 25(if a body corporate) the charity itself,

to take any action specified in the order for the purpose of having the
charity wound up and dissolved, and any remaining property
transferred to a charity with the same purposes.

(3) An order under this section—

(a) 30may require action to be taken whether or not it would
otherwise be within the powers exercisable by the person or
persons concerned, or by the charity, in relation to the winding
up and dissolution of the charity or to its property, and

(b) in particular, may require the person or persons concerned to
35do anything for the purpose of having the charity wound up
and dissolved and its property transferred that could otherwise
only be done by the members of the charity or any of them,

but may not require any action to be taken which is prohibited by any
Act.

(4) 40Before making an order under this section the Commission must give
public notice of its intention to make the order, inviting representations
to be made to it within a period specified in the notice.

(5) The Commission—

(a) must take into account any representations made to it within
the period specified in the notice, and

(b) may make the order (without further notice) either without
modifications or with such modifications as it thinks desirable.

(6) 5An order under this section may not be made less than 60 days after the
first day on which public notice under subsection (4) is given, unless
the Commission is satisfied after complying with subsections (4) and
(5) that it is necessary to make the order to prevent or reduce
misconduct or mismanagement in the administration of the charity or
10to protect the property of the charity or property that may come to the
charity.

(7) Anything done by a person or body under the authority of an order
under this section is to be treated as properly done in the exercise of the
powers mentioned in subsection (3)(a).

(8) 15Subsection (7) does not affect any contractual or other rights arising in
connection with anything which has been done under the authority of
such an order.””

(3) In section 20 (incidental powers), in subsection (3) before “or 85” insert “, 84B”.

(4) In section 86(2) (copy of certain orders, and reasons, to be sent to charity) and
20section 336(2)(a) (enforcement of orders of Commission) insert in the
appropriate place—

• ““section 84B (power to direct winding up),”.”

(5) In Schedule 6 (appeals and applications to Tribunal), insert in the appropriate
place—

8 Power to direct property to be applied to another charity

In section 85 of the Charities Act 2011 (power to direct application of charity
property where person is unwilling) after subsection (5) insert—

“(6) Subsection (5) does not apply to rights of the charity or of a charity
40trustee or trustee for the charity in that capacity.””

9 Automatic disqualification from being a trustee

(1) The Charities Act 2011 is amended as follows.

(2) Section 178 (persons disqualified from being charity trustees or trustees for a
charity) is amended as follows.

(3) 45In subsection (1), in Case A, for “of any offence involving dishonesty or

deception” substitute “of—

(a) an offence specified in section 178A;

(b) an offence, not specified in section 178A, that involves
dishonesty or deception.””

(4) 5In Case D, for “from the office of charity trustee or trustee for a charity”
substitute “as a trustee, charity trustee, officer, agent or employee of a charity”.

(5) At the end of subsection (1) insert—

““Case H

P has been found to be in contempt of court under Civil Procedure
Rules for—

(a) 10making a false disclosure statement, or causing one to be made,
or

(b) making a false statement in a document verified by a statement
of truth, or causing one to be made.

Case I

P has been found guilty of disobedience to an order or direction of the
15Commission on an application to the High Court under section 336(1).

Case J

P is a designated person for the purposes of—

(a) Part 1 of the Terrorist Asset-Freezing etc Act 2010, or

(b) the Al-Qaida (Asset-Freezing) Regulations 2011.””

(6) After subsection (2) insert—

“(3) 20While a person is disqualified under this section in relation to a charity,
the person is also disqualified from holding an office or employment in
the charity with senior management functions.

(4) A function of an office or employment held by a person (A) is a senior
management function if—

(a) 25A is not responsible for it to another officer or employee (other
than a charity trustee or trustee for the charity), or

(b) it involves control over money and the only officer or employee
(other than a charity trustee or trustee for the charity) to whom
A is responsible for it is a person with senior management
30functions other than ones involving control over money.””

(7) After section 178 insert—

“178A Case A: specified offences

(1) The following offences are specified for the purposes of Case A—

(2) An offence which has been superseded (directly or indirectly) by an
20offence specified in subsection (1) is also specified for the purposes of
Case A.

(3) In relation to an offence specified in subsection (1) or (2), the following
offences are also specified for the purposes of Case A—

(a) an offence of attempt, conspiracy or incitement to commit the
25offence;

(b) an offence of aiding, abetting, counselling or procuring the
commission of the offence;

(c) An offence under Part 2 of the Serious Crime Act 2007
(encouraging or assisting) in relation to the offence.

(4) 30The Minister may amend this section by regulations to add or remove
an offence.”

(8) Section 179 (disqualification: pre-commencement events etc) is amended as
follows.

(9) In subsection (1), after “178(1)” insert “or section 178A or any amendment of
35that section”.

(10) At the end add—

“(7) Case H does not apply in relation to a finding of contempt which, if it
had been a conviction for which P was dealt with in the same way,
would be a spent conviction for the purposes of the Rehabilitation of
40Offenders Act 1974.””

(11) Section 181 (waiver of disqualification) is amended as follows.

(12) After subsection (2) insert—

“(2A) A waiver under subsection (2)—

(a) may relate to the whole of P’s disqualification or only to
45disqualification under section 178(3);

(b) in relation to disqualification under section 178(3) may relate to
a particular office or employment or to any office or
employment of a particular description.””

(13) In subsection (3) (presumption for waiver after 5 years) for “or E” substitute “,
5E or I”.

(14) In section 183 (criminal consequences of acting while disqualified), in
subsection (1)—

(a) after “for a charity” insert “or to hold an office or employment”;

(b) after “such a trustee” insert “or from holding that office or
10employment”.

(15) Section 184 (civil consequences of acting while disqualified) is amended as
follows.

(16) In subsections (1) and (2)(a)—

(a) after “for a charity” insert “or as officer or employee of a charity”, and

(b) 15after “such a trustee” insert “or from holding that office or
employment”.

(17) In subsection (2)(b) after “for the charity” insert “or holding the office or
employment”.

(18) Section 348 (regulations subject to affirmative procedure etc) is amended as
20follows.

(19) In subsection (1), after paragraph (b) insert—

“(ba) regulations under section 178A(4) (offences specified for
automatic disqualification of charity trustees);”.”

(20) In subsection (2) after “(1)(a)” insert “, (ba)”.

(21) 25In subsection (4) after “regulations under—” insert—

“(za) section 178A(4), if the regulations add an offence,”.”

10 Power to disqualify from being a trustee

(1) The Charities Act 2011 is amended as follows.

(2) After section 181 insert—

“181A 30 Disqualification orders

(1) The Commission may by order disqualify a person from being a charity
trustee or trustee for a charity.

(2) The order may disqualify a person—

(a) in relation to all charities, or

(b) 35in relation to such charities or classes of charity as may be
specified or described in the order.

(3) While a person is disqualified by virtue of an order under this section
in relation to a charity, the person is also disqualified, subject to
subsection (5), from holding an office or employment in the charity
40with senior management functions.

(4) A function of an office or employment held by a person (A) is a senior
management function if—