Clause 37: Disqualification of trustees receiving remuneration by virtue of section 36

158.     This clause inserts a new section, 73C, into the 1993 Act. Where a trustee or connected person is (or would be) entitled to receive remuneration under an agreement or proposed agreement within section 73A (inserted by clause 36), new section 73C provides (subsection (2)) that the trustee in question is disqualified from acting as a trustee in relation to decisions or other matters about that agreement. For this clause a "connected person" is as defined in section 73B(5) (inserted by clause 36).

159.     Subsection (3) prevents a person's disqualification from invalidating his acts done while disqualified.

160.     Subsection (4) allows the Charity Commission to make an order under subsection (5) or (6) where a person has done something he was disqualified by subsection (2) from doing, and he or a connected person has received, or is due to receive, remuneration. Subsection (5) allows the Charity Commission to order the person to repay to the charity any remuneration received (subsection (5)(a)), including, by virtue of subsection (5)(b), the value of any benefit in kind. Where the person is due to receive the agreed remuneration, subsection (6) allows the Charity Commission to direct that the person is not to receive the remuneration.

Clause 38: Power of Commission to relieve trustees, auditors etc from liability for breach of trust or duty

161.     Currently a charity trustee seeking relief from personal liability for a breach of trust must apply to the court. The court can grant relief, where it believes that the trustee has acted honestly and reasonably and ought fairly to be excused, under section 61 of the Trustee Act 1925 or, for directors of charitable companies, section 727 of the Companies Act 1985. The Charity Commission does not currently have the power to grant relief in that way.

162.     This clause provides the Commission with such a power. It inserts a new section, 73D, into the 1993 Act. Section 73D confers power on the Charity Commission to provide relief from liability (in whole or in part) to a trustee for breach of trust or duty, where the trustee has acted honestly and reasonably, and where the trustee ought fairly to be excused for the breach. It also extends that power to apply to persons appointed by a charity (under section 43 of the Charities Act 1993) as auditor or independent examiner and to persons appointed by a charitable company (under Chapter 5 of Part 11 of the Companies Act 1985) as auditor or reporting accountant.

163.     This clause also inserts new section 73E into the 1993 Act which extends the court's existing power to grant relief to an auditor or independent examiner of an unincorporated charity appointed under the current section 43 of the Charities Act 1993. New section 73E gives the court power to relieve from liability all those who report on the accounts of an unincorporated charity (including group accounts of an unincorporated charity).

Clause 39: Trustees' indemnity insurance

164.     This clause inserts new section 73F into the 1993 Act. It provides trustees with a statutory power to purchase trustee indemnity insurance and to pay the premiums with the charity's money, subject to certain limitations and conditions.

165.     Subsection (1) provides the power for trustees to purchase indemnity insurance, subject to the limitations set out in subsections (2) and (3). Subsections (4) and (5) provide (a) that trustees must satisfy themselves that it is in the charity's best interests to purchase trustee indemnity insurance under this section and (b) that, in so doing, they will be subject to the duty of care in section 1(1) of the Trustee Act 2000.

166.     Subsections (6) and (7) provide a power for the Secretary of State to amend subsections (2) and (3) by order, subject to the affirmative resolution procedure.

167.     Subsection (8) clarifies (a) that this section does not allow purchase of indemnity insurance where it is expressly prohibited by the charity's trusts, and (b) that this section has effect despite any provision in the charity's trusts prohibiting the trustees from receiving personal benefit from the charity's funds.

Clauses 40, 41, and 42: Power to transfer all property; Power to replace purposes; and Power to modify powers or procedures

168.     At present, section 74 of the 1993 Act gives the charity trustees of certain unincorporated charities with low annual income (currently £5,000 or less) the power, subject to specified controls and conditions, to make a resolution:

• to transfer all the property of the charity to one or more other charities; or

• to modify the trusts of the charity by replacing all or any of the purposes of the charity with other charitable purposes; or

• to modify particular powers and procedures in the trusts of the charity.

169.     Section 74 removes the need for charity trustees who wish to make any such transfer or modification, but who do not otherwise have the power to do so, to apply to the Charity Commission to make a scheme effecting the transfer or modification. Under section 74 the Commission's concurrence in writing to the resolution is needed before the transfer or modification can take effect, but for small charities the process of obtaining that concurrence is normally much simpler and quicker than the process of applying for a scheme.

170.     Clauses 40- 42 of the Bill preserve the essence of the current section 74 arrangements for low-income charities while modifying and extending some elements of them.

171.     Clause 40 substitutes for existing section 74 three new sections 74, 74A, and 74B, which deal with the power to transfer a charity's property to one or more other charities. New section 74B makes specific provision for such a transfer where the charity has a permanent endowment (property which is subject to a restriction preventing its expenditure).

172.     Clause 41 inserts a new section, 74C, into the 1993 Act to deal with the power to modify a charity's trusts by replacing all or any of the charity's purposes with other charitable purposes.

173.     Clause 42 inserts a new section, 74D, into the 1993 Act to deal with the power to modify powers or procedures in the trusts of a charity.

Clause 43: Power to spend capital

174.     Section 75 of the 1993 Act gives to the trustees of very small unincorporated charities which have permanent endowment not consisting of any land the power to resolve, by a simple administrative procedure, to spend that endowment. Very small charities in this context are ones whose gross annual income is not more than £1,000. Permanent endowment is property which is subject to a restriction preventing its expenditure. Where permanent endowment is held as an investment the income from the investment must be spent but the capital may not be. The purpose of section 75 is to allow trustees of charities with slender resources to remove the restriction on expenditure of capital, so that the capital can be spent as well as the income. This is useful because the income is often so small that little if anything can be achieved by spending the income alone.

175.     Clause 43 substitutes for the existing section 75 a new section 75, which modifies and extends the current regime for expenditure of capital by small charities.

176.     The principal changes brought about by the new section 75 are:

• the power to resolve to spend permanent endowment is made available to unincorporated charities;

• one of the conditions of the existing section 75 is that, before making a resolution, trustees must be satisfied that the charity's property is too small for "any useful purpose" to be achieved by spending the income alone. It is sometimes difficult for trustees to conclude that a sum of money is so small that there is not any useful purpose to be achieved by spending it. Subsection (4) of new section 75 substitutes a different test of whether the purposes for which the fund is established "could be carried out more effectively" by spending some or all of the capital;

• the requirement for the Charity Commission to go through a procedure of concurrence with the trustees' resolution is removed.

177.     Clause 43 also inserts two new sections, 75A and 75B, into the 1993 Act.

178.     Section 75A provides the same power in relation to larger funds with a single purpose, but subject to some safeguards because of the larger sums involved. Subsections (5) to (11) prescribe some safeguards which apply where the permanent endowment in question came to the charity by a lifetime gift from, or under the will of, a person, or as a grant or other form of donation from an institution, or by way of donations from several sources but with a common purpose (such as a disaster appeal). The safeguards are meant to ensure, by requiring the Charity Commission's concurrence to be obtained and by requiring the Commission to take into account the wishes of the donor as well any changes in the charity's circumstances since the gift was made, that the intentions of the donor or donors in making the gift are treated with due consideration.

179.     Section 75B applies in cases where the Charity Commission have made a direction to a specific effect under section 96(5) of the 1993 Act. That provision allows the Commission to direct that an institution (typically a trust) which is established for some special purposes of, or in connection with, a charity shall be treated either as part of that charity or as a distinct charity by itself. Where the Commission has directed that a special trust is a distinct charity, section 75B allows that charity's trustees to resolve to spend certain permanent endowment subject to conditions and controls which mirror those described above for subsections (5) to (11) of section 75A.

Clause 44: Merger of charities

180.     Clause 42 inserts four new sections, 75C, 75D, 75E and 75F, into the 1993 Act.

181.     New section 75C establishes the register of mergers. Subsection (3) provides for the register to contain only those mergers which are notified to the Commission. Subsection (4) defines the two types of merger that can be registered: the first is a merger in which a charity (or more than one charity) - say charity A - transfers all its property to another charity - charity B - then, on or after the transfer, ceases to exist. The second is where two or more charities - charities C and D - create a new charity - charity E - then transfer all their property to the new charity and, on or after the transfer, go out of existence. Mergers of both types may only be registered once all of the charities transferring their property to another charity have completed the transfer of all of their property (subsection 6). Mergers of charities which have both permanent endowment and other unrestricted property are provided for by subsection (5). Subsection (7) makes registration of the merger a requirement for any charities making use of the vesting declaration provided for by new section 75E.

182.     New section 75D makes supplementary provision about the register of charity mergers. Subsection (2) gives the Charity Commission the power to decide what information, in addition to the date on which property was transferred to the merged charity, should appear in the register about each merger. The register must be open to the public (subsection (3)) and the information on it must be made available in legible form even if the Commission holds the information not in a legible form (such as on a computer) (subsection (4)). This group of provisions for the register of mergers closely follows the provisions for the content and availability of the register of charities kept by the Commission.

183.     New section 75E provides a mechanism for ensuring the automatic transfer of property which is being transferred in the course of a merger. This mechanism is available for both types of merger. It enables a vesting declaration to be made by the charity trustees of a transferring charity (which, in the examples given in paragraph 181 above, are charity A and charities C and D) before any transfer takes place. The effect of making a vesting declaration which fulfils the requirements of subsection (1) is as described in subsection (2). The only property that cannot be transferred by operation of the vesting declaration is property of the sort described by subsection (3). Subsection (4) makes it clear that transferred land must still be registered with the Land Registry where there is such a requirement.

184.     Section 75F deals with a gift to a charity where the gift takes effect after the date of registration of a merger affecting the charity. In the example of a merger in which charity A transfers all its property to charity B then ceases to exist, there might later be gifts - such as legacies under wills written before the merger - which fall due to charity A after it has ceased to exist. Subsection (2) provides that such a gift takes effect as if the gift had originally been made to charity B rather than charity A. Subsection (3) provides an exclusion from this provision for gifts that are to be held as permanent endowment.

Clause 45: Regulation of public charitable collections

185.     This clause and the following 21 clauses comprise Chapter 1 of Part 3 of the Charities Bill, which provide for the regulation of public charitable, philanthropic and benevolent collections. They build on provisions in Part 3 of the 1992 Act. Part 3 of the 1992 Act was never brought into effect, and will be replaced by these provisions. The arrangements currently in force for regulating public charitable collections derive (in the case of street collections) from a law of 1916 and (in the case of house to house collections) from a law of 1939.

186.     Subsection (1) of clause 45 defines the two types of public charitable collection: collections in a public place, and door to door collections. Subsections (2), (3), (4) and (5) provide for the definitions relevant to this Chapter, including that a charitable appeal in this context includes philanthropic and benevolent purposes, and that giving money for the purposes of a charitable appeal includes doing so by whatever means, which would include by direct debit. Subsections (6) and (7) provide definitions relevant to this section, including the definition of public place.

Clause 46: Charitable appeals that are not public charitable collections

187.     This clause defines charitable appeals which are not public charitable collections, and are therefore do not come under this licensing scheme. It reflects section 65(2) of the 1992 Act, with the addition of subsections (1)(c) and (2) which specifically exclude any appeal on land to which the public has unrestricted access, either because of the express or implied permission of the occupier of the land or where the public has a statutory right of access, for example under the Countryside and Rights of Way Act 2000, where the occupier is the promoter of the collection. This provision is intended to exclude collections undertaken by organisations such as the National Trust on their own land from the scope of the scheme.

Clause 47: Other definitions for the purposes of this Chapter

188.     This clause provides further definitions for the purposes of this Chapter.

Clause 48: Restrictions on conducting collections in a public place

189.     This clause sets out the restrictions on collecting in a public place. Subsection (1) provides that a collection in a public place cannot be undertaken unless the organisation (a) holds a public collections certificate (granted under clause 52) and (b) has obtained a permit from the relevant local authority (granted under clause 59).

190.     Subsection (2) exempts from these requirements collections in a public place which are local short-term collections, provided for by clause 50.

191.     Subsection (3) provides that where a promoter undertakes a collection in a public place, other than an exempt local short-term collection, without a public collections certificate and a permit the promoter is guilty of an offence and provides for the maximum level of fine appropriate in such a case.

Clause 49: Restrictions on conducting door to door collections

192.     This clause provides in subsection (1) that a collection by means of visits door to door cannot be undertaken unless the organisation (a) holds a public collections certificate (granted under clause 52) and (b) has (within a period to be prescribed in regulations) notified the local authority of the matters mentioned in subsection (3) of this clause and provided the local authority with a copy of their public collections certificate.

193.     Subsection (2) exempts from these requirements door to door collections which are exempt as local short-term collections, provided for by clause 48.

194.     Subsection (4) provides that where a door to door collection, which is not an exempt local short-term collection, is undertaken without a public collections certificate and without notifying the local authority of the matters referred to in subsection (3) the promoter is guilty of an offence and provides for the maximum level of fine appropriate in such a case.

195.     Subsection (5) provides a separate offence with a lesser maximum penalty if the door to door collection appeal is for goods only.

Clause 50: Exemption for local short-term collections

196.     This clause sets out the conditions under which a collection would be exempt from the requirement to obtain a public collections certificate and (for collections in a public place) a permit to collect.

197.     Subsection (1) provides for collections that are exempt from the requirement to obtain a public collections certificate, and in the case of a collection in a public place, a permit. An exempt collection is one that is (a) a local, short-term collection as defined in subsection (2), and (b) where the promoters notify the local authority in whose area the collection is to take place of the matters set out in subsection (3) within the prescribed period before the first day of the proposed collection. However, if the local authority serve a notice on the promoters under subsection (4), as described in paragraph 199, the collection will not be an exempt collection.

198.     Subsection (2) provides that a collection is a local, short-term collection if the appeal is local in character and does not exceed the prescribed period. Regulations under clause 63 will prescribe matters that local authorities must take into account in determining whether an appeal is local in character.

199.     Promoters would notify the local authority in whose area the collection was to take place. A collection is only an exempt collection for the purposes of this clause if the local authority have not notified the promoter under subsection (1) within the prescribed period preceding the date of the collection that the collection does not qualify as a local, short-term collection. The power for local authorities to determine that a collection is not exempt, and provision for service of that decision, are contained in subsection (4). Local authorities may serve such a notice where it appears to them that the proposed collection is not a local, short-term collection, or that the promoter has breached regulations or been convicted of a relevant offence. A right of appeal against such a decision is provided in section 62(1).

200.     Subsection (6) provides that where a promoter undertakes an exempt local short-term collection without complying with the notification requirements in this clause, the promoter is guilty of an offence and provides for the maximum of a level 3 fine (currently £1,000).

Clause 51: Applications for certificates

201.     Subsection (1) enables a person proposing to undertake public charitable collections (other than exempt local short-term collections) to apply to the Charity Commission for a public collections certificate. That would be the first stage in the process. The second stage of the process, once a public collections certificate had been issued, would involve either the submission of an application to the local authority for a permit for a collection in a public place (clause 58) or, for a door to door collection, notification to the local authority about the collection (clause 49).

202.     Subsection (2) explains that the time period for the application is to be specified in regulations, but enables the Charity Commission to allow individual applications at shorter notice, for example applications related to an urgent disaster appeal.

203.     Subsection (3) provides for the information which must be submitted as part of the application process, and enables the applicant to seek in the application a period for which the certificate would be in force of up to five years. Subsections (5) and (6) set out how the Commission may make regulations for the purposes of this section.

Clause 52: Determination of applications and issue of certificates

204.     Subsections (1) and (2) provide that on receiving an application (clause 51) the Charity Commission may make such inquiries as it thinks fit, and after making such inquiries determine the application by either issuing the certificate, or refusing the application on grounds specified in clause 53.

205.     Subsection (3) provides for the certificate itself; the matters it must specify to be provided in regulations, and its duration to be the period (up to five years) specified in the application, or such shorter period as the Charity Commission thinks fit.

206.     Subsections (4), (5), and (6) enable the Charity Commission to attach conditions to a public collections certificate it issues. The conditions would have to be consistent with the provisions of regulations made under clause 63.

207.     Where the Charity Commission refuses to issue a certificate, or issues a certificate with conditions, it must serve notice on the applicant and set out its reasons (subsection (7)), including setting out the right of appeal conferred by clause 57, and the time limits within which to appeal (subsection (8)).

Clause 53: Grounds for refusing to issue a public collections certificate

208.     This clause sets out the grounds the Charity Commission may rely on for refusing to award a public collections certificate.

209.     The grounds available in subsection (1) include grounds which are equivalent to the grounds provided by paragraphs (c) to (g) of section 69(1) of the 1992 Act. In addition there are new grounds: (1)(d) where the Commission is not satisfied that due diligence will be exercised in respect of a collection; (1)(g) where the applicant has failed to provide information; (1)(h) where it appears to the Commission that the information provided is false or misleading; (1)(i) where conditions attached to a certificate have been breached, or conditions attached to a permit consistently breached; (1)(j) where it appears to the Commission that the applicant or anyone authorised by him has breached a provision of regulations made under clause 63.

210.     Subsection (2) sets out (a) relevant offences that may lead to refusal to issue a certificate, and (b) the due diligence required by subsections (1)(c) and (1)(d).

211.     Subsections (4), (5), and (6) are based on sections 69(3)(b) and (4) of the 1992 Act. They enable the consideration of the required due diligence (set out in subsection (2)(b) of this clause) in connection with collections which were carried out under legislation and regulations that pre-date this legislation.

212.     Subsection (7) clarifies that all types of collections provided for by this Chapter can be considered for the purposes of assessing whether due diligence was exercised in connection with past collections (at subsection (1)(c)). Subsection (8) provides definitions for this section that replicate section 69(5) of the 1992 Act.

Clause 54: Power to call for information and documents

213.     This clause provides a power for the Charity Commission to request information or documents held by applicants or certificate holders in respect of its functions under this Chapter.

Clause 55: Transfer of certificates between trustees of unincorporated charity

214.     This clause provides a fast-track method for unincorporated charities to transfer a public collections certificate between trustees. It enables the Charity Commission to direct that a public collections certificate in force be transferred from its holder(s) to another trustee(s) within the same unincorporated charity, where the holder(s) is (or was) a trustee of the charity, and the recipient(s) and the charity trustees consent to the transfer. Subsections (4) and (5) provide for notice to be given of the Commission's decision if they refuse, and of the right of appeal conferred by clause 57(2). Subsection (7) clarifies that other than as provided for in this clause a public collections certificate is not transferable.