Charities Bill [HL]

House of Commons

Session 2005 - 06
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Charities Bill [HL]

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 1 — New Part 8A of and Schedule 5B to 1993 Act
126

(b)
requiring any person in whose name any stocks, funds or
securities are standing in trust for a CIO to transfer them into
the name of the official custodian or another person or body,
(c)
about the disclaiming, by the official custodian or other
transferee of a CIO’s property, of title to any of that property,
5
(d)
about the application of a CIO’s property cy-près,
(e)
about circumstances in which charity trustees may be
personally liable for contributions to the assets of a CIO or for
its debts,
(f)
about the reversal on a CIO’s revival of anything done on its
10
dissolution.
(3)
The regulations may—
(a)
apply any enactment which would not otherwise apply,
either without modification or with modifications specified
in the regulations,
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(b)
disapply, or modify (in ways specified in the regulations) the
application of, any enactment which would otherwise apply.
(4)
In subsection (3), “enactment” includes a provision of subordinate
legislation within the meaning of the Interpretation Act 1978.
Miscellaneous
20
69O
Power to transfer all property of unincorporated charity to one or more
CIOs

Section 74 below (power to transfer all property of unincorporated
charity) applies with the omission of paragraph (a) of subsection (1)
in relation to a resolution by the charity trustees of a charity to
25
transfer all its property to a CIO or to divide its property between
two or more CIOs.
69P
Further provision about CIOs

The provisions of Schedule 5B to this Act shall have effect with
respect to CIOs.
30
69Q
Regulations
(1)
The Secretary of State may by regulations make further provision
about applications for registration of CIOs, the administration of
CIOs, the conversion of charitable companies, registered societies
and community interest companies into CIOs, the amalgamation of
35
CIOs, and in relation to CIOs generally.
(2)
The regulations may, in particular, make provision about—
(a)
the execution of deeds and documents,
(b)
the electronic communication of messages or documents
relevant to a CIO or to any dealing with the Commission in
40
relation to one,
(c)
the maintenance of registers of members and of charity
trustees,
(d)
the maintenance of other registers (for example, a register of
charges over the CIO’s assets).
45

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 1 — New Part 8A of and Schedule 5B to 1993 Act
127

(3)
The regulations may, in relation to charities constituted as CIOs—
(a)
disapply any of sections 3 to 4 above,
(b)
modify the application of any of those sections in ways
specified in the regulations.
(4)
Subsections (3) and (4) of section 69N above apply for the purposes
5
of this section as they apply for the purposes of that.”
2
After the Schedule 5A inserted in the 1993 Act by Schedule 6 to this Act,
insert the following Schedule—
“Schedule 5B
Section 69P

Further provision about Charitable Incorporated Organisations
10
Powers
1     (1)
Subject to anything in its constitution, a CIO has power to do
anything which is calculated to further its purposes or is
conducive or incidental to doing so.
      (2)
The CIO’s charity trustees shall manage the affairs of the CIO and
15
may for that purpose exercise all the powers of the CIO.
Constitutional requirements
2
A CIO shall use and apply its property in furtherance of its
purposes and in accordance with its constitution.
3
If the CIO is one whose members are liable to contribute to its
20
assets if it is wound 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
25
each member to observe all the provisions of the
constitution.
4
Money payable by a member to the CIO under the constitution is
a debt due from him to the CIO, and is of the nature of a specialty
debt.
30
Third parties
5     (1)
Sub-paragraphs (2) and (3) are subject to sub-paragraph (4).
      (2)
The validity of an act done (or purportedly done) by a CIO shall
not be called into question on the ground that it lacked
constitutional capacity.
35
      (3)
The power of the charity trustees of a CIO to act so as to bind the
CIO (or authorise others to do so) shall not be called into question
on the ground of any constitutional limitations on their powers.

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 1 — New Part 8A of and Schedule 5B to 1993 Act
128

      (4)
But sub-paragraphs (2) and (3) apply only in favour of a person
who gives full consideration in money or money’s worth in
relation to the act in question, and does not know—
(a)
in a sub-paragraph (2) case, that the act is beyond the CIO’s
constitutional capacity, or
5
(b)
in a sub-paragraph (3) case, that the act is beyond the
constitutional powers of its charity trustees,

and (in addition) sub-paragraph (3) applies only if the person
dealt with the CIO in good faith (which he shall be presumed to
have done unless the contrary is proved).
10
      (5)
A party to an arrangement or transaction with a CIO is not bound
to inquire—
(a)
whether it is within the CIO’s constitutional capacity, or
(b)
as to any constitutional limitations on the powers of its
charity trustees to bind the CIO or authorise others to do
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so.
      (6)
If a CIO purports to transfer or grant an interest in property, the
fact that the act was beyond its constitutional capacity, or that its
charity trustees in connection with the act exceeded their
constitutional powers, does not affect the title of a person who
20
subsequently acquires the property or any interest in it for full
consideration without actual notice of any such circumstances
affecting the validity of the CIO’s act.
      (7)
In any proceedings arising out of sub-paragraphs (2) to (4), the
burden of proving that a person knew that an act—
25
(a)
was beyond the CIO’s constitutional capacity, or
(b)
was beyond the constitutional powers of its charity
trustees,

lies on the person making that allegation.
      (8)
In this paragraph and paragraphs 6 to 8—
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(a)
references to a CIO’s lack of “constitutional capacity” are
to lack of capacity because of anything in its constitution,
and
(b)
references to “constitutional limitations” on the powers of
a CIO’s charity trustees are to limitations on their powers
35
under its constitution, including limitations deriving from
a resolution of the CIO in general meeting, or from an
agreement between the CIO’s members, and
“constitutional powers” is to be construed accordingly.
6     (1)
Nothing in paragraph 5 prevents a person from bringing
40
proceedings to restrain the doing of an act which would be—
(a)
beyond the CIO’s constitutional capacity, or
(b)
beyond the constitutional powers of the CIO’s charity
trustees.
      (2)
But no such proceedings may be brought in respect of an act to be
45
done in fulfilment of a legal obligation arising from a previous act
of the CIO.

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 1 — New Part 8A of and Schedule 5B to 1993 Act
129

      (3)
Sub-paragraph (2) does not prevent the Commission from
exercising any of its powers.
7
Nothing in paragraph 5(3) affects any liability incurred by the
CIO’s charity trustees (or any one of them) for acting beyond his
or their constitutional powers.
5
8
Nothing in paragraph 5 absolves the CIO’s charity trustees from
their duty to act within the CIO’s constitution and in accordance
with any constitutional limitations on their powers.
Duties
9
It is the duty of—
10
(a)
each member of a CIO, and
(b)
each charity trustee of a CIO,

to exercise his powers, and (in the case of a charity trustee) to
perform his functions, in his capacity as such, in the way he
decides, in good faith, would be most likely to further the
15
purposes of the CIO.
10    (1)
Subject to any provision of a CIO’s constitution permitted by
virtue of regulations made under sub-paragraph (2), each charity
trustee of a CIO shall in the performance of his functions in that
capacity exercise such care and skill as is reasonable in the
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circumstances, having regard in particular—
(a)
to any special knowledge or experience that he has or
holds himself out as having, and
(b)
if he acts as a charity trustee in the course of a business or
profession, to any special knowledge or experience that it
25
is reasonable to expect of a person acting in the course of
that kind of business or profession.
      (2)
The Secretary of State may make regulations permitting a CIO’s
constitution to provide that the duty in sub-paragraph (1) does not
apply, or does not apply in so far as is specified in the constitution.
30
      (3)
Regulations under sub-paragraph (2) may provide for limits on
the extent to which, or the cases in which, a CIO’s constitution
may disapply the duty in sub-paragraph (1).
Personal benefit and payments
11    (1)
A charity trustee of a CIO may not benefit personally from any
35
arrangement or transaction entered into by the CIO if, before the
arrangement or transaction was entered into, he did not disclose
to all the charity trustees of the CIO any material interest of his in
it or in any other person or body party to it (whether that interest
is direct or indirect).
40
      (2)
Nothing in sub-paragraph (1) confers authority for a charity
trustee of a CIO to benefit personally from any arrangement or
transaction entered into by the CIO.
12
A charity trustee of a CIO—
(a)
is entitled to be reimbursed by the CIO, or
45

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 1 — New Part 8A of and Schedule 5B to 1993 Act
130

(b)
may pay out of the CIO’s funds,

expenses properly incurred by him in the performance of his
functions as such.
Procedure
13    (1)
The Secretary of State may by regulations make provision about
5
the procedure of CIOs.
      (2)
Subject to—
(a)
any such regulations,
(b)
any other requirement imposed by or by virtue of this Act
or any other enactment, and
10
(c)
anything in the CIO’s constitution,

a CIO may regulate its own procedure.
      (3)
But a CIO’s procedure shall include provision for the holding of a
general meeting of its members, and the regulations referred to in
sub-paragraph (1) may in particular make provision about such
15
meetings.
Amendment of constitution
14    (1)
A CIO may by resolution of its members amend its constitution
(and a single resolution may provide for more than one
amendment).
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      (2)
Such a resolution must be passed—
(a)
by a 75% majority of those voting at a general meeting of
the CIO (including those voting by proxy or by post, if
voting that way is permitted), or
(b)
unanimously by the CIO’s members, otherwise than at a
25
general meeting.
      (3)
The date of passing of such a resolution is—
(a)
the date of the general meeting at which it was passed, or
(b)
if it was passed otherwise than at a general meeting, the
date on which provision in the CIO’s constitution or in
30
regulations made under paragraph 13 deems it to have
been passed (but that date may not be earlier than that on
which the last member agreed to it).
      (4)
The power of a CIO to amend its constitution is not exercisable in
any way which would result in the CIO’s ceasing to be a charity.
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      (5)
Subject to paragraph 15(5) below, a resolution containing an
amendment which would make any regulated alteration is to that
extent ineffective unless the prior written consent of the
Commission has been obtained to the making of the amendment.
      (6)
The following are regulated alterations—
40
(a)
any alteration of the CIO’s purposes,
(b)
any alteration of any provision of the CIO’s constitution
directing the application of property of the CIO on its
dissolution,

Charities Bill [HL]
Schedule 7 — Charitable incorporated organisations
Part 2 — Other amendments of 1993 Act
131

(c)
any alteration of any provision of the CIO’s constitution
where the alteration would provide authorisation for any
benefit to be obtained by charity trustees or members of
the CIO or persons connected with them.
      (7)
For the purposes of sub-paragraph (6)(c)—
5
(a)
“benefit” means a direct or indirect benefit of any nature,
except that it does not include any remuneration (within
the meaning of section 73A of this Act) whose receipt may
be authorised under that section, and
(b)
the same rules apply for determining whether a person is
10
connected with a charity trustee or member of the CIO as
apply, in accordance with section 73B(5) and (6) of this Act,
for determining whether a person is connected with a
charity trustee for the purposes of section 73A.
Registration and coming into effect of amendments
15
15    (1)
A CIO shall send to the Commission a copy of a resolution
containing an amendment to its constitution, together with—
(a)
a copy of the constitution as amended, and
(b)
such other documents and information as the Commission
may require,
20

by the end of the period of 15 days beginning with the date of
passing of the resolution (see paragraph 14(3)).
      (2)
An amendment to a CIO’s constitution does not take effect until it
has been registered.
      (3)
The Commission shall refuse to register an amendment if—
25
(a)
in the opinion of the Commission the CIO had no power to
make it (for example, because the effect of making it would
be that the CIO ceased to be a charity, or that the CIO or its
constitution did not comply with any requirement
imposed by or by virtue of this Act or any other
30
enactment), or
(b)
the amendment would change the name of the CIO, and
the Commission could have refused an application under
section 69E of this Act for the constitution and registration
of a CIO with the name specified in the amendment on a
35
ground set out in subsection (4) of that section.
      (4)
The Commission may refuse to register an amendment if the
amendment would make a regulated alteration and the consent
referred to in paragraph 14(5) had not been obtained.
      (5)
But if the Commission does register such an amendment,
40
paragraph 14(5) does not apply.”
Part 2
Other amendments of 1993 Act
3
The 1993 Act is further amended as follows.

Charities Bill [HL]
Schedule 8 — Minor and consequential amendments
132

4
In section 45 (annual reports), after subsection (3A) insert—
“(3B)
But in the case of a charity which is constituted as a CIO—
(a)
the requirement imposed by subsection (3) applies whatever
the charity’s gross income is, and
(b)
subsection (3A) does not apply.”
5
5
In section 48 (annual returns), in subsection (1A), at the end add “(but this
subsection does not apply if the charity is constituted as a CIO)”.
6
In section 86 (regulations and orders)—
(a)
in subsection (2), after paragraph (a) insert—
“(aa)
to regulations of the Secretary of State under section
10
69N above; and no regulations shall be made under
that section unless a draft of the regulations has been
laid before and approved by a resolution of each
House of Parliament; or”,
(b)
in subsection (4), for “or 45” substitute “, 45, 69N or 69Q”.
15
7
In section 97 (general interpretation), in subsection (1), at the appropriate
place insert—
““CIO” means charitable incorporated organisation;”.
Schedule 8
Section 75

Minor and consequential amendments
20
Literary and Scientific Institutions Act 1854 (c. 112)
1
In section 6 of the Literary and Scientific Institutions Act 1854 (power of
corporations etc. to convey land for the purposes of that Act) for “without
the consent of the Charity Commissioners” substitute “except with the
consent of the Charity Commission or in accordance with such provisions of
25
section 36(2) to (8) of the Charities Act 1993 as are applicable”.
Places of Worship Registration Act 1855 (c. 81)
2
In section 9(1) of the Places of Worship Registration Act 1855 (certified places
exempt from requirement to register)—
(a)
for “shall be excepted under subsection (5) of section 3 of the
30
Charities Act 1993, from registration under that section” substitute
“shall, so far as it is a charity, be treated for the purposes of section
3A(4)(b) of the Charities Act 1993 (institutions to be excepted from
registration under that Act) as if that provision applied to it”, and
(b)
for “Charity Commissioners” substitute “Charity Commission”.
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Bishops Trusts Substitution Act 1858 (c. 71)
3
The Bishops Trusts Substitution Act 1858 has effect subject to the following
amendments.
4
In section 1 (substitution of one bishop for another as trustee)—
(a)
for “Charity Commissioners” substitute “Charity Commission”, and
40