Charities Bill [HL]

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Charities Bill [HL]

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 9 — Charity trustees etc.
36

(3)
For the purposes of section 73A(5) an agreement within section 73A(3)
is in force so long as any obligations under the agreement have not been
fully discharged by a party to it.
(4)
In section 73A—
“benefit” means a direct or indirect benefit of any nature;
5
“maximum amount”, in relation to remuneration, means the
maximum amount of the remuneration whether specified in or
ascertainable under the terms of the agreement in question;
“remuneration” includes any benefit in kind (and “amount”
accordingly includes monetary value);
10
“services”, in the context of remuneration for services, includes
goods that are supplied in connection with the provision of
services.
(5)
For the purposes of section 73A the following persons are “connected”
with a charity trustee or trustee for a charity—
15
(a)
a child, parent, grandchild, grandparent, brother or sister of the
trustee;
(b)
the spouse or civil partner of the trustee or of any person falling
within paragraph (a);
(c)
a person carrying on business in partnership with the trustee or
20
with any person falling within paragraph (a) or (b);
(d)
an institution which is controlled—
(i)
by the trustee or by any person falling within paragraph
(a), (b) or (c), or
(ii)
by two or more persons falling within sub-paragraph (i),
25
when taken together;
(e)
a body corporate in which—
(i)
the trustee 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),
30
when taken together, have a substantial interest.
(6)
Paragraphs 2 to 4 of Schedule 5 to this Act apply for the purposes of
subsection (5) above as they apply for the purposes of provisions of that
Schedule.”
37
Disqualification of trustee receiving remuneration by virtue of section 36
35
After section 73B of the 1993 Act (inserted by section 36 above) insert—
“73C
Disqualification of trustee receiving remuneration under section 73A
(1)
This section applies to any charity trustee or trustee for a charity—
(a)
who is or would be entitled to remuneration under an
agreement or proposed agreement within section 73A(3) above,
40
or
(b)
who is connected with a person who is or would be so entitled.
(2)
The charity trustee or trustee for a charity is disqualified from acting as
such in relation to any decision or other matter connected with the
agreement.
45

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 9 — Charity trustees etc.
37

(3)
But any act done by such a person which he is disqualified from doing
by virtue of subsection (2) above shall not be invalid by reason only of
that disqualification.
(4)
Where the Commission is satisfied—
(a)
that a person (“the disqualified trustee”) has done any act which
5
he was disqualified from doing by virtue of subsection (2)
above, and
(b)
that the disqualified trustee or a person connected with him has
received or is to receive from the charity any remuneration
under the agreement in question,
10
it may make an order under subsection (5) or (6) below (as appropriate).
(5)
An order under this subsection is one requiring the disqualified
trustee—
(a)
to reimburse to the charity the whole or part of the
remuneration received as mentioned in subsection (4)(b) above;
15
(b)
to the extent that the remuneration consists of a benefit in kind,
to reimburse to the charity the whole or part of the monetary
value (as determined by the Commission) of the benefit in kind.
(6)
An order under this subsection is one directing that the disqualified
trustee or (as the case may be) connected person is not to be paid the
20
whole or part of the remuneration mentioned in subsection (4)(b)
above.
(7)
If the Commission makes an order under subsection (5) or (6) above,
the disqualified trustee or (as the case may be) connected person
accordingly ceases to have any entitlement under the agreement to so
25
much of the remuneration (or its monetary value) as the order requires
him to reimburse to the charity or (as the case may be) as it directs is not
to be paid to him.
(8)
Subsections (4) to (6) of section 73B above apply for the purposes of this
section as they apply for the purposes of section 73A above.”
30
Liability of trustees etc.
38
Power of Commission to relieve trustees, auditors etc. from liability for
breach of trust or duty
After section 73C of the 1993 Act (inserted by section 37 above) insert—
73D
Power to relieve trustees, auditors etc. from liability for breach of trust
35
or duty
(1)
This section applies to a person who is or has been—
(a)
a charity trustee or trustee for a charity,
(b)
a person appointed to audit a charity’s accounts (whether
appointed under an enactment or otherwise), or
40
(c)
an independent examiner, reporting accountant or other person
appointed to examine or report on a charity’s accounts
(whether appointed under an enactment or otherwise).
(2)
If the Commission considers—

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 9 — Charity trustees etc.
38

(a)
that a person to whom this section applies is or may be
personally liable for a breach of trust or breach of duty
committed in his capacity as a person within paragraph (a), (b)
or (c) of subsection (1) above, but
(b)
that he has acted honestly and reasonably and ought fairly to be
5
excused for the breach of trust or duty,

the Commission may make an order relieving him wholly or partly
from any such liability.
(3)
An order under subsection (2) above may grant the relief on such terms
as the Commission thinks fit.
10
(4)
Subsection (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 73E below—
(a)
subsection (1)(b) above is to be read as including a reference to
the Auditor General for Wales acting as auditor under section
15
43B above, and
(b)
subsection (1)(c) above is to be read as including a reference to
the Auditor General for Wales acting as examiner under that
section;

and in subsection (1)(b) and (c) any reference to a charity’s accounts is
20
to be read as including any group accounts prepared by the charity
trustees or directors 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 trustees),
25
(b)
section 727 of the Companies Act 1985 (power of court to grant
relief to officers or auditors of companies), or
(c)
section 73E(2) below (which extends section 727 to auditors etc.
of charities which are not companies).
73E
Court’s power to grant relief to apply to all auditors etc. of charities
30
which are not companies
(1)
This section applies to a person acting in a capacity within section
73D(1)(b) or (c) above in relation to—
(a)
the accounts of a charity which is not a company, or
(b)
any group accounts prepared by the charity trustees of such a
35
charity.
(2)
Section 727 of the Companies Act 1985 (power of court to grant relief to
officers or auditors of companies) shall have effect in relation to a
person to whom this section applies as it has effect in relation to a
person employed as auditor by a company.”
40
39
Trustees’ indemnity insurance
After section 73E of the 1993 Act (inserted by section 38 above) insert—
“73F
Trustees’ indemnity insurance
(1)
The charity trustees of a charity may arrange for the purchase, out of
the funds of the charity, of insurance designed to indemnify the charity
45

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 9 — Charity trustees etc.
39

trustees or any trustees for the charity against any personal liability in
respect of—
(a)
any breach of trust or breach of duty committed by them in their
capacity as charity trustees or trustees for the charity, or
(b)
any negligence, default, breach of duty or breach of trust
5
committed by them in their capacity as directors or officers of
the charity (if it is a body corporate) or of any body corporate
carrying on any activities on behalf of the charity.
(2)
The terms of such insurance must, however, be so framed as to exclude
the provision of any indemnity for a person in respect of—
10
(a)
any liability incurred by him to pay—
(i)
a fine imposed in criminal proceedings, or
(ii)
a sum payable to a regulatory authority by way of a
penalty in respect of non-compliance with any
requirement of a regulatory nature (however arising);
15
(b)
any liability incurred by him in defending any criminal
proceedings in which he is convicted of an offence arising out of
any fraud or dishonesty, or wilful or reckless misconduct, by
him; or
(c)
any liability incurred by him to the charity that arises out of any
20
conduct which he knew (or must reasonably be assumed to
have known) was not in the interests of the charity or in the case
of which he did not care whether it was in the best interests of
the charity or not.
(3)
For the purposes of subsection (2)(b) above—
25
(a)
the reference to any such conviction is a reference to one that
has become final;
(b)
a conviction becomes final—
(i)
if not appealed against, at the end of the period for
bringing an appeal, or
30
(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 appeal has ended, or
35
(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)
The duty of care in section 1(1) of the Trustee Act 2000 applies to a
40
charity trustee when making such a decision.
(6)
The Secretary of State may by order make such amendments of
subsections (2) and (3) above as he considers appropriate.
(7)
No order may be made under subsection (6) above unless a draft of the
order has been laid before and approved by a resolution of each House
45
of Parliament.
(8)
This section—

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
40

(a)
does not authorise the purchase of any insurance whose
purchase is expressly prohibited by the trusts of the charity, but
(b)
has effect despite any provision prohibiting the charity trustees
or trustees for the charity receiving any personal benefit out of
the funds of the charity.”
5
Chapter 10
Powers of unincorporated charities
40
Power to transfer all property
For section 74 of the 1993 Act substitute—
“74
Power to transfer all property of unincorporated charity
10
(1)
This section applies to a charity if—
(a)
its gross income in its last financial year did not exceed £10,000,
(b)
it does not hold any designated land, and
(c)
it is not a company or other body corporate.

“Designated land” means land held on trusts which stipulate that it is
15
to be used for the purposes, or any particular purposes, of the charity.
(2)
The charity trustees of such a charity may resolve for the purposes of
this section—
(a)
that all the property of the charity should be transferred to
another charity specified in the resolution, or
20
(b)
that all the property of the charity should be transferred to two
or more charities specified in the resolution in accordance with
such division of the property between them as is so specified.
(3)
Any charity so specified may be either a registered charity or a charity
which is not required to be registered.
25
(4)
But the charity trustees of a charity (“the transferor charity”) do not
have power to pass a resolution under subsection (2) above unless they
are satisfied—
(a)
that it is expedient in the interests of furthering the purposes for
which the property is held by the transferor charity for the
30
property to be transferred in accordance with the resolution,
and
(b)
that the purposes (or any of the purposes) of any charity to
which property is to be transferred under the resolution are
substantially similar to the purposes (or any of the purposes) of
35
the transferor charity.
(5)
Any resolution under subsection (2) above must be passed by a
majority of not less than two-thirds of the charity trustees who vote on
the resolution.
(6)
Where charity trustees have passed a resolution under subsection (2),
40
they must send a copy of it to the Commission, together with a
statement of their reasons for passing it.
(7)
Having received the copy of the resolution, the Commission—

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
41

(a)
may direct the charity trustees to give public notice of the
resolution in such manner as is specified in the direction, and
(b)
if it gives such a direction, must take into account any
representations made to it by persons appearing to it to be
interested in the charity, where those representations are made
5
to it within the period of 28 days beginning with the date when
public notice of the resolution is given by the charity trustees.
(8)
The Commission may also direct the charity trustees to provide the
Commission with additional information or explanations relating to—
(a)
the circumstances in and by reference to which they have
10
decided to act under this section, or
(b)
their compliance with any obligation imposed on them by or
under this section in connection with the resolution.
(9)
Subject to the provisions of section 74A below, a resolution under
subsection (2) above takes effect at the end of the period of 60 days
15
beginning with the date on which the copy of it was received by the
Commission.
(10)
Where such a resolution has taken effect, the charity trustees must
arrange for all the property of the transferor charity to be transferred in
accordance with the resolution, and on terms that any property so
20
transferred—
(a)
is to be held by the charity to which it is transferred (“the
transferee charity”) in accordance with subsection (11) below,
but
(b)
when so held is nevertheless to be subject to any restrictions on
25
expenditure to which it was subject as property of the transferor
charity;

and the charity trustees must arrange for the property to be so
transferred by such date after the resolution takes effect as they agree
with the charity trustees of the transferee charity or charities concerned.
30
(11)
The charity trustees of any charity to which property is transferred
under this section must secure, so far as is reasonably practicable, that
the property is applied for such of its purposes as are substantially
similar to those of the transferor charity.

But this requirement does not apply if those charity trustees consider
35
that complying with it would not result in a suitable and effective
method of applying the property.
(12)
For the purpose of enabling any property to be transferred to a charity
under this section, the Commission may, at the request of the charity
trustees of that charity, make orders vesting any property of the
40
transferor charity—
(a)
in the transferee charity, in its charity trustees or in any trustee
for that charity, or
(b)
in any other person nominated by those charity trustees to hold
property in trust for that charity.
45
(13)
The Secretary of State may by order amend subsection (1) above by
substituting a different sum for the sum for the time being specified
there.

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
42

(14)
In this section references to the transfer of property to a charity are
references to its transfer—
(a)
to the charity, or
(b)
to the charity trustees, or
(c)
to any trustee for the charity, or
5
(d)
to a person nominated by the charity trustees to hold it in trust
for the charity,

as the charity trustees may determine.
(15)
Where a charity has a permanent endowment, this section has effect in
accordance with section 74B.
10
74A
Resolution not to take effect or to take effect at later date
(1)
This section deals with circumstances in which a resolution under
section 74(2) above either—
(a)
does not take effect under section 74(9) above, or
(b)
takes effect at a time later than that mentioned in section 74(9).
15
(2)
A resolution does not take effect under section 74(9) above if before the
end of—
(a)
the period of 60 days mentioned in section 74(9) (“the 60-day
period”), or
(b)
that period as modified by subsection (3) or (4) below,
20

the Commission notifies the charity trustees in writing that it objects to
the resolution, either on procedural grounds or on the merits of the
proposals contained in the resolution.

“On procedural grounds” means on the grounds that any obligation
imposed on the charity trustees by or under section 74 above has not
25
been complied with in connection with the resolution.
(3)
If under section 74(7) above the Commission directs the charity trustees
to give public notice of a resolution, the running of the 60-day period is
suspended by virtue of this subsection—
(a)
as from the date on which the direction is given to the charity
30
trustees, and
(b)
until the end of the period of 42 days beginning with the date on
which public notice of the resolution is given by the charity
trustees.
(4)
If under section 74(8) above the Commission directs the charity trustees
35
to provide any information or explanations, the running of the 60-day
period is suspended by virtue of this subsection—
(a)
as from the date on which the direction is given to the charity
trustees, and
(b)
until the date on which the information or explanations is or are
40
provided to the Commission.
(5)
Subsection (6) below applies once the period of time, or the total period
of time, during which the 60-day period is suspended by virtue of
either or both of subsections (3) and (4) above exceeds 120 days.
(6)
At that point the resolution (if not previously objected to by the
45
Commission) is to be treated as if it had never been passed.