Charities Bill [HL]

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Charities Bill [HL]

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
43

74B
Transfer where charity has permanent endowment
(1)
This section provides for the operation of section 74 above where a
charity within section 74(1) has a permanent endowment (whether or
not the charity’s trusts contain provision for the termination of the
charity).
5
(2)
In such a case section 74 applies as follows—
(a)
if the charity has both a permanent endowment and other
property (“unrestricted property”)—
(i)
a resolution under section 74(2) must relate to both its
permanent endowment and its unrestricted property,
10
and
(ii)
that section applies in relation to its unrestricted
property in accordance with subsection (3) below and in
relation to its permanent endowment in accordance
with subsections (4) to (11) below;
15
(b)
if all of the property of the charity is comprised in its permanent
endowment, that section applies in relation to its permanent
endowment in accordance with subsections (4) to (11) below.
(3)
Section 74 applies in relation to unrestricted property of the charity as
if references in that section to all or any of the property of the charity
20
were references to all or any of its unrestricted property.
(4)
Section 74 applies in relation to the permanent endowment of the
charity with the following modifications.
(5)
References in that section to all or any of the property of the charity are
references to all or any of the property comprised in its permanent
25
endowment.
(6)
If the property comprised in its permanent endowment is to be
transferred to a single charity, the charity trustees must (instead of
being satisfied as mentioned in section 74(4)(b)) be satisfied that the
proposed transferee charity has purposes which are substantially
30
similar to all of the purposes of the transferor charity.
(7)
If the property comprised in its permanent endowment is to be
transferred to two or more charities, the charity trustees must (instead
of being satisfied as mentioned in section 74(4)(b)) be satisfied—
(a)
that the proposed transferee charities, taken together, have
35
purposes which are substantially similar to all of the purposes
of the transferor charity, and
(b)
that each of the proposed transferee charities has purposes
which are substantially similar to one or more of the purposes
of the transferor charity.
40
(8)
In the case of a transfer to which subsection (7) above applies, the
resolution under section 74(2) must provide for the property comprised
in the permanent endowment of the charity to be divided between the
transferee charities in such a way as to take account of such guidance as
may be given by the Commission for the purposes of this section.
45
(9)
The requirement in section 74(11) shall apply in the case of every such
transfer, and in complying with that requirement the charity trustees of

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
44

a transferee charity must secure that the application of property
transferred to the charity takes account of any such guidance.
(10)
Any guidance given by the Commission for the purposes of this section
may take such form and be given in such manner as the Commission
considers appropriate.
5
(11)
For the purposes of sections 74 and 74A above, any reference to any
obligation imposed on the charity trustees by or under section 74
includes a reference to any obligation imposed on them by virtue of any
of subsections (6) to (8) above.
(12)
Section 74(14) applies for the purposes of this section as it applies for
10
the purposes of section 74.”
41
Power to replace purposes
After section 74B of the 1993 Act (inserted by section 40 above) insert—
“74C
Power to replace purposes of unincorporated charity
(1)
This section applies to a charity if—
15
(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
to be used for the purposes, or any particular purposes, of the charity.
20
(2)
The charity trustees of such a charity may resolve for the purposes of
this section that the trusts of the charity should be modified by
replacing all or any of the purposes of the charity with other purposes
specified in the resolution.
(3)
The other purposes so specified must be charitable purposes.
25
(4)
But the charity trustees of a 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 the charity for the purposes
in question to be replaced, and
(b)
that, so far as is reasonably practicable, the new purposes
30
consist of or include purposes that are similar in character to
those that are to be replaced.
(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.
35
(6)
Where charity trustees have passed a resolution under subsection (2),
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—
(a)
may direct the charity trustees to give public notice of the
40
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

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 10 — Powers of unincorporated charities
45

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
5
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 above (as they apply in
accordance with subsection (10) below), a resolution under subsection
10
(2) above takes effect at the end of the period of 60 days beginning with
the date on which the copy of it was received by the Commission.
(10)
Section 74A above applies to a resolution under subsection (2) of this
section as it applies to a resolution under subsection (2) of section 74
above, except that any reference to section 74(7), (8) or (9) is to be read
15
as a reference to subsection (7), (8) or (9) above.
(11)
As from the time when a resolution takes effect under subsection (9)
above, the trusts of the charity concerned are to be taken to have been
modified in accordance with the terms of the resolution.
(12)
The Secretary of State may by order amend subsection (1) above by
20
substituting a different sum for the sum for the time being specified
there.”
42
Power to modify powers or procedures
After section 74C of the 1993 Act (inserted by section 41 above) insert—
“74D
Power to modify powers or procedures of unincorporated charity
25
(1)
This section applies to any charity which is not a company or other
body corporate.
(2)
The charity trustees of such a charity may resolve for the purposes of
this section that any provision of the trusts of the charity—
(a)
relating to any of the powers exercisable by the charity trustees
30
in the administration of the charity, or
(b)
regulating the procedure to be followed in any respect in
connection with its administration,

should be modified in such manner as is specified in the resolution.
(3)
Subsection (4) applies if the charity is an unincorporated association
35
with a body of members distinct from the charity trustees.
(4)
Any resolution of the charity trustees under subsection (2) must be
approved by a further resolution which is passed at a general meeting
of the body either—
(a)
by a majority of not less than two-thirds of the members entitled
40
to attend and vote at the meeting who vote on the resolution, or
(b)
by a decision taken without a vote and without any expression
of dissent.
(5)
Where—

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 11 — Powers to spend capital and mergers
46

(a)
the charity trustees have passed a resolution under subsection
(2), and
(b)
(if subsection (4) applies) a further resolution has been passed
under that subsection,
the trusts of the charity are to be taken to have been modified in
5
accordance with the terms of the resolution.
(6)
The trusts are to be taken to have been so modified as from such date
as is specified for this purpose in the resolution under subsection (2), or
(if later) the date when any such further resolution was passed under
subsection (4).”
10
Chapter 11
Powers to spend capital and mergers
Spending of capital
43
Power to spend capital
For section 75 of the 1993 Act substitute—
15
“75
Power of unincorporated charities to spend capital: general
(1)
This section applies to any available endowment fund of a charity
which is not a company or other body corporate.
(2)
But this section does not apply to a fund if section 75A below (power of
larger charities to spend capital given for particular purpose) applies to
20
it.
(3)
Where the condition in subsection (4) below is met in relation to the
charity, the charity trustees may resolve for the purposes of this section
that the fund, or a portion of it, ought to be freed from the restrictions
with respect to expenditure of capital that apply to it.
25
(4)
The condition in this subsection is that the charity trustees are satisfied
that the purposes set out in the trusts to which the fund is subject could
be carried out more effectively if the capital of the fund, or the relevant
portion of the capital, could be expended as well as income accruing to
it, rather than just such income.
30
(5)
Once the charity trustees have passed a resolution under subsection (3)
above, the fund or portion may by virtue of this section be expended in
carrying out the purposes set out in the trusts to which the fund is
subject without regard to the restrictions mentioned in that subsection.
(6)
The fund or portion may be so expended as from such date as is
35
specified for this purpose in the resolution.
(7)
In this section “available endowment fund”, in relation to a charity,
means—
(a)
the whole of the charity’s permanent endowment if it is all
subject to the same trusts, or
40

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 11 — Powers to spend capital and mergers
47

(b)
any part of its permanent endowment which is subject to any
particular trusts that are different from those to which any other
part is subject,

excluding (in either case) so much of that endowment or part as consists
of land held on trusts which stipulate that it is to be used for the
5
purposes, or any particular purposes, of the charity.
75A
Power of larger unincorporated charities to spend capital given for
particular purpose
(1)
This section applies to any available endowment fund of a charity
which is not a company or other body corporate if—
10
(a)
the capital of the fund consists entirely of property given—
(i)
by a particular individual,
(ii)
by a particular institution (by way of grant or
otherwise), or
(iii)
by two or more individuals or institutions in pursuit of
15
a common purpose, and
(b)
the financial condition in subsection (2) below is met.
(2)
The financial condition in this subsection is met if—
(a)
the relevant charity’s gross income in its last financial year
exceeded £1,000, and
20
(b)
the market value of the endowment fund exceeds £10,000.
(3)
Where the condition in subsection (4) below is met in relation to the
charity, the charity trustees may resolve for the purposes of this section
that the fund, or a portion of it, ought to be freed from the restrictions
with respect to expenditure of capital that apply to it.
25
(4)
The condition in this subsection is that the charity trustees are satisfied
that the purposes set out in the trusts to which the fund is subject could
be carried out more effectively if the capital of the fund, or the relevant
portion of the capital, could be expended as well as income accruing to
it, rather than just such income.
30
(5)
The charity trustees—
(a)
must send a copy of any resolution under subsection (3) above
to the Commission, together with a statement of their reasons
for passing it, and
(b)
may not implement the resolution except in accordance with the
35
following provisions of this section.
(6)
Having received the copy of the resolution the Commission may—
(a)
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
40
representations made to it by persons appearing to it to be
interested in the charity, where those representations are made
to it within the period of 28 days beginning with the date when
public notice of the resolution is given by the charity trustees.
(7)
The Commission may also direct the charity trustees to provide the
45
Commission with additional information or explanations relating to—
(a)
the circumstances in and by reference to which they have
decided to act under this section, or

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 11 — Powers to spend capital and mergers
48

(b)
their compliance with any obligation imposed on them by or
under this section in connection with the resolution.
(8)
When considering whether to concur with the resolution the
Commission must take into account—
(a)
any evidence available to it as to the wishes of the donor or
5
donors mentioned in subsection (1)(a) above, and
(b)
any changes in the circumstances relating to the charity since
the making of the gift or gifts (including, in particular, its
financial position, the needs of its beneficiaries, and the social,
economic and legal environment in which it operates).
10
(9)
The Commission must not concur with the resolution unless it is
satisfied—
(a)
that its implementation would accord with the spirit of the gift
or gifts mentioned in subsection (1)(a) above (even though it
would be inconsistent with the restrictions mentioned in
15
subsection (3) above), and
(b)
that the charity trustees have complied with the obligations
imposed on them by or under this section in connection with the
resolution.
(10)
Before the end of the period of three months beginning with the
20
relevant date, the Commission must notify the charity trustees in
writing either—
(a)
that the Commission concurs with the resolution, or
(b)
that it does not concur with it.
(11)
In subsection (10) “the relevant date” means—
25
(a)
in a case where the Commission directs the charity trustees
under subsection (6) above to give public notice of the
resolution, the date when that notice is given, and
(b)
in any other case, the date on which the Commission receives
the copy of the resolution in accordance with subsection (5)
30
above.
(12)
Where—
(a)
the charity trustees are notified by the Commission that it
concurs with the resolution, or
(b)
the period of three months mentioned in subsection (10) above
35
has elapsed without the Commission notifying them that it does
not concur with the resolution,

the fund or portion may, by virtue of this section, be expended in
carrying out the purposes set out in the trusts to which the fund is
subject without regard to the restrictions mentioned in subsection (3).
40
(13)
The Secretary of State may by order amend subsection (2) above by
substituting a different sum for any sum specified there.
(14)
In this section—
(a)
“available endowment fund” has the same meaning as in
section 75 above,
45
(b)
“market value”, in relation to an endowment fund, means—
(i)
the market value of the fund as recorded in the accounts
for the last financial year of the relevant charity, or

Charities Bill [HL]
Part 2 — Regulation of charities
Chapter 11 — Powers to spend capital and mergers
49

(ii)
if no such value was so recorded, the current market
value of the fund as determined on a valuation carried
out for the purpose, and
(c)
the reference in subsection (1) to the giving of property by an
individual includes his giving it under his will.
5
75B
Power to spend capital subject to special trusts
(1)
This section applies to any available endowment fund of a special trust
which, as the result of a direction under section 96(5) below, is to be
treated as a separate charity (“the relevant charity”) for the purposes of
this section.
10
(2)
Where the condition in subsection (3) below is met in relation to the
relevant charity, the charity trustees may resolve for the purposes of
this section that the fund, or a portion of it, ought to be freed from the
restrictions with respect to expenditure of capital that apply to it.
(3)
The condition in this subsection is that the charity trustees are satisfied
15
that the purposes set out in the trusts to which the fund is subject could
be carried out more effectively if the capital of the fund, or the relevant
portion of the capital, could be expended as well as income accruing to
it, rather than just such income.
(4)
Where the market value of the fund exceeds £10,000 and the capital of
20
the fund consists entirely of property given—
(a)
by a particular individual,
(b)
by a particular institution (by way of grant or otherwise), or
(c)
by two or more individuals or institutions in pursuit of a
common purpose,
25

subsections (5) to (11) of section 75A above apply in relation to the
resolution and that gift or gifts as they apply in relation to a resolution
under section 75A(3) and the gift or gifts mentioned in section
75A(1)(a).
(5)
Where—
30
(a)
the charity trustees have passed a resolution under subsection
(2) above, and
(b)
(in a case where section 75A(5) to (11) above apply in
accordance with subsection (4) above) either—
(i)
the charity trustees are notified by the Commission that
35
it concurs with the resolution, or
(ii)
the period of three months mentioned in section 75A(10)
has elapsed without the Commission notifying them
that it does not concur with the resolution,

the fund or portion may, by virtue of this section, be expended in
40
carrying out the purposes set out in the trusts to which the fund is
subject without regard to the restrictions mentioned in subsection (2).
(6)
The fund or portion may be so expended as from such date as is
specified for this purpose in the resolution.
(7)
The Secretary of State may by order amend subsection (4) above by
45
substituting a different sum for the sum specified there.
(8)
In this section—