Martin
Horwood: I confess that I am slightly puzzled by the
amendment. The raft of new offences described by the hon. Gentleman are
merely the equivalents for CIOs of parallel offences for companies. Any
charity that is moving from company to CIO status will not be subject
to more offences, risk of heartache, distress or other problems induced
by the risk of criminality because they were liable for those very
same, or parallel, offences under company law. The only possible
circumstance in which the hon. Gentleman’s concerns might be
relevant is one in which a charity that was not previously a company
applies for CIO status. However, it is merely being saved the more
onerous burden of company law. Although I am sure that the amendment is
well intentioned, it does not seem to be justified and interferes with
the CIO status as a less burdensome alternative to company
status. The hon.
Gentleman did not mention amendment No.129, which is grouped with
amendment No. 36.
Mr.
Turner: I said that it was
unnecessary.
Martin
Horwood: In that case, I will sit
down.
Peter
Bottomley: When the Minister responds, will he explain
what the word “body” means? It appears in this
subsection.
Edward
Miliband: No, is the answer to that, but I will endeavour
to do so in due course.
Let me deal with the
substantive points made by the hon. Member for Isle of Wight. If I may
so, the hon. Member for Cheltenham spoke particularly eloquently in his
explanation—more eloquently that I could. The new section
replicates for charitable incorporated organisations offences that
exist for charities that register under company law. The hon. Gentleman
talked eloquently about the risks that people might fear, but I assure
him that we are simply reproducing sanctions that already exist for
charities under company law. Even for charities section 5(5) of the
1993 Act already provides that an offence regarding the signing of a
document is a level 3 offence, which is the same as that under proposed
new section 69D of that Act.
Although I understand what the
hon. Gentleman is getting at, I assure him that a new set of draconian
powers is not being taken. The provision simply reproduces the
proportionate and sensible offences that already exist under current
law in return for the duties and privileges of being connected with a
charity.
4.30
pm
Mr.
Turner: I cannot say that I am satisfied with that answer.
My argument was well set out in the quotation from the Joint
Committee’s report. It is hoped that many charitable
organisations that are currently unincorporated will transfer and
become CIOs and that some companies may become CIOs. That may impose
onerous responsibilities on the trustees of charities. I have no doubt
that they already have onerous responsibilities, but that is no excuse
for perpetuating them. We ought to be considering how to make the lives
of trustees easier, not more difficult.
I did not find an answer to the
point that the Charity Commission can intervene if a trustee or a
charity acts unlawfully.
Martin
Horwood: I have great respect for Bircham Dyson Bell,
which is associated with Fight for Sight, a charity of which I am a
trustee. Perhaps the hon. Gentleman’s interpretation of its
opinions is still a bit wide of the mark. For instance, if the
provision did not exist, what would the hon. Gentleman suggest should
happen to an organisation that pretends to have CIO status? It seems
that it would escape sanction.
Mr.
Turner: If an organisation misrepresents itself,
presumably it does so for a purpose. Usually, that purpose is to obtain
some pecuniary advantage; it is not done entirely by accident, and if
it is, the organisation is unlikely to be prosecuted. We have to look
behind the action. On
the whole, the problem is not the trustees. In the hon.
Gentleman’s example, the problem is that the people concerned
are not trustees, or they are trustees of an organisation that is not a
CIO. If a charity has not become a CIO, the commission will be able to
intervene to correct it; and if it is not a charity but it is
representing itself as one, the fact that it is likely to have an
ulterior motive can easily be demonstrated.
I understand why the Minister
does not wish to accept the amendment. The provision is a continuation
of existing regulation, and some might describe it as over-regulation.
It underlines the need to be a little more sensitive to the needs of
lay people who become trustees.
If it is the will of the
Committee, I shall not press the amendment to a Division, but I believe
that we should consider every opportunity to deregulate and encourage
people to take on such responsibilities. I beg to ask leave to withdraw
the amendment.
Amendment, by leave,
withdrawn.
Mr.
Turner: I beg to move amendment No. 37, in
schedule 7, page 117, line 32, at
end insert
‘and (d)
which shall be an organisation having limited liability and which shall
not be subject to the provisions of the Companies Act
1985.’.
The
Chairman: With this it will be convenient to discuss the
following amendments: No. 123, in
schedule 7, page 117, line 33, at
beginning insert
‘Subject to subsection (3B)
below’.
No. 38, in
schedule 7, page 117, line 36, at
end insert— ‘(3A) Any
liability of the applicant entered into in pursuance of the charitable
purpose of the CIO shall by virtue of this subsection become a
liability of the CIO. (3B) Any
liability of a charity which becomes a CIO shall by virtue of this
subsection become a liability of the
CIO.’. No.
124, in
schedule 7, page 117, line 36, at
end insert ‘, subject to any liabilities
previously incurred in relation to that
property. ‘(3A)
Where— (a) the
applicants in subsection (3) are the charity trustees of an
unincorporated charity whose purpose are substantially the same as
those of the proposed CIO;
and (b) the unincorporated
charity has passed a valid resolution to become a
CIO registration of the CIO has
the effect of converting the unincorporated charity into a
CIO. (3B) Where an
unincorporated charity converting under subsections (3) and (3A) holds
permanent endowment, registration of the CIO has the effect of
appointing the CIO as corporate trustee of the permanent
endowment.’. No.
39, in
schedule 7, page 120, line 35, at
end insert— ‘(6A) Any asset
or liability of the converting company or registered society shall by
virtue of subsection (4) transfer to the
CIO.’. No.
29, in
schedule 7, page 123, line 39, at
end insert ‘or at the expiration of six
months from receipt by the Charity Commission of the
resolution.’.
Mr.
Turner: This is another group of amendments that have
benefited from our lunch hour. We did not get anything to eat, but we
made some progress. It is fair to say that we established that
amendments Nos. 37 and 29 are not important enough for me to press to a
Division. However, amendments Nos. 38 and 39, and perhaps Nos. 123 and
124 because they form part of the same general argument, illuminate a
problem. When an
unincorporated organisation sets out to become a CIO, the process is
usually that the CIO is established. The unincorporated organisation
then hands over its assets, but what happens to its liabilities?
Liabilities can be handed over only with the approval of the creditor.
It is unlikely that the creditor would agree to transfer a debt from an
unincorporated organisation, the trustees of which are individually
liable for the full sum, to a body that has limited liability. We are
left with the original charity with its liabilities, but no assets and
the CIO with its assets, but no liabilities and no way of moving the
liabilities to the CIO. That will not encourage bodies to transfer from
being unincorporated organisations to being CIOs. Amendments Nos. 38,
39, 123 and 124 attempt to deal with the issue in different ways and I
invite the Minister to look at the problem to see if he can come up
with a
solution.
Edward
Miliband: The hon. Gentleman has raised a point of genuine
difficulty because the Government are keen to encourage the use of the
CIO and that partly will be about unincorporated charities moving to
take advantage of the limited liability and the other positive aspects
of becoming a CIO. However, there is no
question that we face the barrier that the hon. Gentleman set out rather
clearly. There is
provision in proposed new section 69O to make the process of conversion
as easy as possible but, as the hon. Gentleman says, it requires the
setting up of a new organisation, the termination of the existing
organisation and a transfer of the assets and liabilities, and that
depends at least on authorisation from the people to whom those
liabilities are owed. It is a problem to which a solution has not been
found so far in the long and winding road under the Bill. Again,
without wishing to ruin my summer completely or that of my officials
who are working on the Bill, we shall keep looking at such matters and
will respond positively to any ingenious suggestions that are made.
With that assurance, I hope that the hon. Gentleman will withdraw the
amendment.
Mr.
Turner: I am grateful for that reassurance. Indeed, I am
grateful for the assistance of the Charity Law Association in bringing
forward some of the problems. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Schedule
7 agreed
to. Clause 35
ordered to stand part of the
Bill.
Clause
36Remuneration
of trustees etc. providing services to
charity
Mr.
Turner: I beg to move amendment No. 30, in
clause 36, page 34, line 24, after
‘out’, insert ‘in
advance’.
The
Chairman: With this it will be convenient to discuss the
following amendments: No. 31, in
clause 36, page 35, line 10, leave
out ‘or under a contract of
employment,’. No.
32, in
clause 36, page 35, line 46, at
end insert— ‘(ba) a person
having a relationship with a trustee akin to that of a spouse or civil
partner with a trustee or any person falling within paragraph
(a);’. No.
33, in
clause 36, page 36, line 2, after
‘(b), insert ‘or
(bb)’. No. 34,
in
clause 36, page 36, line 5, leave
out ‘, (b) or’ and insert
‘to’.
Mr.
Turner: This is a series of short amendments to clarify
the position of paying trustees. They have special responsibility to
safeguard a charity’s assets. I welcome the statement by the
noble Lord Bassam in Grand Committee in another place. He confirmed
that the Government
were “trying to preserve
the essence of the voluntary principle of
trusteeship” and he said
that the conditions of payment to a trustee
were “designed to ensure
that it is proportionate, protects against conflicts of interest and is
in the best interests of the charity.”—[Official
Report, House of Lords, 16 March 2005; Vol. 670, c.
GC515.]
Amendment
No. 30 would simply require that any agreement about payment should be
made “in advance” of that payment being made or, indeed,
the work being undertaken for which the payment might be made. That
seems a sensible principle and is, I believe, one of the proposals of
the Joint Committee, at paragraph
259. Amendment No. 31
would exclude charities from employing their own trustees. It is one
thing to have a short-term relationship with a trustee who is perhaps
doing a little plumbing for the benefit of the charity; it is another
thing entirely to have a trustee as a permanent or, indeed, temporary
employee of the
charity. Amendments
Nos. 32 to 34 deal with unmarried partners or, as I put it, people in a
relationship akin to a marriage or civil partnership. There are now
many relationships that are not recognised by law, but which will have
an influence that might be perceived as inappropriate when it comes to
the appointment of people to do jobs, to work for charities and so on.
The amendments are designed to deal with
that.
Edward
Miliband: The hon. Gentleman was admirably brief; I shall
be slightly less brief in trying to answer his questions, but I will be
as brief as I can. On amendment No. 30, to clause 36, I understand that
there are two aspects to his concern. First, he is worried that there
would not be an agreement in place when the payment was made and
therefore the agreement would be made retrospectively. Secondly, he is
worried that there would not be an agreement in place when the service
was provided and the agreement would be made
retrospectively—after the service was provided. I think that
those are his two
concerns. Let me deal
first with the hon. Gentleman’s first concern, which relates to
the principle that the agreement needs to be in place before the
payment is made. I can certainly reassure him on that point, because
clause 36(2)
states: “If
conditions A to D are met in relation to remuneration within subsection
(1), the person providing the services...is entitled to receive
the remuneration out of the funds of the
charity.” Condition A is
that there is an agreement set out in writing, so I hope that that
avoids the problem that he is getting at, which involves a payment
being made and an agreement being agreed post hoc—after the
event. The second
worry—which the hon. Gentleman may not have had—is also
covered, because the clause refers to an agreement under which the
relevant person “is to
provide the services in
question”, which suggests
that the agreement has to be made before the services are provided. I
hope that that satisfies the hon. Gentleman on that
point. On amendment
No. 31, I think that we have the same end in view, but I advise the
hon. Gentleman that taking out the
words “or under a
contract of
employment” would get
charities into precisely the pickle that we do not want to get them
into, which is that, under the clause, services can be provided that
are contractual services. The
words “or under a
contract of employment”
are in this clause, covering the
remuneration of trustees providing services, precisely so that it will
not be about contracts of employment. I hope that that explanation
satisfies the hon.
Gentleman. 4.45
pm I
assure the hon. Gentleman that his interesting point about cohabiting
couples or people is not immediately obvious in the Bill. However, I
hope that he will be satisfied on reading new section 73B(6) of the
1993 Act in tandem with paragraph 171(5) of schedule 8 of the Bill,
which would add paragraph 2(3) to schedule 5 of the 1993
Act: “Where two
persons of the same sex are not civil partners but live together as if
they were, each of them shall be treated for those purposes as the
civil partner of the
other.”
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