DCH 34 Charity Law Association
Draft Charities Bill
Main points
Introduction
1. The Charity Law Association (CLA)
is an association with over 700 members, who are principally solicitors
and barristers but also accountants and other non-professional
members. The current Chairman, Stephen Lloyd, and the Chair of
the CLA Working Party on the Strategy Unit report, Judith Hill,
will be attending to give evidence.
Context
2. The purpose of this paper is to
give the Joint Committee an indication of the points of greatest
concern identified by the CLA. A more detailed and technical
submission will follow by 28th June. This will be
designed to deal, as well, with lesser concerns and inconsistencies.
We hope it will be useful also in indicating where detail is
needed to render the new law workable in the context of the structure
of the general law and existing charity law provisions which are
not to be changed.
General points
3. The Bill, together with last year's
document "Charities and Not-for-Profits: A Modern Legal Framework",
reconstitutes the Charity Commission (the CC) as a statutory corporation,
grants it new powers and imposes new duties on it. This raises
two issues:
3.1 In our view, the Bill must contain
a provision obliging the CC to use its powers proportionately,
fairly and in accordance with the principles of natural justice.
Such obligations could be included as proposed new Clause 1D(2)(3)
of the Charities Act 1993 ("the 1993 Act"), inserted
by Clause 5 of the Bill;
3.2 It seems to us that the CC will
need significant additional funding if it is to obtain the state
necessary to discharge its duties (as increased) properly. We
estimate, for example, that an additional £250,000 per annum
will be needed to enable the Commission to carry out its rolling
public character review. We are surprised that the Regulatory
Impact Assessment does not appear to address the costs implications
of all aspects of the CC's increased role. More importantly,
however, it seems to us that in order to attract the right calibre
of staff it will be necessary for the CC to be in a position to
pay higher salaries. This can only be achieved if the CC is relieved
of the restrictions attaching to the levels of pay the Civil Service
can offer. Since this would have the additional affect of increasing
the CC's independence from Government this can only be a good
thing.
Part 1 - Meaning of 'charity' and
'charitable purposes'
4. The definition of 'charity' has
changed since earlier publications, which proposed that a charity
should be defined as an organisation established to provide public
benefit and having one or more of the prescribed purposes. In
Clause 2(1) of the Bill, the public benefit test is to be applied
to the charitable purposes, rather than to the way the organisation
furthers those purposes. We are not sure that this is what was
intended.
Part 2 Chapter 1 - The CC
5. At present, the Charity Commissioners
are active in the work of the CC. The CLA is concerned that restructuring
the CC into a body with a Chief Executive accountable to the larger
board may lead to the Commissioners taking a more 'non-executive'
approach and leaving day to day management to the Chief Executive.
In our view, this would be a retrograde step; the Bill could
be more explicit in prescribing the accountability and supervisory
elements of the relationship between the board and senior management.
6. The "social and economic impact
objective" is surprising. Social and economic impact is
not a part of charity law: many charities that operate for the
public benefit have little or no social or economic impact. Our
concern is that this is how the Parliamentary draftsman has sought
to translate 'public benefit', which is a different concept.
We would like to see the reference to social and economic impact
removed and for the Commission instead to have some obligation
relating to public benefit
7. We consider that the general duty
set out in new Section 1D(2)2 of the 1993 Act should oblige the
CC to have regard to the need to use its resources in the most
effective, efficient and economic way.
Part 2 Chapter 2 - The Charity
Appeal Tribunal
8. At present, the Tribunal will only
be able to hear appeals on specified decisions and, in relation
to some decisions, appeals may only be brought on specified grounds.
(For example, the right to appeal against decisions to institute
s.8 inquiries and the investigation of company accounts only applies
where the institution concerned is not a charity.) We recommend
that the Tribunal be able to hear appeals against any decision
of the Charity Commission (including "non-decisions",
such as a decision not to make a scheme or order), on any point
of law, on any basis.
9. There
seems to be no provision for the CC to refer matters to the Tribunal
for interpretation, which could be useful. Equally, there seems
to be no general right of reference to the Tribunal (for example,
by representative bodies) which could also be useful.
Part 2 Chapter 3 - Registration
of Charities
10. New Section 3(4) of the 1993 Act
(inserted by Clause 5) obliges the CC to remove 'any institution
which it considers is no longer a charity'. The Bill does not
say what should happen to the assets of an institution which has
purposes that once were valid charitable purposes but have ceased
to be so. At present, such institutions lose their assets. The
CLA considers this to be unsatisfactory.
11. Clause 11 obliges the 'principal
regulator' of an exempt charity to increase compliance with charity
law by the trustees of exempt charities under his supervision.
However, by virtue of sub-Clause (4)(b), there will be no 'principal
regulators' unless the Secretary of State designates a person/body
as such under Regulations. To ensure charity law compliance,
we consider that:
11.1 the Secretary of State should
make such regulations as soon as possible after the Bill comes
into force;
11.2 The negative resolution procedure
should be used to make these Regulations.
12. The CLA welcomes the extension
(under Schedule 5) of CC regulation to exempt charities. However,
the two most significant powers (to institute inquiries and to
act for the protection of charities) may only be exercised on
the invitation of the principal regulator. If an exempt charity
has no principal regulator (see our concerns in the previous paragraph),
these powers will be more apparent than real.
Part 2 Chapter 5 - Assistance and supervision
of charities by court and Commission
13. In our view, the Bill presents
an opportunity to amend Section 8 of the 1993 Act to stipulate
that the CC can only open enquiries where it has reasonable grounds
to do so.
14. It has always been axiomatic that
the CC should not take over the administration of charities and
it is right that this is reiterated in new Section 1(E)(2) of
the 1993 Act (inserted by Clause 5). However, parts of Chapter
5 run counter to this principle by empowering the CC to direct
trustees to act in a particular way or to apply property for particular
purposes (new Sections 19A and 19B of the 1993 Act, inserted by
Clauses16 and 17 respectively).
Part 2 Chapter 8 - Charitable Incorporated
Organisations
15. The CIO should be available as
a structure with both limited liability (as with a charitable
company) and a single tier of management (as with a charitable
trust). There should not be, as currently, a requirement for,
or a necessary assumption that there is, a membership (e.g. new
Sections 69B(4), 69C(2) 69G(2)c of the 1993 Act and Schedule 5A(13)
3 and 14(1)). In a single tier constitution, amendment could be
by the trustees by a specified special majority.
16. New Section 69H(4) of the 1993
Act, contrary to the principle of easing reconstitution etc procedures
elsewhere in the Bill, requires a conversion to go through a new
registration procedure with the CC. The Bill could instead provide
for institutional continuity, subject to the adoption of an appropriate
new constitution. To provide flexibility provision might be made
for the conversion, in the same way, of a CIO to a company limited
by guarantee or registered friendly society.
Part 3 - Funding for charitable,
benevolent or philanthropic institutions
17. The CC does not have (either at
present or under the Bill) power to enforce criminal sanctions
against professional fundraisers or commercial participators
in breach of their obligations under the 1992 Act. The CPS is
uninterested in prosecuting on these matters, meaning that this
aspect of charity law is not being enforced. This could be remedied
by giving the CC (or possibly Trading Standards?) power to prosecute
defaulting commercial organisations.
18. The Bill obliges all charities
that undertake public charitable collections to have a certificate
of fitness (COF) from the local authority in which they have their
registered address. In central London, local authorities may
be inundated by applications for COFs, possibly causing a logjam,
particularly given the local authority's obligations to consult
with the Police. The Bill does not oblige local authorities
to issue COFs within a particular timeframe.
19. Collections in public places will
only be allowed with a permit from the local authority (as well
as the COF). In London this means that charities will have to
negotiate with 32 London Boroughs, whereas they currently only
have to deal with the Metropolitan Police authority. This could
have a severe impact on their capacity to fundraise and augment
fundraising costs, which the Government is most anxious that charities
should keep down.
20. We urge that all registered charities
be automatically deemed fit to carry out public collections so
as to dispense with the need for the COF. The CC could note against
each charity's record on its website any complaints about fundraising.
Local authorities could refer to this and refuse to allow collections
by charities that have been so listed:
20.1 When a charity applies for a permit
to carry out a public collection;
20.2 When a charity notifies the local
authority that it intends to carry out a door to door collection
- which no permit is required.
This would simplify the law and make the whole
operation much cheaper.
|
