For some charities, undertaking fundamental governance changes to the way the organisation works can be confusing. In its 2017 report recommending 43 changes to technical issues on charity law, the Law Commission believed these changes could result in reducing a charity’s resources being expended on administration when it could be used for charitable causes.
The Technical Issues in Charity Law report aimed to balance the ability of the sector to ‘maximise the efficient use of charitable funds whilst ensuring proper safeguards for the public’.
In brief, the recommendations presented by the Law Commission and accepted by the government include:
- Offering charities more flexibility in gaining tailored advice to trustees when they are selling charity land and providing additional protection to purchasers of said land;
- Introducing a range of measures to make it easier for different charities to amend their governing documents, including a simpler regime for unincorporated charities akin to that available to charitable incorporated organisations and corporate charities. Where necessary, the Charity Commission would provide regulatory oversight to ensure changes reflected the original purposes of the charity in light of current social and economic circumstances.
- The ability for charities to use their permanent endowment to borrow from and support social investments, where appropriate checks are in place to ensure its long-term protection;
- Giving trustees a statutory power to be paid for the supply of goods, bringing it into line for that approach for paying trustees for services;
- Making it easier to make ex gratia payments, within certain limits, and for trustees to delegate that function;
- Reducing legal barriers to charities merging, such as the need to retain ‘shell charities’ in situations where legacies may be made out to the charity prior to its merger;
- Providing the Charity Commission with the power to establish the identity of trustees, a power akin to that they already have to identify members;
- Making it easier for trustees to use funds generated by an unsuccessful fundraising appeal to be used for general charitable purposes; and
- Giving the Charity Commission the power to direct exempt and unregistered charities to change their name.
When the recommendations come into effect, they will significantly reduce some of the complexity, confusion and administrative burden on charities identified by Lord Hodgson of Astley Abbotts in his review of charity law in 2012: Trusted and independent: Giving charity back to charities. Although the government has agreed to many of the recommendations, there is no clear timeline for their implementation with it stating legislation will be brought forward when Parliamentary time permits.
The government’s response to the Law Commission’s report can be found at: https://www.gov.uk/government/publications/government-response-to-law-commission-report-on-technical-issues-in-charity-law
Louise Thomson FCG, Head of Policy (NFP), The Chartered Governance Institute UK & Ireland