We would like to welcome you to a special edition of Charity Matters, which examines the Charities Bill, which was published on 27 May. It is also an opportunity to welcome Penelope Lorton who joins us as a senior associate in the Charities Team in our Birmingham office.

Main objectives of the reforms

Following a major review of the law relating to charities by the Prime Minister’s Strategy Unit, the Government published a report in July 2003 confirming the Government’s acceptance of almost all of the recommendations made by the Strategy Unit. The purpose of the Charities Bill is to implement the majority of the accepted recommendations. The remainder will be implemented by other legislation or administrative action, primarily by the Charity Commission.

The main objectives of the reforms are to:

• Modernise charity law

• Improve the range of legal forms available to charities

• Develop greater accountability and transparency and thereby increase public confidence in charities

CHARITIES BILL: KEY PROPOSALS

Defining Charity

The Bill includes a statutory definition of ‘charity’ as a body or trust ‘established for charitable purposes only.’

 ‘Charitable purpose’ is defined as a purpose that:

• falls within a statutory list of 12 charitable purposes (see below) - statutory list is intended to reflect existing charitable purposes;

and

• is for the ‘public benefit’- meaning will continue to be based on case law

The statutory list of charitable purposes is as follows:

• the prevention or relief of poverty

• the advancement of education

• the advancement of religion

• the advancement of health

• the advancement of citizenship or community development

• the advancement of the arts, heritage or science

• the advancement of amateur sport

• the advancement of human rights, conflict resolution or   reconciliation

• the advancement of environmental protection or improvement

• the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage

• the advancement of animal welfare

• any other purposes recognised as charitable purposes under existing charity law or analogous to any recognised charitable purpose

The presumption of public benefit for charities for the relief of poverty, the advancement of religion and the advancement of education will be removed. New charities registered under these headings will therefore need to demonstrate that they will be providing benefit to the public.

Charitable Incorporated Organisation

The Bill provides for a new legal incorporated form designed specifically for charities to be known as a Charitable Incorporated Organisation (CIO). This is designed to overcome difficulties associated with use of the legal form of company limited by guarantee by charities, such as the need for dual registration with Companies House and the Charity Commission.

Measures are included to ease conversion of existing charitable companies to CIOs.

Payments to trustees

There is no change in the basic principle of voluntary trusteeship for charity trustees.

The Bill, however, enables a trustee to be paid for services provided to the charity, other than as a trustee, provided the trustees are satisfied that this is in the best interests of the charity and certain other conditions are met. The conditions are designed to prevent any misuse of such power, deliberately or otherwise, and to avoid potential conflicts of interest.

Relief from personal liability for trustees

The Charity Commission will have the power to relieve a trustee from personal liability for breach of trust or duty where it considers that that such person has acted honestly and reasonably and "ought fairly to be excused". Previously such relief could only be obtained by an application to the High Court.

Power to spend capital

The Bill modifies and extends the existing regime for expenditure by smaller unincorporated charities of permanent endowment not consisting of land. The power to spend permanent endowment is to be extended to charities with gross income over £1,000 where the endowment fund is worth not more than £10,000.

A new power is included for larger unincorporated charities to resolve to spend permanent endowment funds not consisting of land provided certain conditions are met. The approval of the Charity Commission will be required where the permanent endowment came to the charity either (a) by lifetime gift from, or under the will of an individual or (b) by grant/donation from an institution. This safeguard is designed to ensure that the donor’s intentions in making the gift or grant are given due consideration.

continued on page 2...