So, this is where we stand – with a defective law but with opportunities down the road to reshape how it might be implemented – principally an agreement from the Charity Commission to consult on its new powers to disqualify trustees. Our last update on the Bill was published in Lawyer Monthly Magazine in March and can be found here.
Section 1: Statutory Warnings
This new power allows the Charity Commission to issue a formal warning to a charity without opening up a full-blown statutory enquiry. It is something between that and sending a letter to the trustees. What’s wrong with that, you ask? Mainly the possibility that this could cause unwarranted damage to the charity’s reputation without any form of redress. Initially the government wanted the Charity Commission to have the power to issue statutory warnings to charities without giving the charity prior notice or affording the charity the opportunity to make representations or to appeal a warning.
The Government conceded that warnings, while they still cannot be appealed to the Charity Tribunal, can be varied or withdrawn (for example if the basis of the warning was found to be incorrect). A minor improvement, but it’s a bit like a newspaper publishing a correction on Page 23 after the erroneous headline the previous day – the damage will already have been done. Also the Government stated that normally there will be a 14 day notice period for trustees, but this is not binding.
Section 9 – Automatic Disqualification from Trusteeship
The Act expands the criteria for the disqualification of people from acting as trustees to include those who have unspent convictions, for example under the Terrorism Act. It also extends the effect of this disqualification to people in senior management positions in a charity. So, if you have been disqualified for certain offences from acting as a trustee, you also cannot be employed as a Chief Executive or a Finance Director for example. This was opposed by many offender rehabilitation charities which depend on the input of ex-offenders into their governance and service delivery – but they were largely ignored by the Government.
The Government eventually conceded that non-managerial employees who are disqualified as trustees can be employed by small charities, where there is no ‘senior manager’, and that there will be a 12 month commencement period to allow charity boards to adapt. We have no idea how many serving trustees with unspent convictions will now have to step down or apply to the Charity Commission for a waiver. Which will they choose? And will the Commission be minded to assess and grant waivers anyway?
Section 10 – Discretionary Disqualification from Trusteeship
The biggest threat in the Act from our perspective is the new power the Charity Commission will have to disqualify trustees they deem to be ‘unfit’ and who have in their view engaged in past or continuing activities which are ‘damaging or likely to damage public trust and confidence in charities’. This highly illiberal and broad power gives the Commission power to remove any trustee for virtually any reason. The Government conceded that the Commission will consult on definitions and procedure, so remains some opportunity to influence how this power is exercised in practice.
The Act is now law, but we can still influence the forthcoming consultation on definitions and procedure under Section 10 as this could have a big impact on how the Commission uses this power in practice. We are in contact with the Commission about this, and with our partners will be looking to influence the consultation and subsequent guidance. We will alert charities when this is happening so that the consultation can be as wide as possible.
Bates Wells Braithwaite have also produced a detailed briefing which you can find here.