Charities Act 2006
The new Charities Act 2006 has now come into force although some of its provisions will be rolled out over the coming months. It is the largest piece of Charity Legislation in hundreds of years so it is worth looking at some of the provisions and what they will mean to charities and their trustees.
There has been much discussion about the new definition of charitable purpose but no current charity will be disadvantaged, as there is an umbrella provision, which covers all existing charities. There had been some concern that some charities, especially in the education field, would no longer be charities but this was changed in the committee stage of the Bill. There are, however, a number of new definitions of charitable purpose and these can be found on the Charity Commission Website (www.charity-commision.gov.uk) and charities will still have to meet the public benefit test.
The Commission is also going to keep a register of merged charities which will be especially beneficial if you leave a gift to a charity in your will and that charity is then taken over or merges with another. It will mean your gift will still go to the place you intended it to, or as near as possible.
The roles of the charity trustees which will affected by some of the changes. Firstly it will be permissible for charity trustees to be paid, but only if they are providing a service beyond that of being a trustee. For example if their firm provides legal or accountancy advice. Previously each case of this sort needed the permission of the Charity Commission. The trustee board has a responsibility to ensure that this professional relationship is in the best interests of the charity. There are new rules for charities fundraising on the streets and this will make it clear who is being paid for collecting and who is doing it as a volunteer.
The act acknowledges that for some charities it has been really hard to recruit trustees because of the personal liability that a trustee has. To a large extent this has now been eased as charities can obtain Trustee Indemnity Insurance which protects the trustees when they have acted responsibly and in good faith. This is not a carte blanch for trustees to do what they like – the insurance won't pay out if you have acted wilfully or irresponsibly. Up until now the charity has had to apply for permission from the Charity Commission to hold such insurance. The trustees can also apply to the courts or the Commission for relief from personal liability where they have acted responsibly.
Where charities have not acted responsibly the act gives the Charity Commission some real teeth in protecting the public interest. They will be able to intervene in the activities of a charity with greater ease and then remove trustees and staff if it is in the public interest to do so. This should send a very clear message to the public that charities activities are being scrutinised properly and being effectively policed. Where there are disputes of this nature and the charity is unhappy they will be able to appeal to the newly created Charity Tribunal.
This is a wide ranging piece of legislation and has been a very long time coming. This is only a summary of some of the areas it covers. Lemon and Co have been advising charities and trustees for very many years and understand the need to provide timely and cost effective support when charities need it most.
Catherine Green
Solicitor
Lemon & Co Solicitors.
This article gives a general view and cannot be relied upon in any particular case. The need for specific legal advice must always be considered. For further information, contact Catherine Green by email on catherine.green@lemon-co.co.uk or alternatively, please visit our website at www.lemon-co.co.uk for articles on other legal issues
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<p><strong><a href="http://www.lemon-co.co.uk/article_charities-act2006.php">Charities Act 2006 </a></strong><br />
The new Charities Act 2006 has now come into force although some of its provisions will be rolled out over the coming months...</p>