Area of change

Charities Act 2009

What is being changed?

What does this mean

What can charities expect

Registration

Charity Governing Document (Constitution) Section 42A

When this section of the Act is commenced, charities will be required to seek the Charities Regulator’s approval before amending their objects clause, income and property clause, or the winding up clause in their constitution. Approval for a change to charitable purpose will also be required.

The Charity Regulator’s approval must be obtained before a charity makes any changes to these three clauses in their constitution / governing document.

This is to avoid a charity making changes that could mean they no longer meet the legal requirements to be a charity, and put their status as a charity at risk.

The Charities Regulator will prepare and publish guidance and information for the charity sector before these changes are commenced by the Minister.

Suitable online forms and instructions will be available.

References to being a registered charity
Section 46 (7)

The Act will list what information must be published.

When this section is commenced by the Minister, a charity will be required to state it is a charity, provide its name (as it appears on the Register) and its charity registration number in all public documents (including television and the internet).

Charities will need to review their current public documents and make sure those preparing or updating documents are aware of this legal requirement.

The Charities Regulator will prepare information and engage with the charity sector ahead of the relevant section commencing.

Human Rights is being added as a charitable purpose Section 39

Organisations that promote the advancement of human rights may be able to register as charities. Existing charities may also seek approval to add human rights as a charitable purpose.

While the Act provides for the addition of human rights as a charitable purpose, it does not include a definition. The Charities Regulator will engage with the charity sector and other key stakeholders on a definition. We will then prepare and publish updated guidance documents and update the registration form which will require IT infrastructural changes.

Definition of  a charity trustee and trustees’ duties and obligations

The definition of charity trustee is amended
Section 3

A company secretary will no longer be automatically deemed a charity trustee unless they are also a director of the company.

Charities Regulator will prepare and publish updated guidance on the duties and legal obligations of charity trustees and engage with the charity sector before this section of the Act is commenced so trustees are aware and have time to prepare.

Charities are currently required to keep the information on the Register of Charities about their charity up to date. The Amendment Act details the information trustees are legally required to provide to the Charities Regulator. Section 39 (11)

Charity trustees must make sure they keep the details of their charity up-to-date on the Register. These includes:

*Name of charity

*Charity trustees

*Address of principal place of business

Charity trustees must also notify the Regulator if they propose to wind up their charity.

For the first time, the Act states that a charity must have a minimum of three (3) trustees. Furthermore the majority of trustees must not be a connected relative and must be resident in the State, UK or European Economic Area. Section 54A

Charities are now required to have a minimum of three trustees, who must be individual people, on their board / committee at all times. Some charities may need to recruit additional trustees to meet the legal requirements regarding the make-up of their board of trustees.

Furthermore, a charitable trust may have one body corporate (for example a company) as a trustee. The body corporate must have at least three directors who are natural persons, the majority of whom are resident in the State, UK or EEA and are not a connected relative of another director. In such circumstances each of the directors of the body corporate (the company) and the body corporate itself are the trustees of the charitable trust.

The principal duties of trustees are explicitly listed in the Amendment Act. Section 54B

The Act will now clearly state the principal duties of charity trustees, giving greater clarity on their role in a charity. Trustees should ensure they are aware of them, and take account of relevant guidance to make sure they are fulfilling them.

The Charities Regulator will prepare and publish guidance in advance.

Charities to keep a Register of Members.
Section 54D

Charities must keep a record of the members of the charity. This register of members must include the name and address of each member and the date they became a member.

The members of a charity normally means those who are entitled to attend a charity’s Annual General Meetings (AGMs) or Extraordinary General Meetings (EGMs) and can vote on matters such as the approval of the charity’s financial statements or a proposal to add or remove trustees of the charity.

A charity’s constitution or governing document will usually set out the role of members, who can be a member and how members can be added or removed.  Members can be trustees, committee members, volunteers or supporters of the charity.

Financial regulations

New accounting regulations are being introduced and Charities’ Statement of Recommended Practice (SORP). Section 48

All charities currently have to prepare financial statements each year. The format of the statements for charities that are companies is well known by accountants as these statements must be filed in the Companies Registration Office (CRO).

The new accounting regulations will standardise the format of financial statements for all charities, which will make their preparation more efficient. The format will make information about a charity’s finances clearer to donors, funders and others interested in a charity. This will also allow the finances of charities to be directly comparable, and improve the data that is available on the Register of Charities about the sector.

The level of detail required in financial statements will depend on the size of the charity. Small charities will prepare simple income and expenditure accounts, medium sized charities will prepare accrual accounts, and the audit threshold will be increased for large charities.
The thresholds for small, medium and large charities will be set by the Minister as part of the introduction of the accounting regulations.

The Charities Regulator will produce detailed guidance documents and engage with the sector and other key stakeholders, including the accounting profession, well in advance of the implementation of new accounting regulations.

Accountants will be able to advise charities in relation to any changes that may apply to the preparation of financial statements for your charity.

Agreements and Appointments

Charity may enter into paid agreements with charity trustees and members in certain circumstances.
Part 6A

A charity may appoint an employee as a trustee. A charity may enter into an agreement with a trustee or member for that trustee or member to provide a service to the charity.

The Minister may make statutory regulations around appointments. Guidance will be developed and published by the Charities Regulator.

Annual report

Section 52

The obligation to file an annual report within 10 months of the financial year end remains, but it will be called an annual return instead.

All references to annual report in Charities Regulator’s guidance, forms and website will be changed.

Charities Act 1961
relating to charity services functions

Section 34(2) relating to the transfer of charity property for less than market value to another charity is being changed.

Section 29(4) is repealed

Section 53 is repealed

Section 54 is repealed

The requirement that the charity receiving the property must have a different charitable purpose will no longer apply. A cy-près scheme framed by the High Court cannot be subsequently amended by the Charities Regulator. There is no longer a requirement to notify the Charities Regulator of legal proceedings in relation to a charity. The Charities Regulator will no longer provide a repository for deeds deposited by charity trustees.

The Charities Regulator will update its website, guidance and forms to reflect the relevant changes.

Area of change

Charities Act 2009
What has changed?

What does this mean?

Next steps

Charity trustees

The definition of charity trustee is amended. (Section 3)

A company secretary will no longer be automatically deemed a charity trustee unless they are also a director of the company.

If your charity is a company please check whether your company secretary is also a director and, if not, make the appropriate changes. If you wish to update your charity trustees, you can do so via MyAccount by completing and submitting an Update Trustees, Connections and External Advisors.

Connected persons

The definition of a connected person is amended. (Section 2(2))

A person is considered to be connected with an individual if that person is a child, step-child, parent, step-parent, brother, sister, spouse, civil partner, cohabitant, grandparent or grandchild of the individual or a child of the individual’s civil partner or cohabitant.

Your charity, and especially its trustees, should make sure they understand who a “connected person” is under charity law to avoid potential conflicts of interest.

Registration

There has been a minor amendment to the definition of constitution
(Section 2(1))

The wording has been changed from: “…..memorandum and articles of association” to “constitution”.

There has been a minor amendment to definition of an education body. (Section 2(1))

A body established solely for the purpose of funding not more than one institution of higher education is no longer considered to be an education body.

Requirement to provide information

The wording of section 53(1) has been amended to provide for the Charities Regulator to specify a time limit for a response and the format information is to be provided in. The amendment makes it an offence not to comply with a direction issued under
Section 53(1).

Previously the Charities Regulator could issue a direction to require a “charitable organisation” to provide information, and the charitable organisation was required to comply. Now the direction may be issued to a charity trustee or the charity. Failure to comply with a direction issued is an offence.

In most cases, charities provide information voluntarily to us. Nonetheless we encourage all charities to review your processes for dealing with correspondence from the Charities Regulator. This will help to avoid us having to issue a written direction for information, and where we do, will help make sure that we receive the information we are seeking within the time specified.

Protection of charitable organisations

A new subsection has been added. Section 74(1)(f).

Section 74(1) contains a number of grounds on which the Charities Regulator can make an application to the High Court to take steps to protect a charity and its assets. These grounds now include where the High Court is satisfied that there is no effective management or oversight of the charity’s activities by the charity’s trustees.

Subsection 74(3B) has been added meaning, liability limited for charity trustees appointed to a charity by an order of the High Court under
Section 74.

Charity trustees appointed to a charity by a High Court order shall not be liable for actions prior to their appointment or for their own actions as a trustee of the charity unless they have been done in bad faith or due to their own negligence.

A new subsection has been added regarding the winding up of a charity. Section 74(4)(g)

The High Court can now make an order directing that a charity be wound up or dissolved.

Amendment of
Charities Act 1961

Section 34(2) (of 1961 Act

The requirement under section 34(2) that a transfer of charity property for less than market value to a charity with different charitable purposes has been removed.

Charities who apply for authorisation to transfer a property for less than market value to another charity can now transfer to a charity with similar charitable purposes.

29(4), 53 and 54 (of 1961 Act)

These sections have been repealed in full. See Charities Services section of our website for further detail.

Requirement to notify the Charities Regulator of the institution of proceedings against a charity has been removed.