The latest reforms to the Charities Act 2022 began this summer, and affect a wide variety of aspects of charity law. Jerry Knight-Smith, who works in Counterculture’s specialist charity law team, takes a closer look at several of these reforms to examine how they could affect our clients.
Although the Charities Act 2022 received Royal Assent on 24th February last year, not all of its various and significant changes for charities (many in response to cues from the Law Commission) were operative straight away. However on 14 June 2023 the second of three phases of its amendments to areas of the Charities Act 2011 came into force.
To summarise three main reforms and what they will mean for charity trustees, senior staff and their charities:
Permanent Endowment
Refers to land or property, as held by many charities, where a donor or supporter intended that it should never be disposed of or expended, but with the exception that any income derived from it can be used by the trustees to provide the charity with a lasting revenue stream. Where it produces no income the permanent endowment may only be used to pursue the charity’s purposes.
Typically a very technical area of charity law, ‘permanent endowment’ has been redefined to clarify that any fund held subject to a restriction on expenditure of capital is caught and that certain types of property are not caught within the reformulated definition. Trustees will be now able to make use of the various statutory powers in the Charities Act 2011 with that in mind.
There are also new broader statutory powers to ease the release of restrictions affecting permanent endowments, simplify borrowing from them and make certain investments using them.
Charity Land
Although the original charity land rules were designed to aid trustees’ decision-making when selling, leasing or mortgaging charity land, the new reforms should also make things easier and save money (and legal costs) for charities here.
They include a relaxation of the content required in reports necessary for certain charity land disposals and no requirement for charity trustees to advertise such disposals.
Where charity trustees were restricted to RICS accredited surveyors to obtain (often expensive) advice on disposals of charity land, reports can now be given by a wider range of designated advisers. These could be suitably accredited estate agents, agricultural valuers and even suitably qualified charity employees and trustees (subject to the usual regard to conflicts of interest). This point could be of particular interest to Local Authorities who are sole trustees of charities or trust land within their administrative area.
Generally no land held by or in trust for a charity can be disposed of without either a Charity Commission order or without following the prescribed statutory procedure. The new Act makes clear that this will apply only where the whole of the land intended to be disposed of is held by the charity or in trust solely for the charity.
This means that if a charity owns part of a property as a tenant in common with another body (charitable or not) or perhaps a legacy of a property is shared between more than one beneficiary (including the charity), a decision to dispose of the whole property could be taken without the need for an order or to follow the statutory procedure.
It is worth noting that in most cases the Charity Commission still strongly recommends that trustees proposing to acquire land obtain a surveyors report from a designated advisor acting solely for them, applying the statutory rules that apply on a charity land disposal.
Charities may also now grant a short term or periodic residential lease to an employee (e.g. a caretaker for a property) without needing the approval of the Charity Commission first.
Charity Names
The Charity Commission can force a charity to change its official name under its existing powers, for instance if the name is misleading, offensive or too similar to that of another charity. This second phase of reforms now extends the power to a working name too (subject to a right of appeal).
In each case the Commission can delay registration of a charity. It can also require a change of name from charities that are exempt from the requirement to be registered. Where a charitable company is directed to change its name, company law will now allow its directors to resolve to make the change (rather than by a members’ special resolution).
Aside from the obvious point of confusingly similar names, using inappropriate or misleading names (working or official) is seen as compromising the public reputation of the charities generally.
In conclusion
Although charities dealing with property or permanent endowments may now be able to do so in a more straightforward way, these remain complex areas of charity law.
Our specialist charity law team at Counterculture is on hand and happy to advise trustees in best practice when discharging their duties in these areas and to help charities to understand their rights and obligations under the Charity Act 2022.