How will the final sections of the Charities Act 2016 impact the sector?
Delayed in its full implementation, what can we expect from the remaining sections of the Charities Act?
The second commencement order required to bring the final sections of the Charities (Protection and Social Investment) Act 2016 (the “2016 Act”) into force is still awaited, although it was originally expected that these sections would be in force by April this year.
Of these final sections, one is uncontentious. Section 12 aims to prevent someone who is disqualified from acting as a charity trustee from continuing to make decisions in relation to the administration of a charity in his or her role as director of a corporate trustee of the charity.
However, issues arising from the remaining parts of section 9, which relate to the automatic disqualification of trustees for certain unspent convictions, have resulted in a delay to their coming into force.
At present, an individual is prevented from acting as a charity trustee if they have an unspent conviction for an offence of dishonesty or deception, under the provisions of the Charities Act 2011. However, the Charity Commission thought these criteria too lenient, and sought to broaden the scope of the automatic disqualification provisions in the 2016 Act.
The Commission was successful in its aim and the provisions of the 2016 Act extend the list of offences resulting in disqualification beyond dishonesty and deception, to include convictions for theft, fraud, terrorist offences, perjury, money laundering and misconduct in public office. The new provisions will not just affect charity trustees, either. Any senior managers or staff with “control over money” (including chief executives and finance directors) will also be disqualified if they have a conviction relating to any of the specified offences.
All those affected will have either to resign from their positions or to apply to the Commission for a waiver, which will be considered on a case by case basis. If they fail to do so, and they are discovered to be subject to the automatic disqualification rules while in post, the charity will have to dismiss them, notify the police and report this serious incident to the Commission.
The new disqualification provisions go beyond what was initially sought by the Commission, and the Commission has indicated that the commencement date for the automatic disqualification provisions will not occur before September this year at the earliest, to allow charities time to prepare.
Concerns have been raised as to the potential impact of these provisions of the 2016 Act on charities working in some sectors, such as prison reform and rehabilitation of offenders, in particular, as such charities often have those with personal experience of the prison system as trustees or as employees or as both. However, all charities should be aware of the new automatic disqualification provisions, and take steps to ensure they are able to comply with these provisions when they do eventually come into force.
The Commission is working on guidance in this area, including guidance on the process of making an application for a waiver. In the meantime, charities seeking to recruit new trustees should make sure they:
- check the Commission’s list of removed trustees before any appointment of a new trustee, and
- ask any new trustee to sign the Commission’s Declaration of Eligibility and Responsibility to confirm they are able to act.
It would also be prudent to make appropriate enquiries of any new senior managers before appointment, and charities should start checking their position regarding existing trustees and senior management, as well.
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Neil Burton is a Partner at Mills & Reeve. Neil is a corporate and charities lawyer and advise a number of not-for-profit entities (including NDPBs, Universities and other charities) and corporates including those conducting business in the insurance market. Neil is also a member and active participant in Charity Finance Group, Charity Tax Group, Charity Law Association, and the European Association for Philanthropy and Giving.Read more articles by this author