Stephen Claus – The Charities Act 2022

This article is an all-embracing update regarding changes being introduced by the Charities Act 2022 (the Act), which amends the Charities Act 2011.

I have previously written about this new law, but here I have consolidated what has happened and updated things to reflect this law being implemented this spring.

This articles provides short summaries of the changes that are due to come into force in early 2024 and links to my previous updates for the changes that came into force on 14 June 2023 and 31 October 2022.

Changes due to be introduced in early 2024

What follows is a short summary of the changes due to come into force in early 2024. Updated official guidance on these topics will be made available by the regulator on the days that provisions are implemented.

Making changes to governing documents

The Act is introducing a new statutory power that Trusts and unincorporated associations will be able to use to make changes to their governing document. These charities will need to have the Commission’s authority to make certain ‘regulated alterations’ in the same way as charitable companies and Charitable Incorporated Organisations (CIO).

The changes include:

• How unincorporated charities must pass trustee and (where they have members) member resolutions when using the new power
• That the Commission will apply the same legal test when deciding whether to give authority to charitable companies, CIOs, and unincorporated charities changing their charitable purposes
• A power for the Commission to give public notice, or to direct a charity to give notice, of regulated alterations to a governing document

Existing statutory powers for certain (small) unincorporated Charities to change their governing document will be repealed.

Selling, leasing or otherwise disposing of charity land

The following provisions will come into force:

• Provisions relating to disposals by liquidators, provisional liquidators, receivers, mortgagees or administrators
• Provisions relating to the taking out of mortgages by liquidators, provisional liquidators, receivers, mortgagees or administrators
• Changes about what must be included in statements and certificates for both disposals and mortgages

These provisions were due to come into force on 14 June 2023, but did not.

Charity mergers

For certain mergers, new rules will allow most gifts to charities that merge to take effect as gifts to the charity they have merged with.  This is an attempt to guarantee, or make more certain, the original intention of the donor is honoured.  However, please note the merger will need to be recorded in the official register of mergers for this to be secure.

The existing statutory process for certain (small) unincorporated charity mergers will be repealed.

Other provisions

The Act will enable the Commission to:

• Authorise a Trustee to receive or retain a payment for work completed for the charity where the Commission decides it would be inequitable for a Trustee not to be paid
• Confirm defective or potentially defective Trustee appointments

Changes that came into force on 14 June 2023

Selling, leasing or otherwise disposing of charity land

Charities must comply with certain legal requirements before they dispose of charity land. Disposal can include selling, transferring or leasing Charity land. The Act simplified some of these legal requirements. The changes that came into force include:

• Widening the category of designated advisers who can provide charities with advice on certain disposals
• Confirming that a trustee, officer or employee can provide advice on a disposal if they meet the relevant requirements
• Giving trustees discretion to decide how to advertise a proposed disposal of charity land
• Removing the requirement for charities to obtain Commission authority to grant a residential lease to a charity employee for a short periodic or fixed term tenancy

Using permanent endowment

Put simply, permanent endowment is property that a Charity must keep rather than spend, but can spend the income from it.

The Act introduced new statutory powers to enable:

• Charities to spend, in certain circumstances, from a ‘smaller value’ permanent endowment fund of £25,000 or less without Commission authority
• Certain Charities to borrow up to 25% of the value of their permanent endowment fund without Commission authority

Charities that cannot use the statutory powers will require Charity Commission authority.

A new statutory power that came into force enables Charities that have opted into a total return approach to investment to use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains.

Charity names

The Act enables the Commission to:

• Direct a Charity to stop using a working name if it is too similar to another Charity’s name or is offensive or misleading. A working name is any name used to identify a Charity and under which the activities of the Charity are carried out. For example, ‘Comic Relief’ is the working name of the charity ‘Charity Projects’
• Delay registration of a charity with an unsuitable name or delay entry of a new unsuitable name onto the Register of Charities
• Use its powers in relation to exempt charities in consultation with the principal regulator

Other provisions

The definition of a “connected person” was updated to remove outdated language.

Changes that came into force on 31 October 2022

Paying trustees for providing services or goods to the charity

Charities now have a statutory power to pay Trustees for providing goods alone to the charity in certain circumstances.

Using the new statutory power, trustees can be paid for:

• Services only, for example, estate agency or computer consultancy
• Services and associated goods, for example, plumbing or painting service and any associated materials such as plumbing parts or paint
• Goods only, for example, supplying stationery to the Charity

Fundraising appeals that do not raise enough or raise too much

There are now simpler requirements for Trustees to follow if an appeal does not raise the amount needed to deliver its aim, raises too much, or circumstances change and the donations cannot be used as intended.

Power to amend Royal Charters

These Charities have a new statutory power to change sections in their Royal Charter with approval from the Privy Council.

In addition, the following changes are now in effect:

• The Charity Tribunal has the power to make “authorised costs orders” following an application by a Charity.
• The Commission’s scheme-making powers include making schemes for charitable companies
• Trust corporation status is automatically conferred on existing and future corporate Charities in respect of any Charitable Trust of which the corporation is (or, in the future, becomes) a Trustee
• Updated provisions relating to giving public notice to written consents and orders of the Charity Commission under various sections of the Charities Act 2011
• When a Charity amends its governing document by parliamentary scheme under section 73 of the Charities Act 2011, the scheme will by default always be under a lighter touch parliamentary process (known as the negative parliamentary procedure)

Please note that there is no substitute for taking specific legal advice in respect of issues, and this note is only meant to be a general summary of the law and not legal advice.

Stephen Claus

January 2024.

These are the views of Stephen Claus and therefore do not constitute individual legal or financial advice, this article is for information only. If you require guidance or advice, please get in touch.

Or, click here to go to our Charites and Trusts page to read about our approach when it comes to guiding and advising trustees.