THE CHARITIES ACT 2006

AN ACT FOR THE PUBLIC BENEFIT?

CHARITABLE CONSTITUTIONS AND THE NEW CHARITABLE INCORPORATED

ORGANISATION (CIO)• “Up until now in the charity world we have had

unincorporated associations, which are rather like battered old slippers, they are very comfortable but not quite what we want. We have had companies limited by guarantees, which are rather like clogs; they are very hard working and durable but they do not fit exactly with what we need them to do. Now we have CIOs, which some of us are led to believe will be the high performance, all terrain shoe that we need in order to do our business”

Baroness Barker, House of Lords Bill stage, 2005

EXISTING LEGAL STRUCTURES FOR CHARITIES

1. An unincorporated association2. A charitable trust3. A company limited by guarantee4. An industrial and provident society5. A community interest company6. NEW – A CHARITABLE INCORPORATED

ORGANISATION

UNINCORPORATED ORGANISATIONS

• The first format• “corpus” body• Unincorporated• No outside approval needed• Not necessary to be a “charity”• Governed by a “Constitution”

CHARITABLE TRUSTS

• Founded by a bequest of money or land, for a charitable purpose

• Must register as a charity• Governed by a Deed of Trust

COMPANY LIMITED BY GUARANTEE

• Body corporate• Limited liability• May or may not be a charity• Regulated by Companies House• Governed by Articles and Memorandum of

Association

INDUSTRIAL AND PROVIDENT SOCIETIES

• A CO-OP• A profit making business run for the benefit of

its members, with profits being paid back into the business and not out to its shareholders

• No charity status• Must be a limited company• Governed by Memo/Arts and “model rules”

COMMUNITY INTEREST COMPANIES

• A business with a social purpose• Must have an “asset-lock”• Cannot be a charity• Governed by a constitution at least• Can be a company, trust or I&P

NEW – CHARITABLE INCORPORATED ORGANISATION

• Pros• Cons• When• How

PROS• Incorporation• Single registration• Annual report and annual return only• Lower costs• Simpler & more flexible governing documents• Simpler mergers• Not subject to company law (we hope)• Remove conflicting duties trustee v director• Formalises structures of responsibility

CONS

• Must be a charity• Untested – foreign banks?• More complex than trust/simple constitution• Amend governing documents• Cost of EGM• 2 tier structure/members and trustees remains• Hope for children – yes probably (medium)• Cancer Research UK – no not yet (large)

When

• Consultation finishes Spring 09• Expected summer 09

How

• Charities that are already incorporated:1.Consider liabilites/employee rights2.Special resolution of members3.Notify companies house4.Apply to charities commision5.Vesting of legal property automatic

(we hope)

HowCharities that are NOT already incorporated1. Special resolution will not suffice2. Two/thirds of trustees must agree3. Transfer agreements4. Consider indemnities5. Apply only to charities commission6. Similar to process of incorporation7. TUPE8. Notifications to third parties

No brainer if limited liability required anyway?

PUBLIC BENEFIT – NEW RULES/NEW STANCE?

• What is public benefit? – definition is key to the meaning of charity itself

• What will it will NOT be? – where the benefit provided is for either specific individuals or a restricted class of society

• Many grey areas – hence large part of the Act• Not a new concept – advancement of

education/religion/relief of poverty/other purposes beneficial to the community

NEW APPROACH TO PUBLIC BENEFIT

• 13 recognised charitable purposes• Catch all provision for existing charities• May extend and change as society does• BUT – Charity Commission briefings – new

approach to be more rigorous and policy driven

3 KEY PRINCIPLES

1. Must be an identifiable benefit2. Benefit must be related to your aims3. Benefit must not be unnecessarily restricted

by geography or by an ability to pay fees

1. MUST BE AN IDENTIFIABLE BENEFIT

• Charity Comm. independent expert review• Charity Comm. Random assessments• Quantifying benefit• Intrusive?• “I do not wish to answer”• NEW report on public benefit in annual return• Can appeal to NEW Charities Tribunal

2. BENEFITS MUST BE RELATED TO AIMS

• Dangers of getting sidetracked or;• Change your objects first• If several aims each one must meet the public

benefit requirement• Better tighter management particularly of

sensitive client data

3. BENEFIT NOT RESTRICTED BY GEOGRAPHY OR FEES

• A Charity must not be an exclusive club that only a few can join.

• Public schools and private care homes?• “An organisation which explicitly excludes the

poor in its objects will not be granted charitable status BUT fee-charging in itself is not regarded as excluding the poor & should not therefore be an obstacle to charitable status”

FEE CHARGING CHARITIES• Fees often charged to cover costs• Public schools/care homes not rich• BUT:

The lower the fees, the easier it will be shownThe higher the fees, the harder trustees will have to think about how to provide benefits to those who cannot pay

• Bankruptcy is not worth it!• Partnerships?• Radio broadcasts?

FUNDRAISING AND THE NEW ACT

1. PUBLIC CHARITABLE COLLECTIONS2. PROFESSIONAL FUNDRAISERS3. COMMERCIAL PARTICIPATORS

1. PUBLIC CHARITABLE COLLECTIONS

• s45(2)“a collection that takes place in any public place, or one that involves visits to a house or a business”

• What is a public place?

“Public Place”

PUBLIC PLACE?

• Elephant test• Bus stations, airports, market squares• Both private and public roads• Not including places where a ticket is required

ACTION REQUIRED

1. Public collections certificates (New)Charity Commission – backlog?/several grounds for refusal – but is value judgment possible?5 years maxNational Exemption Certificates abolishedAll door to door collections

ACTION REQUIRED2. Local authority permits

status quo1 yr max1 ground for refusal only – inconvenience to public(day/time/frequency/locality) – overly restrictive?

3. Local authority notifications

4. Obtain Local short term collection exemptionunlikely with paid collectors not volunteerstsunami appeal?

2. PROFESSIONAL FUNDRAISERS

• Either“wholly or primarily engaged in procuring money for charitable purposes”

• Or“any other person who for a reward solicits money for a charitable purpose”

• Must actively procure the obtaining of funds and not be a passive recipient

Examples

• Obviously – a fundraising businessAgents and consultants

• Not so obvious – lay fundraisersMarathon runners/mountain climbers/ naked ramblers

Exempted fundraisers

1. People paid below certain limits£5 per day £500 per year or less

2. Charities3. Companies connected to charities4. Celebrities5. Collectors

Company answering calls re direct debits?

Rules of engagement

1. Must have a written s59 agreement with the charity

• Minimum terms – period/termination• Recommended terms – i.e. int./meetings/©2. NEW - must make a s60 statement with each

solicitation• Actual or estimated sum of money/cancellations3. Must pass money to charity within timeframe

OFFENCES

• Failure to make agreement – fundraiser offence – unenforceable

• Failure to make statement – trustee and fundraiser offence – up to £5,000

3. COMMERCIAL PARTICIPARTORS

“Any person who carries on for gain a business other than a fundraising business, but in the course of that business engages in any promotional venture in the course of which it is represented that charitable contributions are to be given to or applied for the benefit of a charitable institution.”

WHO?1. “Represent”

by speech or public statement”

2. “Charitable contributions”the whole or part of the consideration given for goods or services sold or supplied by the CP;or by way of donation in connection with any such supply, whether or not the amount given correlates to the consideration raised.

3. “Services”access to premises/membership/advertising space/financ.

EXAMPLES

• Affinity cards• Producer vs retailer• Solicitors’ will writing• Event organisers• Charity Christmas cards?• Broadcast appeals?

RULES OF ENGAGEMENT

1. Must have a written agreement with the charity• Minimum terms• Recommended terms2. Must make a s60 statement with each

solicitation• Actual or estimated sums of money3. Must pass money to charity within timeframe

PROBLEMS

• Disrepute - warranties?• Charity logo - terms?• Competition - terms?• Losses – terms?• Monies received separation – terms?• Outside objects – income tax/VAT?• Complaints to CPS or CC?