Charities Bill [HL]

moved Amendment No. 62:"Page 46, line 32, at end insert—" ““(   )   Where the statement in subsection (6) is false or the arrangements are not appropriate, the charity trustees of the   charity concerned shall be jointly and severally liable for the discharge of such liabilities.”” The noble Lord said: This amendment was debated at some length in Grand Committee on the previous occasion. The merger provisions set out in Clause 42 of the Bill have the effect of introducing into the 1993 Act proposed new Sections 75C, 75D and 75E. This will bring into existence a radical arrangement whereby the property of merging charities can be vested in the charity receiving the merged assets, automatically and by operation of law, as long as the provisions of proposed new Sections 75C and 75D are complied with. In a nutshell, this radical effect will be achieved by a pre-merger declaration being made by the relevant charities. As long as they comply with the two proposed new sections, there will be an automatic vesting of the legal title, by operation of law, in the charity which is to continue in existence or in the new charity into which the merging charities decide to direct their assets. The Government responded to the anxiety that I expressed at an earlier stage about the liabilities of the merging charities by kindly introducing into proposed new Section 75C, at subsection (6)(b), a requirement that when notifying the relevant charity merger there must be included,"““a statement that appropriate arrangements have been made with respect to the discharge of any liabilities of the transferor charity or charities””." Amendment No. 62 seeks to add a new subsection, which picks up on those two provisions. It states:"““Where the statement in subsection (6) is false or the arrangements are not appropriate, the charity trustees of the charity concerned shall be jointly and severally liable for the discharge of such liabilities””." The need for this is common-sense because otherwise, in the case of corporate charities, creditors who were left in the lurch would be faced with what can only be described as an assault course in trying to get back their entitlements. They would be in the position of having to ask for the corporate charity, the affairs of which had been wound up, to be reinstated. They would then have to trace the assets and the former directors to see whether there was a prospect of recovering their entitlements. Where the merging charitable organisations are non-corporation trusts, the trustees remain jointly and severally liable by dint of trust law. The spirit of my amendment is incorporated in the   Bill where there is a conversion of a charitable company or an industrial provident society into a CIO. Proposed new Section 69I(9) specifically states:"““in particular, any liability to which the company or registered society was subject by virtue of its being a charitable company or registered society””," shall not be affected by the conversion into the CIO. Similarly, it states that, where CIOs merge, the merger shall be without affect to any pre-existing liability. My amendment is the same in spirit as provisions made as I have indicated. The Committee should be particularly sensitive to the prospects of what in Anglo-Saxon is called a ““cock-up”” in one of the mergers. It is not uncommon for charities to be a little slapdash in record keeping. I do not want to see innocent creditors of corporate charities left without any effective remedy because we have legislated in a way that leaves them with no protection. That is the best that I can do by way of a short explanation of what is quite a complicated amendment. I beg to move.