On 26 May 2021, the Charities Bill [HL] was introduced in the House of Lords as HL Bill 17 of 2021-22. The Government also published Explanatory Notes and a factsheet.
The Bill would implement recommendations made by the Law Commission by making some technical changes to charity law affecting areas such as amending governing documents and charity land transactions.
The Bill is following the special parliamentary procedure for uncontroversial Law Commission bills. Having completed its passage through the House of Lords, the Bill was introduced in the House of Commons on 11 January 2022 as Bill 223 of 2021-22 (PDF). The Bill was referred to a Second Reading Committee which met on 18 January 2022. The debate in this Committee replaced a Second Reading debate in the House.
The Bill was considered by a Public Bill Committee in one sitting on 25 January 2022. This consisted almost entirely of consideration of whether each of the clauses should form part of the Bill, none of which were opposed. The Opposition did not table any amendments. The one Government amendment which had been tabled was agreed: to remove the privilege amendment inserted by the Lords.
The Bill as amended in Public Bill Committee was republished as Bill 237 of 2021-22 (PDF).
Report stage in the House of Commons is scheduled for 22 February 2022.
Background
Review of Charities Act 2006
Lord Hodgson of Astley Abbotts’s 2012 review of the Charities Act 2006 concluded that technical problems in various areas of charity law were causing difficulties for charities and diverting resources away from their charitable activities.
In its response, the Government said the Law Commission would consider several of the more technical recommendations (PDF) in more detail and consult on potential changes, which might result in legislation.
Law Commission report
Following public consultation, in September 2017, the Law Commission published a report, Technical Issues in Charity Law (PDF),which included a draft bill. The report made recommendations “to maximise the efficient use of charitable funds” while ensuring proper safeguards for the public.
Government response to Law Commission report
On 22 March 2021, the Government responded to the Law Commission’s report and confirmed its acceptance in principle of “the vast majority” of the Law Commission’s recommendations. The Government said it would bring forward legislation when parliamentary time allowed.
The Bill
The Explanatory Notes (PDF) published with the Bill state that the Bill would:
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Give charities wider or additional powers and flexibility:
- to amend their governing documents;
- to decide on how they procure goods and services;
- to make “ex gratia” payments (which charities have a moral obligation, but no legal power, to make).
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Clarify when property can be applied cy-près including the proceeds of failed fundraising appeals. [“Cy-pres” means “as near as possible”. When a charitable purpose cannot be carried out, the Charity Commission can direct that the funds should be used for other similar charitable purposes.]
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Produce a clearer and less administratively burdensome legal framework for buying, selling, leasing and mortgaging charity land.
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Clarify and expand the statutory regime that applies to permanent endowment [property held by, or on behalf of, a charity that is subject to a restriction on it being spent].
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Introduce a power – with appropriate safeguards – for charities to borrow from their permanent endowment and to make certain social investments using permanent endowment.
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Facilitate, where appropriate, charity mergers and incorporations.
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Confer additional powers on the Charity Commission:
- to authorise charities to pay an equitable allowance;
- to require charities to change or stop using inappropriate names; and
- to ratify the appointment or election of charity trustees where there is uncertainty concerning the validity of their appointment or election.
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Improve and clarify certain powers of the Charity Tribunal.
The Government considers the Bill would have beneficial effects. It said:
The impact of these changes will significantly improve the efficiency of the sector, release more funds for use on charitable purposes rather than administration, and reduce unnecessary and overly bureaucratic regulation that not only increases the sector’s costs but also is a factor in discouraging people from volunteering to become trustees.
The Charity Commission and charity sector organisations have welcomed the Bill.
Law Commission recommendations not in the Bill
Some of the Law Commission’s recommendations are not in the Bill because:
- they do not require primary legislation to implement;
- they were addressed to other parties; or
- the Government did not accept them.
The Government did not accept recommendations relating to:
- wholly-owned subsidiaries being excluded from the definition of ‘connected persons’;
- abolishing the requirement for charities to advertise proposed disposals of designated land and to consider any responses received;
- challenging Charity Commission decisions;
- authorisation to pursue charity proceedings (in general, disputes within a charity, such as claims about the way it is being run);
- removing the requirement for the Charity Commission to obtain the Attorney General’s consent before making a reference on questions of charity law to the Charity Tribunal.