Disqualification, warnings and fundraising – more of the Charities (Protection and Social Investment) Act 2016 comes into force

Official warnings – section 1

This gives the Charity Commission power to issue official warnings to trustees or charities it considers have breached their duties or otherwise engaged in misconduct or mismanagement. Before issuing a warning, the Commission will have to give notice to the charity in question, containing a number of prescribed elements:

• the grounds for making it;
• action the Commission considers should be taken, or which the Commission is considering taking, to rectify the mismanagement or misconduct;
• whether the Commission intends to publish the warning; and
• a period in which representations can be made to the Commission about the contents of the proposed warning.

The Commission recently consulted on draft guidance on how it intends exercising the new power to issue official warnings and is currently considering the responses. 

Charity Commission's discretionary power to disqualify trustees – section 10

This gives the Commission a discretionary power to make an order disqualifying a person from being a trustee or office-holder with senior management functions in relation to a particular charity, a class of charity or all charities.

To make an order, the Commission will need to satisfy itself that at least one of a list of conditions is met, that the person is "unfit" to be a charity trustee, and that making the order is desirable in the public interest.

As with the power to make official warnings, the Charity Commission has consulted on a policy paper describing how it intends using this power. At the time of writing, the Commission is analysing consultation feedback.

New fundraising controls – section 13 

For many years, the law has required charities to enter into agreements when using professional fundraisers, and for those agreements to cover certain matters. The Act adds to the list of prescribed matters: in future, agreements will also need to set out how the fundraiser will ensure that people are protected from unreasonable intrusions into their privacy, unreasonably persistent approaches for donations, and from undue pressure to donate. They must also specify how the charity is to monitor compliance with these new duties, and refer to any voluntary fundraising standard with which the fundraiser is to comply.

Charities that are required to have their accounts audited will be obliged to cover fundraising matters in their annual reports. Specifically, they will need to include statements on the following subjects, in relation to the year in question:

• the charity's approach to fundraising, in particular whether a professional fundraiser or commercial participator[1] has raised funds for the charity;
• whether the charity or any external fundraiser undertook to be bound by a voluntary scheme for regulating fundraising, or a voluntary fundraising standard and, if so, what scheme or standard;
• any failure to abide by such a voluntary scheme or standard;whether the charity monitored the activities of those who raised funds for it and, if so, how;
• the number of fundraising-related complaints received, either by the charity or by those raising funds for it;
• what the charity has done to protect vulnerable people and other members of the public from unreasonable intrusions into their privacy, unreasonably persistent approaches for donations, and from undue pressure to donate.

These reporting obligations only apply to financial years starting on or after 1 November 2016.

If you require further information on anything covered in this briefing please contact Rachel Holmes ([email protected]; 020 3375 7561) or your usual contact at the firm on 020 3375 7000. Further information can also be found on our Charities page.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2016

[1] A commercial participator is a person who carries on a business and, in the course of that business, represents that it will make charitable donations, eg a breakfast cereal manufacturer saying that it will donate 10p to charity for every box of cereal it sells.