Now in force: the new rules on automatic disqualification of trustees and senior managers

The new rules on automatic disqualification came into force on 1 August 2018 as part of the Charities (Protection and Social Investment) Act 2016. They affect charity trustees and charity senior managers.

What was the position before 1 August 2018?

Until 1 August 2018, a person could be disqualified from acting as a trustee of a charity if they had unspent convictions for offences mainly involving dishonesty or deception or if they were in circumstances that Parliament decided were incompatible with charity trusteeship.

It was an offence for a person to act as a charity trustee whilst disqualified. Unless the disqualification had been waived, charities were prohibited from appointing a disqualified trustee.

What has changed?

The new rules extend the list of offences which cause automatic disqualification to include money laundering, bribery, perjury, a range of terrorism offences, sexual offences, contempt of court and perverting the course of justice, among others.

The roles to which disqualification applies has also been extended to those holding an office or employment with a “senior management function”. This includes individuals who have overall management of the charity and/or control of the charity’s finances. This is likely to be the Chief Executive and Chief Finance Officer, though the Charity Commission has confirmed that the designation relates to the function of the individual, and not their title.

Can disqualification still be waived?

Persons subject to disqualification are entitled to apply to the Charity Commission for a waiver. It is possible to apply for broader or narrower types of waiver. For instance, one individual may want to apply for a waiver to allow them to take up a senior management role with a particular charity; another may want a waiver allowing them to act as a trustee or senior manager for any charity.

Decisions on waiver applications are made on a case-by-case basis, with consideration given to the need to protect charities whilst ensuring that the valuable experience and skills required to run charities are retained where possible. Most importantly, the Commission will consider whether granting a waiver will be in the best interests of a particular charity or charities, class of charities, or charities in general.

The automatic disqualification rules do not disqualify people from all involvement with charities, so they can still take on positions as volunteers or advisers.

What do charities need to do?

From 1 August 2018, trustees and senior managers who have been disqualified and continue to act could face prosecution under Section 183 of the Charities Act 2011, and a charity’s failure to comply with the new the rules is a reportable serious incident.

Charities should therefore:

1. ensure that trustees and staff are aware of the new rules
2. ensure that all positions covered by the new restrictions are identified and take further independent advice in relation to identifying such persons if necessary
3. require a declaration in writing from trustees and/or senior managers confirming that the disqualification criteria do not apply to them (the Charity Commission has recently published model declarations for this purpose which are available here), and
4. carry out independent background checks on trustees and senior managers such as obtaining criminal records information via the Disclosure and Barring Service (DBS), checking the register of individuals who have been removed as a charity trustee and searching the Individual Insolvency Register and register of disqualified directors.

The Charity Commission has published helpful guidance on the new rules and how they apply.

If you have any concerns or questions about the new disqualification rules, please contact Emma James, or your usual contact at the firm on +44(0)20 3375 7000.

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

© Farrer & Co LLP, September 2018