The Charities Act 2022 has now almost fully been brought into operation, with the latest changes becoming effective from 7 March 2024. (We’ve previously outlined the other provisions coming into force at the end of 2022 and the middle of 2023.)
One of the key changes is the introduction of a new statutory power allowing trusts and unincorporated associations to amend their governing documents. This power, however, comes with the requirement for the Charity Commission's consent for certain 'regulated alterations' (that is, charitable purposes, trustee benefits and winding up provisions), aligning the process with that of charitable companies and Charitable Incorporated Organisations (CIOs). This change aims to provide greater flexibility while ensuring that amendments serve the charity's purpose and comply with legal standards.
The Act also simplifies the process of selling, leasing, or otherwise disposing of charity land. It introduces provisions related to disposals by liquidators and others in control of a charity's assets, as well as changes to what must be included in statements and certificates for both disposals and mortgages.
Specifically:
- trustees will no longer need to sign a certificate of compliance, which could be cumbersome if lots of signatures are required from (sometimes distant) trustees, and particularly frustrating if you need to exchange or complete quickly. Instead, the transfer deed and contracts will contain a statement confirming the charity has complied with all obligations and that the trust has the power to dispose of the property
- when a charity sells land to another charity with the aim of maximizing returns, it must now adhere to standard disposal procedures, which include a valuation report. Until 7 March 2024, there was no obligation to seek advice or demonstrate that the best value was obtained
- if a liquidator, receiver, mortgagee, or administrator is involved in selling charity land, they are bound by their professional standards for selling land, not by the specific regulations for charity land sales
These changes are designed to protect the interests of the charity and any potential purchasers or mortgagees, reflecting a more streamlined approach to managing charity land. These changes are probably not as consequential for most charities disposing of land, as the other provisions relating to property disposal enacted in June 2023, which amongst other matters broadened the pool of advisors who can advise trustees. Besides chartered surveyors, fellows of the Institute of Estate Agents and certain agricultural valuers can also advise the trustees when disposing property (as appropriate for the type of property, of course!)
Remember, charities must take formal advice when disposing of a property, or when taking on a mortgage or loan. That isn’t changed, the provisions just broaden the pool of who can advise on disposals, and simplify the formal documentary requirements. The Land Registry have updated their practice guides, but any disposals effected before 7 March 2024 remain subject to the old requirements for certificates and documents.
Charity mergers have been given attention too, with new rules allowing most gifts to charities that merge to take effect as gifts to the merged entity. This provision simplifies the process and encourages more efficient restructuring where it benefits the charities' objectives. Previously, there was some ambiguity. Where charities merged, and registered this on the Charity Commission's register of merged charities, any legacies would accrue to the new entity – except, potentially, if the will in question said something like: “if that charity is in existence at the time” or “not if the charity is not in existence”, and there was some case law in this regard. You can see how that could have been slightly ambiguous, and some charities that were trusts and looking to convert to CIOs kept the old trusts open in case a legacy accrued to them. These recent changes will take away the need for that unnecessary step, and trustees can close the old trusts in that situation. Importantly, the merger must have been registered on the Charity Commission’s register of merged charities, otherwise the loophole remains.
Additionally, the statutory process for certain small unincorporated charity mergers has been repealed, reducing bureaucracy and promoting a more straightforward merger process.
Furthermore, the Act grants the Charity Commission new powers to resolve uncertainties or defects in the appointment or election of trustees. It’s essentially a magic wand to approve such an appointment, remedy any defects, set right any property matters and remove any uncertainty about the validity of any decisions made by the trustees before regularisation of the appointment.
The Commission can also now retrospectively authorise, or even order, the payment of a trustee or the retention of an unauthorised benefit received by a trustee, addressing issues of equity and fairness in trustees' remuneration. Previously, if a charity approached the Charity Commission to approve an existing arrangement where the charity didn’t actually have the approval to pay a trustee for another service or role, the Commission couldn’t retrospectively authorise it, just prospectively. Now they can do that, if appropriate – and there are specific conditions they have to consider, like whether it was appropriate, the work done was to a good standard, etc. (I wonder how they will assess that!)
This means that almost all of the provisions of the Charities Act 2022 have now come into force, barring the changes related to ex gratia payments. These provisions of the act (enabling charity trustees to make payments they feel morally obliged to make, but do not have the legal power to do), have been postponed as the government is concerned about the impact on museums experiencing pressure to return objects in their collections. The government is working to bring these provisions into force, while excluding museum collections.
As always, we recommend obtaining more information from appropriate advisors where necessary, and we’d be happy to help point you in the right direction or give appropriate guidance if you’re signed up to our Consultancy Helpline.
More information:
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Lourens du Plessis
Lourens leads our teams who guide and strengthen churches and Christian charities with their governance and finances. Our professional services include independent examinations of charities’ accounts, an award-winning payroll bureau, consultancy and governance advisory services and helping charities get registered with the Charity Commission. He joined Stewardship in 2020 and brings with him a wealth of experience in both the charity and commercial sectors. He’s a member of the Charity Community Advisory Group of the Institute of Chartered Accountants in England and Wales, and regularly interacts with regulators in the sector.
Before joining Stewardship he worked for an international church developing governance and financial stewardship for various ministries. Prior to that Lourens had a senior role at a Big Four firm in the City, advising international investment banks. He is a qualified Chartered Accountant and has a postgraduate degree in Theology.
Lourens grew up in South Africa, but has spent the majority of his working life in London. He is a member of the International Presbyterian Church in Ealing. He is also a trustee of a number of other churches and charities, including a new pregnancy counselling centre, and he’s involved in initiatives to help Christians better integrate their faith and work.
Lourens supports causes which encourage bringing the gospel to people in his neighbourhood and to the ends of the earth, and particularly supporting persecuted Christians around the world.
