When the Charities Act 2022 (the Act) first received Royal Assent back on 24 February 2022, it introduced a number of new laws with the aim of simplifying and modernising the regulation of charities in England and Wales. Since then, these changes have been implemented in stages with the latest tranche now due to come into force on Thursday 7 March. (for more information on the previous tranches please read our article here).
The latest tranche arguably covers the most highly anticipated changes. So, what are these changes and how will they affect charities?
The Act introduces new statutory powers for trusts and unincorporated associations to amend their governing documents. This will make it easier for these charities to update their structure and administration. However, the Charity Commission's authority will be needed for certain regulated alterations (eg amending charitable objects, amending trustee benefits clause, altering dissolution provisions, altering restrictions on permanent endowment). These provisions also set out the matters the Charity Commission must consider when deciding whether to give its consent. This harmonises the rules on making changes to the purposes of unincorporated charities, charitable companies and Charitable Incorporated Organisations (CIOs).
Some of the changes to charity land dispositions were introduced in the second tranche but arguably the biggest changes to this regime were delayed to the third tranche. From 7 March 2024, a new exception to the general restrictions on disposing of or mortgaging charity land will apply. Liquidators, provisional liquidators, receivers, mortgagees and administrators will not be subject to the restrictions on disposing and/or mortgaging charity land.
This tranche also makes changes to the information that must be included in statements and certificates for both charity land disposals and mortgages. The instruments relating to the transaction (eg contract, conveyance, lease, etc) will no longer contain a certificate from the charity trustees, in their personal capacity, confirming that the restrictions on disposition have been complied with. Instead, the instruments will contain a statement that there is power under the trusts of the charity to effect the disposition and that the restrictions have been complied with. While there is little substantive effect on how the provisions operate, it ensures the consistency at each stage of the transaction and simplifies the execution of documents. The person responsible for providing the statement will be the same person responsible for executing the contract or conveyance. In the case of an incorporated charity this means the documents will no longer need to be executed separately by the charity, as the party to the transaction, and by the charity trustees in their personal capacity, to provide the certificate.
While this has been included in the commencement regulations of the third tranche, these provisions will not come into force until 19 May 2025. Once in force, the detailed provisions of the 1925 Act will be repealed and universities and colleges to which it applies will be given all the powers over land of an absolute owner subject to any restrictions imposed by statute, common law, equity or the institution's governing document. A disposal of land will therefore be subject to the restrictions of the Charities Act 2011.
Section 29 introduces a new statutory power for the Charity Commission to make an order ratifying the appointment or election of a trustee if the charity inadvertently fails to appointment correctly. Under this new power, the Charity Commission will be able to vest property in the trustee(s) as well as ratifying actions of the trustee(s) undertaken before the order was made.
Section 31 gives the Charity Commission the power to order a charity to pay a trustee or allow them to retain a benefit already received for work they carried out for, or on behalf of, the charity where it would be inequitable for them not to be paid or to retain the benefit. However, this power is subject to certain conditions including whether the charity's governing document contains an express prohibition on such remuneration/benefit.
These new rules will enable gifts to a charity which has merged (and entered in the Register of Mergers) to take effect as a gift to the new/merged charity. This will apply regardless of any wording in the will that prevents a legacy to a named charity if it has ceased to exist at or before the testator's death. This is a welcome closure of a loophole in previous legislation and should mean that charities will not need to retain a shell charity to prevent certain legacies from falling through the net.
The types of property that are excluded from automatic vesting when a vesting declaration is made in respect of a relevant charity merger will also be amended. Reference to pre-1925 mortgages will be removed as it is no longer relevant and leases containing an absolute or qualified prohibition on assignment will be excluded. In order for these leases to transfer by automatic vesting under a vesting declaration, the relevant landlord must first have given its consent or waived its right to enforce.
The third tranche is expected to save charities time and money by simplifying processes and reducing administrative burdens. Their aim is to enhance good governance and promote efficiency though initially it may take charities some time to familiarise themselves with the new regimes. Updated guidance from the Charity Commission and others (eg HM Land Registry) will be issued when the changes come into force.
More information on the implementation of the Charities Act 2022 can be found on the Charity Commission website.
Should you need legal advice on how these changes can benefit your charity or more generally, then please do not hesitate to contact us.
This article is provided for general information only and reflects the law at the date of publication. It does not constitute legal, financial, or other professional advice so should not be relied on for any purposes. You should consult a suitably qualified lawyer or other relevant professional on a specific problem or matter. Please see our terms and conditions for further details.
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