Charities Act 2006
November 2006 saw the long-anticipated Charities Act receive royal assent. Its various provisions will be phased in over the next two years. The Act is an overhaul of Britain's 400-year-old charity laws, first mooted in 2003, and has been through a lengthy process of parliamentary scrutiny.
BOND briefing
BOND has prepared a briefing setting out the impacts of the Act on international development NGOs and the wider sector, how significant their effect is likely to be, and the timescale for implementation.
Charities Act 2006 - Impact on development NGOs (49 KB)
Charities Act 2006 - Impact on development NGOs (81 KB)
Summary
As expected, the Bill draws heavily on recommendations previously published by the Prime Minister's Strategy Unit in September 2002. 'Public benefit', as determined by existing case law and the courts, lies at the heart of the Bill's definition of charity and all charities will be subjected to a public character test, managed by the Charity Commission. There will no longer be an automatic presumption that certain charitable purposes provide benefit to the public. The range of charitable purposes has expanded, and organisations that do not currently have charitable status may now be able to become charities under such new headings as the advancement of environmental protection or human rights.
Changes are to be made to the structure of the Charity Commission, with the introduction of an independent Charities Appeal Tribunal, proposed as an affordable means of obtaining an independent scrutiny of Commission decisions. The Bill expands the advisory role of the Commission to a considerable degree, posing the ongoing problem of successfully separating this out from its core regulatory role. There is also concern that one of the objectives for the Commission is to "encourage charities to maximise their social and economic impact", which could provide an unwelcome distraction from their primary objective - encouraging charities to maximise their public benefit.
The Bill has provisions for a new legal form, the Charitable Incorporated Organisation (CIO), a new type of legal entity which avoids dual regulation between charity and company law, providing a simple alternative to the company limited by guarantee model currently used by many charities. There are some changes to the registration of certain types of charity. Charities with an income of less than £5,000 will not be required to register, though they may choose to do so, while many exempt and excepted charities will come under Charity Commission scrutiny for the first time.
There is a raft of measures designed to help charities merge and reorganise more easily. A new rule will allow many charity trustees to receive reasonable remuneration for services they provide to the charity. The Charity Commission will be able to remove the liability of trustees where they have acted "reasonably and in good faith".
Significant changes are being made to the rules surrounding public charitable collections, which will bring face-to-face fundraising into line with cash collections. The new rules will introduce a two-stage process for charitable collections. First, fundraising organisations will have to prove that they are "fit to collect" by applying to the local authority where their headquarters is based. A certificate of fitness will last up to five years. Fundraisers will also have to apply for permission to the local authority in each area in which they plan to make collections. The council will determine how many fundraisers streets can take and will have the power to refuse licences if it decides there are too many face-to-face teams on the street or that they would create a public nuisance.
Other sources of information
The Charities Act and explanatory notes
Office of the Third Sector implementation plan
BOND's submission of July 2004 to the Joint Committee on the draft Charities Bill.