Charities monthly round-up April 2024

Company law reforms – points to note for charitable companies

At the end of October 2023, the Economic Crime and Corporate Transparency Act 2023 received Royal Assent. The Act provides for new objectives for the Registrar of Companies to promote, which includes ensuring that details on the register are accurate, comprehensive and not misleading to the public. Charitable companies should note the following changes that came into effect on 4 March 2024: 

• Companies are required to maintain an appropriate registered office address. This is defined by the expectation that any documents sent to that address come to the attention of a person acting on behalf of the company and that an acknowledgement of delivery can be supplied. PO boxes are therefore not appropriate. 
• Companies will be prompted to provide a registered email address upon filing future confirmation statements, this will not be shared on the public register. When filing confirmation statements, companies will also be asked to confirm that their future activities will be lawful.
• The Registrar will be entitled to exercise further powers. As part of promoting the objectives noted above, they will be able to annotate the register to flag information that is potentially misleading or confusing. In certain cases, the Registrar has the power to remove details that are misleading or inaccurate. 

Companies House are set to increase their filing fees from 1 May 2024. This will affect those who are looking to incorporate a charitable company, as well as existing charitable companies when filing confirmation statements. A full list of the new fees can be found here.

If you have any questions regarding the changes relevant to charitable companies, please contact Edwina Turner or Charlie Maddox.

Updated guidance from the Charity Commission on preventing abuse for ‘extremist purposes’

On 14 March 2024, the Department for Levelling Up, Housing and Communities (DLUHC) published a guidance document setting out the Government’s new definition of extremism. The revised definition now describes extremism as: ‘the promotion or advancement of an ideology based on violence, hatred or intolerance that aims to:

• negate or destroy the fundamental rights and freedoms of others; or
• undermine, overturn or replace the UK’s system of liberal parliamentary democracy and democratic rights; or
• intentionally create a permissive environment for others to achieve the results in (1) or (2).’

The guidance document also helpfully sets out a list of behaviours which might indicate extremist behaviours and acts. In response, the Commission has now updated its own guidance and associated compliance toolkit on protecting charities from abuse for extremist purposes to reflect the new definition. 

The Commission guidance, which was first published in 2013, recognises the important role charities can play in challenging perceptions and encouraging free speech. However, it also notes the risk of abuse in these situations, particularly where extremist groups have used charities to promote their message. The recent update of this guidance serves as a helpful prompt for charities to re-visit the documents and ensure they are familiar with how to achieve compliance. 

If you have any concerns regarding abuse from extremism in your charity, please contact Edwina Turner or Catherine Gibbons.

Charity Commission inquiry results in trustee disqualification due to extremist activity

The statutory enquiry into the Charr Yarr Welfare Foundation Limited was originally launched in June 2020 due to concerns regarding potential maladministration, mismanagement, governance and conduct of the trustees. Whilst the inquiry made findings of misconduct and mismanagement on the part of the trustees, it also discovered statements made by one trustee which the Commission found fell within the then definition of extremism (i.e., before the updated definition was published by DLUHC in March 2023 as above). The Commission found that a former trustee delivered speeches ‘promoting religious violence’. The inquiry led to the disqualification of not only the trustee involved in making the relevant statements but also two other trustees who were found to have contributed to financial mismanagement within the organisation. 

The finding and resulting disqualifications, emphasise the Commission’s message that trustee’s misconduct can have a detrimental impact, not only on the reputation of their own charity but on the sector more generally. This case serves as an important reminder of the trustee’s duties to act in the best interests of their charity and ensure that their organisation is protected from being associated with extremist views or activities. 

If you are concerned about a conflict of interest or require any assistance with Charity Commission inquiries, please contact, Phil Watts or Sarah Tomlinson.

Charity Commission inquiry following concerns over trustee elections

This month, the Commission published the decision on its inquiry into the Jamia Hanfia Ghosia Mosque and Princess Street Resource Centre based in Burton upon Trent. The inquiry was launched following concerns over potential mismanagement and maladministration by the trustees, together with allegations of unauthorised trustee benefits. Although they did not find any evidence of unauthorised trustee benefits, the inquiry found that the trustees failed to act in the best interests of the charity when they refused membership applications without cause and failed to hold trustee elections in line with the requirements of their governing document. The inquiry also found that the trustee’s actions obstructed the election process, despite having received repeated written advice from the Regulator on how to address the concerns raised. 

Readers (and particularly those of you who attended our recent webinar on the Charities Act 2022) will be aware that the Commission has now been granted the power to ratify the appointment of charity trustees. This means that, where there has been a defect in the appointment of a trustee, charities can make an application to the Commission for an order under s.184B of the Charities Act 2011. The effect of this order would be to retrospectively validate the appointment and any actions conducted by the trustee during that period. However, it is important to note that the Commission will only grant these orders where the defect has been caused, for example, by a genuine administrative error, not where the error has been caused by incompetence or a deliberate attempt to obstruct fair election processes. 

If you or your charity have any questions regarding trustee elections or require any assistance with Charity Commission inquiries, please contact Phil Watts or Sarah Tomlinson.

Updates from the Office of the Scottish Charity Regulator (OSCR), including a crackdown on late accounts

The first changes introduced by the Charities (Regulation and Administration) (Scotland) Act 2023 came into force on 1 April 2024 and have granted additional regulatory powers to The OSCR. The Scottish Regulator is now granted the power to direct charities to take positive action, compelling charities to make changes or improvements the Regulator considers to be necessary. The OSCR has also been granted to power to appoint interim trustees and make inquiries into former charities and former charity trustees.  

Among the most noteworthy of these changes is the Regulator’s new power to remove charities from its register upon a failure to submit accounts on time. The OSCR has confirmed that it will be writing to ‘over 100 charities’ to inform them that it plans to remove them from the register as a result of their late accounts. The charities have been listed on the Regulator’s website and have been granted a three-month period to engage with The OSCR and bring their reporting up to date. Failure to heed this warning will result in removal from the register.

The remaining provisions of the Charities (Regulation and Administration) (Scotland) Act 2023 are scheduled to be implemented in two additional phases. The next set of changes are slated to take effect in October 2024, with the final provisions following in the Summer of 2025.

If you or your charity have any questions regarding engagement with The OSCR, please contact Esther Campsall.

Charity Commission compliance case – the problem with making loans to employees

It has been reported that the Commission has initiated a compliance investigation into a charity that loaned its CEO over £200,000 for expanding storage facilities on her personal land. Records for the financial year ending 31 March 2023 indicated that the CEO of Community360, based in Colchester, paid £3,500 in interest from September to March of that year. The charity has stated that the loan has since been fully repaid, with an additional £11,600 in interest received from the arrangement. It has been reported that the interest payments made by the CEO were above market rate and have therefore financially benefited the charity. 

This matter underscores the importance of charities exercising caution when they are considering making a loan to an employee. While there may be legitimate reasons for a charity to make such a loan, any such arrangements are likely to be subject to scrutiny as they can present a risk of conflicts of interest arising, particularly where the recipient of the loan is a senior employee who may be perceived to be in a position to influence decisions that benefit them personally. Furthermore, charities should be aware of the legal requirement that their activities should not give rise to more than incidental personal benefit, a principle which could conflict with the decision to grant loans of this nature. 

If you are concerned about a conflict of interest or receipt of personal benefit in your charity, please contact Edwina Turner, Phil Watts or Sarah Tomlinson.

Employment update

Our employment team have recently published several insightful articles which might be of interest to readers:

• In his recent ebriefing our senior partner, Matthew Wort, discusses the recent increase in the National Minimum Wage and the disproportionate effect the change is having on organisations within the health and social care sector. Noting the growing financial strain being felt by many publically funded care providers, Matthew sets out a number of key takeaways and recommendations for organisations impacted by the changes. 
• Michael Brownlee, solicitor in our employment team, discusses the new flexible working rules in his recent blog post. Noting that the Employment Relations (Flexible Working) Act 2003 came into force on 6 April 2024, Michael highlights what changes have been made to the rules around flexible working and discusses potential changes that could be brought about in the future. 

For any advice on employment matters related to your organisation, please contact our employment team.

For more information, contact Natalie Barbosa.

• Share this