Charities monthly round-up – November 2024

It is never easy to see charities in the news for the wrong reasons. It can however be useful to see where charities have (usually) unwittingly got themselves on the Charity Commission’s (the Commission) naughty list. Other charities can use these incidents as a lesson to help shape the governance of their organisation, work with their trustee boards to understand their duties and responsibilities and to understand the requirements and regulations of the Commission and other regulators.

What can we take away from Kids Company’s tenacity in challenging decisions?

Kids Company continues to push boundaries with the judicial review granted by the High Court.

The High Court granted the former clinical director of Kids Company the right to continue a judicial review initially launched by Camila Batmanghelidjh, the charity’s late founder and CEO.

The case challenges the Commission’s 2022 report, which had been critical of Kids Company’s governance and business model, and questions whether the Commission approached its inquiry with sufficient impartiality. The case is poised to address issues that may resonate with other charities facing unfavourable Charity Commission rulings.

Below, we outline key options and considerations for charities seeking to challenge or review decisions made by the Commission.

Judicial review: A last resort for legal recourse

Judicial reviews allow charities to challenge how a decision was made, focusing on procedural fairness and legality. A judicial review does not re-evaluate the decision itself but assesses if the process was legally sound. This can be a complex and costly route, as it involves court proceedings, and permission to proceed must be obtained by demonstrating a clear interest and arguable case. Key considerations include its eligibility, timing and costs.

Request for an internal review by the Commission

For those reluctant to pursue a judicial review, the Commission itself offers a pathway for charities to seek a review of its decisions. If a charity believes a ruling was made in error or based on incomplete information, it can request an internal review, which is conducted by a separate team within the Commission.

Independent complaints mechanism

The Commission has an independent complaints mechanism through which charities can raise concerns about its handling of their case. This process is particularly useful for complaints regarding conduct, communication, or perceived unfair treatment by Charity Commission staff during an inquiry or review.

Appeals to the First-Tier Tribunal (Charity)

Some decisions by the Commission can be appealed to the First-Tier Tribunal (Charity), a legal body that independently reviews decisions related to charity law. The Tribunal can assess matters like the refusal to register a charity, removal of trustees, or certain orders impacting charitable assets. Unlike a judicial review, which examines procedure, the Tribunal can make a new decision on the matter.

Final thoughts for charities

While a judicial review is one of the more challenging options, it can be crucial for organisations and individuals who believe they have been misrepresented or unfairly treated. Charities facing difficult regulatory outcomes should carefully evaluate these options, considering factors like timing, potential costs, and the degree of impact on their mission and reputation. Seeking specialised legal advice early on can also provide clarity and ensure that the charity takes the most effective steps toward resolution.

If you would like advice on matters relating to decisions made by the Commission, please contact Edwina Turner or Catherine Gibbons.

Make those minutes FAT – How incomplete records can harm your charity

In a recent investigation, the Charity Commission emphasised the importance of keeping minutes that are factual, accurate, and timely (FAT). The inquiry particularly criticised the lack of comprehensive minutes to document key trustee decisions. It serves as a vital reminder for all charities about the risks associated with inadequate record-keeping.

For every meeting, trustees must ensure that minutes capture:

• Factual information: minutes should include a summary of discussions on each agenda item, covering key facts and evidence presented.
• Accuracy: minutes should reflect who attended, who participated in each discussion and who voted, providing an honest record of the decision-making process.
• Timeliness: minutes must be recorded promptly and thoroughly to ensure all decisions are well-documented and accessible.

The Commission also offers guidance which should be continually reviewed.

These practices ensure that decisions are not only clear to current trustees but also defensible under regulatory scrutiny. Charities should also establish routine reviews of minute-keeping practices to ensure they meet evolving governance standards. The minutes should also be accessible to relevant parties, ensuring clarity and accountability across the organisation.

Incomplete or vague records create real risks for charities, from regulatory action to reputational harm. So in your next trustees meeting, do not forget your FAT minutes.

If you would like advice on minute-taking, please contact Katie Crosbie or Sarah Tomlinson. 

Do charity members really have power?

This is a common question we get asked as charity lawyers. And as the High Court has recently confirmed, charity members do have power within their organisation. The extent of the power can change in different types of charities particularly those who have included rights for the members in the governing document and not just under statute.

In a landmark decision, the High Court recently granted members of an unincorporated charity, Masjid e Tauheedul Islam, a declaration that their charity’s recent executive committee election process was unlawful, making the election results invalid. The court ordered the charity to re-run the election following its constitution’s rules, highlighting an important reality: members do have the power to ensure their charity operates in line with its governing documents and members’ rights.
This case emphasises the power that members hold in various charity structures such as company members, CIO members and members of unincorporated associations.

In the Masjid e Tauheedul Islam case, the court recognised that although the existing executive committee may have acted in what they believed to be the charity’s best interests, they had not followed the election procedure specified in the charity’s constitution. The court ruled that any deviation from this procedure required members’ approval, either through a constitutional amendment or under section 280A of the Charities Act 2011. Simply put, members have the final say in changes that impact their rights and roles in the charity’s governance structure.

Moreover, while the court acknowledged that a limited power might exist for the executive committee to set eligibility criteria (such as excluding someone disqualified from serving as a trustee), it clarified that any significant eligibility criteria must be determined by the members, not unilaterally by the committee.

While this case progressed to the High Court, here at Anthony Collins we have often found success resolving disputes through alternative dispute resolution (ADR). ADR allows members and trustees to address disagreements cost-effectively, without the expenses and publicity associated with court proceedings. In fact, many charities have resolved internal conflicts amicably through ADR, safeguarding their reputations and avoiding adverse media coverage.

For more information on members’ rights or for advice on handling disputes within the charity, please contact Edwina Turner or Phil Watts. 

What does the national insurance increase in the Budget mean for charities?

From April 2025, like all employers, charities who employ staff will see notable changes to employer National Insurance contributions (NICs), impacting payroll expenses and potential savings. The employer NIC rate will rise from the current 13.8% to 15%, adding an extra cost for each employee earning above the NIC threshold. Furthermore, the earnings threshold at which employers must start paying NIC per employee will drop from £9,100 to £5,000. This change means more employees will fall within the NICs bracket, increasing overall NICs contributions for employers.

This increase in both the NIC rate and the expanded pool of employees covered by NICs could lead to higher payroll costs for many charities, especially those with a large workforce. Charities operating on tight budgets may need to consider the impact on funding allocations, particularly for those reliant on government grants and donations that may not adjust for increased staffing costs.

5,000 charities have signed an open letter calling for help for the voluntary sector following the NI increase which is estimated to cost the sector £1.4 billion a year. The open letter was called by the National Council for Voluntary Organisations asking for the government to reimburse them the increased employer NI contributions.

To plan ahead, these changes may be an opportunity for charities to reassess financial and staffing plans by:

• Reviewing Budget impact: assess how the NIC increase and threshold change may affect payroll costs. For many charities, this may mean revisiting financial projections for 2025 and beyond
• Utilising the employment allowance: make sure to apply for the expanded Employment Allowance, which can significantly reduce the overall impact of the NICs rise. This could free up more funds for programmatic or operational expenses.
• Consulting with payroll providers: charities may benefit from discussing these changes with payroll providers or advisors to ensure all adjustments are handled accurately and that potential savings are maximised.

High Court blocks Royal Charter charity’s bid to broaden its objects – Strict requirements that cannot be compromised

A recent High Court decision has significant implications for Royal Charter charities seeking to broaden their charitable purposes. In The Keepers and Governors of the Possessions, Revenues and Goods of the Free Grammar School of John Lyon v HM Attorney General [2024] EWHC 2857 (Ch), the court ruled that the school could not alter its purposes through a cy-près scheme. This scheme allows the court or the Commission to amend the purposes only if the objects can no longer be fulfilled as originally intended (nor could it use provisions in the Public Schools Act 1868 to widen its objects).

Charities considering a change in purposes may benefit from legal guidance to assess whether a cy-près occasion applies, as well as exploring alternative avenues within the charity’s original framework. This decision serves as an important reminder that any powers granted by statutes or other governing rules remain subordinate to a Royal Charter’s core provisions.

The ruling underscores the strict requirements for cy-près schemes under the Charities Act 2011. For Royal Charter charities, altering purposes or widening objects through cy-près will require meeting specific statutory criteria, including demonstrating that the original purposes are impossible to fulfil as written.

For more information on the above, contact Esther Campsall and Phil Watts.

Gift Aid

We have recently become aware of a not-for-profit platform called GivenGain which can automate the Gift Aid process for charities. It is said to potentially save the UK charity sector up to £80 million per year. Anthony Collins has no affiliation to the platform however it may be useful to charities!

Edwina Turner has also recently produced a helpful blog post which discusses charities who fail to submit their tax return declarations and are therefore putting Gift Aid payments at risk.

For more information, please contact Katie Crosbie. Katie has recently returned to the charities governance team following maternity leave. Katie continues to work with charities from across the sector, including churches and Christian organisations. Katie has settled back into the team by assisting charities with their registrations, advising charities on their governance and restructures including incorporations and conversions to charitable incorporated organisations. Katie has worked in the team for over 12 years and has assisted hundreds of charities with their registrations. 

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