The latest instalment of the Charities Act 2022 (the "Act") is being implemented today (7 March 2024), introducing technical legal changes that are designed to modernise and simplify the regulation of charities in England and Wales for charities and their charity trustees.
This is the third instalment and makes changes in the following four key areas.
1. Charity governing documents
The Act introduces a streamlined statutory power allowing trusts and unincorporated associations to change their governing documents more easily. The new power simplifies the process for charities, as the powers to be used to make changes will no longer differ depending on the income of the charity or the type of change being made.
The changes also align the Charity Commission's approach to charitable companies, Charitable Incorporated Organisations (CIOs), and unincorporated charities when:
- applying the legal test when deciding whether to authorise changes to their charitable purposes; and
- giving approval for certain 'regulated alterations' to governing documents (such as changes to a charity's purposes, winding up clause and trustee benefit clauses).
2. Charity land transactions
Initially scheduled for June 2023 but delayed until now, these new provisions make further changes to the legal framework for disposals of charity land (including freehold, leasehold and mortgages among other disposals). The Act introduces:
- Changes to the statements and certificates that must be included in property contracts and transfers.
- Trustees will no longer have to certify compliance with the rules on disposals of property personally, instead the charity will confirm compliance through statements in the transaction documents.
- It will be important for charities to use the new wording to ensure transactions are registered smoothly by the Land Registry.
- Changes to the rules on disposals by liquidators.
- The Act clarifies that disposals by various parties in control of charity assets, such as liquidators and receivers, will not be subject to the restrictions on disposals of charity land, which should reduce the burden on charities and the Charity Commission in those situations.
- This change aims to increase clarity and consistency for property transactions for charities and simplifies the execution of property transaction documents.
3. Simplifying charity mergers
The Act introduces new rules that aim to protect legacies that might otherwise have been lost following a merger of charities. The new rules allow gifts made to a charity which has since merged to take effect as a gift to the merged charity (if it is on the Register of Mergers), removing the need, in most cases, to retain a shell charity following the merger.
4. Charity trustees
The Act gives the Commission new powers to authorise payments to trustees for work completed for the charity and confirm defective trustee appointments.
What changes are still to be made?
This is the latest round of legal updates to modernise and simplify the governance of charities following the Law Commission's detailed report and proposals on Technical Issues in Charity Law.
These changes almost complete the implementation programme for the Charities Act 2022. The only provisions not yet implemented are modified rules on ex-gratia payments – payments by a charity on moral rather than legal grounds. The ex gratia changes were mainly intended to simplify the process for charities to make uncontentious ex gratia payments, but were put on hold when the Government realised that they might also be used for more contentious transfers, such as the deaccessioning (or repatriation) of cultural artefacts from major national museums. They are now expected to be implemented later in 2024, but with measures to exclude transfers of cultural artefacts.
If you would like further details on how the changes might benefit your charity or affect an ongoing project, please contact Chris Willis Pickup or Rosie Lucas in our Charities & Social Ventures team.