On 24 February the Charities Act 2022 received Royal Assent. The purpose of the Act is to streamline the use of charitable funds, make life easier for trustees and remove some of the legal and technical hurdles imposed by the current legislation.
It followed the recommendations set out in the Law Commission’s report – Technical Issues in Charity Law – published in 2017 and has largely been welcomed by the third sector.
The most notable features and changes are:
- Ensuring that gifts and legacies to charities which subsequently merge are treated as gifts to the merged charity without requiring the former charity to be retained as a “shell charity”.
- Proceeds from failed fundraising appeals will more easily be able to be applied cy-près without needing to obtain individual donor consent, for instance where individual donations are under £120 or where it would be disproportionate to return the donation.
- The ability for charities to make “small ex gratia payments” without requiring Charity Commission consent, under section 15 Charities Act 2022 which amends the Charities Act 2011 and provides for relevant thresholds of up to £20,000 in cases where a charity’s gross income exceeded £1 million in its last financial year.
- Simplifying the process for charities to amend their governing documents, including power for unincorporated charities to amend by resolution and for Royal Charter charities to amend their charter.
- Providing trustees with new powers over a charity’s permanent endowment, including the power to borrow up to 25% of the fund subject to a 20-year repayment term and the ability to invest the fund in ‘social investments’ (as defined by section 292A Charities Act 2011) i.e. investments with a negative or unclear financial return where doing so furthers the charity’s purposes.
- Simplifying the law and obligations on trustees when it comes to dispositions of land, for example removing some of the “red tape” around the advice needed prior to a disposal, by whom that advice must be sought (by expanding the list of potential advisors) and enabling charities to obtain that advice internally.
- Charity trustees will be able to be paid for providing goods to the charity where it can be shown to be in the charity’s best interests (they can already be paid for providing services).
These features will result in updated and new guidance being introduced by the Charity Commission as well as major changes to the Charities Act 2011.
For more information, please visit our dedicated charity law webpage.