Charities (Protection and Social Investment) Act 2016: In force!


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Summary: Some provisions of the Charities (Protection and Social Investment) Act 2016 (the “Act”), including the new statutory social investment power, are now in force. Further provisions will come into force on 1 October 2016 and 1 November 2016.

We wrote earlier this year about the implications of the Act on charity fundraising.  This post looks at the wider changes that the Act introduces, their implications and when they will be in force.

Charity Commission’s Protective Powers

The Act gives the Charity Commission a new power to issue an ‘official warning’ to charities or charity trustees where it is concerned about relatively minor misconduct or mismanagement issues.  More serious issues would be tackled, as now, by the opening of an inquiry. The Commission will be able to publicise the warning, and this negative publicity may have serious consequences for charities in terms of public confidence and funding. Charities will be unable to appeal warnings once made. They will, however, be given prior notice of the Commission’s intention to issue a warning and will be given an opportunity at this stage to make representations. 

Charities should ensure that their contact details at the Commission are up to date so that any notices are received promptly. It will also be important for charities in receipt of a notice of a warning to respond quickly. This new power will come into force on 1 November 2016 and the Charity Commission are currently consulting on its use.

The Charity Commission’s powers once they have opened an official statutory inquiry are also extended under the Act and include the power to remove trustees following an inquiry, to direct specified action not to be taken and to direct the winding up of a charity.  These powers came into force on 31 July 2016.

Statutory Power to Make Social Investments

A welcome change under the Act is the introduction of a new statutory power to make social investments. A social investment is defined under the Act as an investment made with a view to making a financial return (however small) and furthering a charity’s purposes. Although a very few charities already have a specific power to make social investments in their governing document, most have had to rely, unsatisfactorily, on the exercise of their power to make grants and their power to invest concurrently. 

The new statutory power is now in force and is available to all charities unless it is specifically restricted in a charity’s governing document. The Charity Commission has issued interim guidance on the use of the new power.

Disqualification from Charity Trusteeship and Senior Management Positions

The Act extends the scope of convictions which will result in a person being disqualified from acting as a charity trustee to include offences under counter-terrorism legislation, some money laundering offences and offences under the Bribery Act. Any individual listed on the sex offenders register will also be barred automatically from being a charity trustee. These provisions are not expected to come into force until April 2017. 

The Act also contains a power which allows the Commission to disqualify individuals from acting as a charity trustee under certain circumstances. The  scope of this new discretionary power has been controversial and the Charity Commission is currently consulting on its use. The power will come into force on 1 October 2016.

Charity Fundraising

The Act extends existing legislation controlling fund raising by the addition of new requirements to the content of agreements made between charities and professional fundraisers and commercial participators. From 1 November 2016, agreements between professional fund-raisers, commercial participators and charities will need to:

  • set out any scheme regulating fund-raising that the professional fund-raiser or commercial participator has agreed, voluntarily, to follow;
  • contain details of measures taken to protect members of the public and, in particular, vulnerable members of the public from aggressive fundraising practices; and
  • set out how charities will monitor compliance with the above.

Larger charities will also be required to include details of their fundraising activities, and compliance with the voluntary codes of regulation in their annual report.  Transitional measures are in place for charities whose financial year begins prior to 1 November 2016.

The new Fundraising Regulator assumed responsibility for regulating fundraising from 7 July 2016. Further details are available on their website.

If you have any specific questions relating to how the Act might affect you, we would be happy to advise in more detail.

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