The rules set out in the 1993 Charities Act can make it difficult for charities to alter outmoded objects. Some charities shoehorn their activities into their existing purposes, limiting their potential; others stray into activities outside their objects, exposing themselves to the risk of assets being applied in breach of trust.
But the Charities Act 2006 relaxes the cy-pres rules significantly, which will make it easier for small and large unincorporated charities to amend their objects in future.
Under the current rules, small, unincorporated charities with incomes of less than £5,000 can rely on statutory powers to amend their purposes, provided the Charity Commission does not object and they publicise the changes. The new rules will change this level of income to £10,000. Although such charities will still have to go through a concurrence procedure, they will no longer need to give any public notice of the changes. This should enable many more charities to update their objects more easily.
The 2006 Act also modernises the rules governing the circumstances and extent to which large, unincorporated charities may change their purposes.
Larger charities will still be required to apply to the commission for a scheme to amend their objects. However, the commission will be able to take into account both the spirit of the gift and the prevailing social and economic circumstances. The intention behind the changes is to give such charities greater flexibility to evolve.
Charitable companies will still need to get prior approval from the commission before they can amend their objects. There are no specific measures in the 2006 Act to make it easier for charitable companies to amend them, but it is hoped that the liberalisation introduced in relation to unincorporated charities will be reflected in an increasingly flexible approach by the commission to applications by charitable companies to modernise their purposes.
Some charities have found that if they did not adopt sufficiently wide objects on formation, it has become difficult to move with the times.
The new rules are due to come into force in 2008, which would be a good time for charities to review whether their objects remain fit for purpose so that they can function as effectively as possible.