Law Commission consults on trust corporation status

The organisation would like to make it easier for some charities to change their purposes and to become trust corporations

Law Commission
Law Commission

The Law Commission is asking for the voluntary sector’s views on proposals that would make it easier for some charities to change their purposes and to convert to trust corporation status.

The consultation, which opens today, is part of a larger project by the Law Commission on charity law, which began in June 2013.

The Law Commission first ran a consultation from March to July last year covering a range of technical issues in charity law and has begun analysing responses and developing policy to recommend to government as a draft bill.

But in a statement accompanying the new consultation, which will run until 31 October, the Law Commission said: "Two issues arose from our consultation on which we did not expressly invite consultees’ views, but on which we would like to hear from consultees before deciding on our final recommendations."

Incorporated charities are able to change their purposes, with Charity Commission permission, through a vote at a general meeting, but most unincorporated charities must go to the commission to get a "cy-pres scheme" to allow them to make the change.

But Nicola Evans, charity counsel at the law firm Bircham Dyson Bell and vice-chair of the Charity Law Association, said there was a limited set of circumstances in which the commission could legally grant the cy-pres.

"If you don’t fall within the circumstances, the Charity Commission is not in a position, even if it would otherwise be appropriate, to make the scheme," she said.

In its consultation, the Law Commission proposes allowing unincorporated charities to change their purposes in the same way as corporate charities do.

"The Charity Commission can work only with the law that’s there," said Evans. "With the proposal that the Law Commission has put forward, we can make it a more flexible, modern regime that still has appropriate safeguards."

The second issue in the consultation is trust corporation status for charities that have recently incorporated or merged – if they hold land on trust they need to become trust corporations in order to sell it.

To do this, charities must make an application to the Lord Chancellor or request an administrative scheme from the Charity Commission or use a complex vested declaration process before the merger.

In its consultation summary, the Law Commission says these procedures are "complicated, lengthy and costly and present a barrier to charities wishing to incorporate or merge without any obvious benefits". It proposes that the trust corporation form should be more widely available.

Evans said: "The proposal means that, if you’re a charitable company or a charitable incorporated organisation, you would have a power to simply adopt that status, making it a much more streamlined process."

The Law Commission said it expected to publish a report containing its final recommendations and a draft bill in the first half of 2017.

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