Law Commission plan for more flexible permanent endowments for charities gets cautious welcome

The proposal, which would allow trustees to spend and replenish the fund, is discussed at an event held in London by the University of Liverpool Charity Law & Policy Unit

Commission: proposals discussed
Commission: proposals discussed

Charity lawyers have given a cautious welcome to the Law Commission’s proposal for a new, more flexible form of permanent endowment that would allow charity trustees to spend and replenish a fund.

In March, the independent statutory body published a 300-page document containing 40 proposed changes to charity law across a range of areas, including amendments to the powers of the Charity Commission and the charity tribunal, and to trustees' powers to amend governing documents, cy-près schemes, land transactions and endowments.

On Friday, the University of Liverpool’s Charity Law & Policy Unit held an event in London that brought together Charity Law Association members, governance and charity specialists and the Law Commission to discuss the parts of the consultation involving constitutions, land and permanent endowment.

The Law Commission’s consultation paper proposes a new form of permanent endowment, which a charity’s trustees would be able to spend and would be able to use for a social investment it expected to make a loss, so long as they had a plan for replenishing that fund.

The 30-plus attendees at the event, held under the Chatham House Rule – which means that the identities of speakers and participants cannot identified – were asked what they thought about the idea for what is provisionally called a preserved endowment fund. About a dozen said they supported it and three said they opposed it, with the majority not expressing a view.

There was general agreement that if the preserved endowment fund came into existence the Sorp accounting standards would need to be updated to accommodate it.

Another Law Commission proposal in the area of endowments is the proposal to consolidate the statutory powers that allow trustees to spend permanent endowment in certain circumstances.

The meeting heard that the CLA working party on this area of the consultation was generally in favour of the specific proposals on permanent endowment rules, but the group still had to finalise its response.

The consultation closes on 3 July, after which the Law Commission will prepare a final report and a draft bill in 2016.

Professor Elizabeth Cook, the Law Commissioner in charge of the project, is leaving the organisation later this month. Some attendees expressed concern to Third Sector that this could delay the process. A spokeswoman for the Law Commission said interviews for a successor were being held in June and an appointment should be announced "by the end of the summer".

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