Law Commission proposes more flexibility for charities to spend permanent endowments

The independent statutory body invites comments on the plan, contained in the second part of its project on charity law

Law Commission
Law Commission

The Law Commission is inviting comment on 40 proposed changes to charity law that it says would remove unnecessary burdens on charities, including a new regime to allow more flexible use of permanent endowments.

The independent statutory body has today published a 300-page document as the second part of its project on charity law.

The first part, initiated at the beginning of 2014, concluded after consultation that government should give charity trustees an explicit legal power to make social investments

The Law Commission is inviting comments on the proposals, split across six topics, by 3 July. Many of these emanate from the official review of the Charities Act 2006, carried out by Lord Hodgson of Astley Abbotts, a Conservative peer.

The Law Commission is asking whether charities should be given more flexibility to spend permanent endowments if they could replenish the fund in future years, and whether there are alternatives to the rules that mean a gift designated for a charity that later merges can often only be received through a specially created shell organisation.

It also suggests removing the obligations put on charities relating to the sale of properties, such as the need to pay for a full, detailed surveyor’s report regardless of the size of the land in question, and proposes repealing provisions in the Charities Act 2011 about the sale of property to persons connected to a charity, such as its trustees.

Other proposals include giving charities established or governed by royal charter the power to make minor amendments to their governing documents, raising the income threshold under which unincorporated charities may amend their purposes, and the introduction of a statutory mechanism for the authorisation of remuneration of trustees for the supply of goods, mirroring the existing mechanism governing the supply of services.

It also proposes asking the Charity Commission to revise its guidance Managing Financial Difficulties & Insolvency in Charities (CC12).

Professor Elizabeth Cooke, the law commissioner in charge of the project, said: "The existing law can divert charities’ resources – both financial and human – from what should be their principal concern of achieving their charitable objectives. Our aim is to provide clear and sensible rules that remove unnecessary regulation while safeguarding the public interest in ensuring that charities are properly run and free to do their work."

The Charity Law Association has set up a working party on the new paper, chaired by Nicola Evans, a senior associate at the law firm Bircham Dyson Bell.

Hodgson told Third Sector he had yet to go through the document in full, but said he was pleased that his recommendations appeared to have been taken on board.

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