Legal Update: The Charity Commission is getting tougher on misconduct

The regulator is also improving its transparency, writes Adrian Pashley

The regulator expects charities to be more self-reliant
The regulator expects charities to be more self-reliant

The Charity Commission continues to refocus on being – and being seen to be – more robust in its approach to misconduct and mismanagement and streamlining its registration and compliance work.

It expects charities to be more self-reliant and to seek its assistance only with issues of serious concern and once they have exhausted publicly available guidance. This has led to a flurry of recent activity concerning the commission.

Increased transparency The commission will now announce that it has opened a statutory inquiry into a charity as a matter of course, reversing its previous policy to make an announcement only if it was in the public interest to do so. It's likely that any such increased transparency is a direct result of a recent Supreme Court decision that applied common law principles of open justice to quasi-judicial inquiries (Kennedy v Charity Commission). This established a strong public interest in disclosing information about inquiries that must be weighed against any public or private interest in not disclosing. We expect further policy developments from the commission in the near future.

The Protection of Charities Bill A draft bill to bolster the commission's powers to tackle serious abuse was among measures announced last month in the Queen's Speech. The details have not yet been published: it will be subject to consultation and pre-legislative scrutiny in the next parliamentary session.

Charity registration The commission has updated its online form and published new resources on registering a charity. These include new guides on how to choose a structure for a charity, write its governing document, set it up and register it as a charity, and on how the commission makes registration decisions. Incomplete or faulty applications will be sent back because the commission does not have resources to hand-hold applicants through the process. It hopes that the more user-friendly guidance will encourage individuals to consider alternatives to setting up new charities.

Conflicts of interest The commission has published its much-anticipated revised guidance for charity trustees on conflicts of interest, together with a detailed paper on the underlying law and a case study on conflicts that typically arise where all or most of the charity trustees are also directors of the charity's subsidiary trading company. The guidance places new emphasis on the seriousness of failing to manage conflicts of interest and on the responsibility of charity trustees to identify and declare them.

We also await with interest the charity tribunal's decision on the appeal by the international sexual rights organisation, the Human Dignity Trust, against the commission's refusal to register it as a charity. We hope this will clarify the law on the scope of the promotion of human rights as a charitable purpose.

And the two new Statements of Recommended Practice for accounting and reporting by charities are expected to be published later in the summer, possibly in July.

This column is written by Adrian Pashley, charities editor at Thomson Reuters, Practical Law, on behalf of the CLA

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