The Charities (Protection and Social Investment) Act 2016 gained Royal Assent in March this year, bringing with it significant changes to charity law and regulation which affects all charities in England and Wales.
In response to years of damaging headlines and parliamentary scrutiny into governance standards in the charity sector, the Act has strengthened the role of the Charity Commission by granting it more power to enforce standards across the sector and closing several significant legal loopholes. The Act also imposes more controls and safeguards around fundraising and introduces a new statutory power to make social investments.
The grounds upon which people could be disqualified from acting as charity trustees, as well as the circumstances in which existing trustees can be disqualified, have been significantly expanded. This means, for example, that people who have been convicted of serious crimes, such as money laundering, are now not allowed to act as charity trustees.
Although many of the new laws seem logical – many would question why these provisions were not in place earlier – concerns have been raised about the Commission’s new discretionary power to disqualify trustees deemed ‘unfit’ where three criteria have been met. NCVO went as far as saying that the tests designed to establish whether or not a trustee is fit to serve are ‘insufficiently defined and lack appropriate objective criteria by which to measure the reasonableness of the commission’s decision.’
Charities are under the spotlight like never before and face growing public scrutiny while their resources dwindle. It is therefore important for trustees to be aware of their general legal duties and give further thought to having robust vetting procedures for new and existing trustees. Crucially, the new disqualification criteria require trustees to avoid acting in a way that would bring the organisation and sector as a whole into disrepute. It also extends beyond trustees to include most senior managers, such as chief executives or finance directors.
As the public’s faith in the sector wanes, the stakes are higher than ever for charity governance professionals. If charities are to win back public trust and confidence, effective governance must be at the top of their agendas.
The ICSA Charities (Protection and Social Investment) Act 2016 Conference takes place on 8 September and brings together governance, risk and compliance professionals to examine the Act and explore its key provisions. Speakers will include representatives from the Charity Commission, Association of Chairs and NCVO who will discuss the issues around trustees and disqualification raised in this article as well as the legislative safeguards and routes to challenge the regulator’s decisions.
Francesca Tay is Events Producer at ICSA: The Governance Institute