An overview of the Charities Act 2006

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	ALL CHANGE! An overview of the Charities Act 2006 The Charities Act 2006 creates the most significant changes in this part of English law for perhaps four hundred years. Here we give a broad overview of the main areas that will be subject to change. The new list of charitable purposes For the first time, there will be a statutory definition of what a charity is and what potentially charitable purposes are. This part of the Act also sets out principles that must be used by the Charity Commission when deciding whether any organisation that is, or wishes to become, a registered charity in England and Wales provides “public benefit” of a suitable kind. Registration of charities There is a revised regime for charity registration, which will lead to far more charities having to register with the Charity Commission. The first phase of new registrations will bring in most of the largest exempt and excepted charities (annual income over £100,000). Smaller charities (annual income under £5,000) are no longer subject to compulsory registration. The Charity Commission and the Charity Tribunal There is a new legal structure for the Charity Commission, with revised responsibilities and enhanced powers. There is a Charity Tribunal, able to hear appeals against Charity Commission decisions and actions in certain circumstances. Trustees A range of changes affect trustees, in areas including removal from office and liability indemnity insurance. Mergers and restructuring There are a range of provisions that relax current restrictions and provide new and easier procedures for charities to merge or otherwise restructure. Charity assets and property (small unincorporated charities) In relation to small unincorporated charities (annual income under £10,000) there is greater future freedom for the courts and the Charity Commission to take account of current social and economic circumstances when such charities seek their permission for the re-assignment of charitable funds that cannot be used for their original purpose (for instance because no suitable beneficiaries can be found). Such smaller charities can more easily gain permission to spend some of their permanent endowment. In addition, their trustees will be able to transfer property to another charity with consistent objects or alter their own charity’s objects to reflect modern social conditions (provided the new objects remain consistent with what the charity was originally set up to do). Legal forms and altering charity constitutions There will be an optional new legal form for charities, the charitable incorporated organisation. This will be subject to specific regulations. CIO registrations will not commence until late 2008 (earliest). The trustees of small unincorporated charities will be permitted to make changes to the administrative provisions of their charities’ governing documents, even though those documents do not empower them to do so. The occasions on which advance Charity Commission consent will be needed for alterations to the memorandum and articles of a charitable company will be fewer than under the current law. New accounting and audit rules A modified system for compulsory audit of charity accounts applies to financial years begininng on or after 1 April 2008. This results in compulsory audit for any charity that has annual income of £500,000 or more (whether that charity is a charitable company or unincorporated). The Act and associated regulations also facilitate the preparation of group accounts by any charity that has one or more trading subsidiaries. Fundraising and public collections Significant changes are being introduced in these areas. There are strengthened controls on fundraising ventures with commercial partners and schemes that use professional third party fundraisers, including enhanced requirements for statements made to potential donors. A new national licensing scheme, supervised by the Charity Commission, will apply to charities that wish to make public collections of cash or giving pledges (including direct debits). The regime for local authority licensing of all public collections is to be extended so that collections in private areas used by the public (supermarket foyers, railway stations, airport lounges etc) and on business premises will be covered, alongside street collections and door to door collections from residential premises.

			Contacts
	Click contact name to email Cecile Gillard 0117 918 1319

			Charity News
	Public benefit guidance issued for charities The Charity Commission has issued its long awaited guidance on public benefit. Find out more Activation of the Charities Act 2006 (England and Wales). Find out more New rules on the assessment of public benefit. Find out more New charity law for Northen Ireland is expected during 2008. Find out more

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