PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
The Charities Act 2006 was introduced to make life simpler for trustees, to provide more safeguards for them and to bring the definition of ‘charity’ up to date.
The Act defines a charity as a ‘body or trust which is for a charitable purpose that provides benefit to the public’. It lists 13 charitable purposes under four heads:
- Relief from poverty;
- Advancement of education;
- Advancement of religion; and
- Other purposes beneficial to the community.
For some significant areas of administration, the red tape has been reduced. The need to gain consent from the Charities Commission has been removed for many actions, such as transferring property, legacies and donations. A trustee also has new powers and is now able to alter parts of the charity’s governing document, such as ‘administrative powers and procedures’, without consulting the Commission. A new legal structure is in place for incorporated charities so that dual regulation by Companies House and the Commission can be avoided. The aim is to allow charities to be free from bureaucracy and to use their resources for their beneficiaries.
The Act introduced the ‘public benefit requirement’, which requires that a charity must have an identifiable benefit or benefits which are benefits to the public or a section of it. One of the Commission’s new objectives is to promote understanding of and guidance on the requirement. Trustees are not legally obliged to follow such guidance but must have regard to it when it is relevant to their charity.
The Role of Trustee
The role of trustee is still a voluntary one. The Act has, however, introduced the power to remunerate trustees for providing goods or services to the charity, provided there is a clear benefit to the charity. Certain rules must be satisfied in such cases. For example, the terms should be set out in a written agreement and payment should not be agreed by the person receiving it. Trustees are required to follow the Commission’s guidance and to act in accordance with the duty of care set out in the Trustee Act 2000. Charities should consult the Commission’s guidance when proposing to pay a trustee.
The Act grants the Commission a new power to relieve trustees from personal liability for breach of trust or duty where they have acted honestly and reasonably and ought fairly to be excused. Trustees are now able to apply to the Commission as well as the courts for relief from personal liability should problems arise. This helps to alleviate one of the main worries of becoming a trustee. Trustee Indemnity Insurance is appropriate if such cover is in the best interests of the charity and not for personal benefit.