Our last eBulletin in 2007 ran through the main provisions which came into force in February 2007.
Since then in November 2007 there has been a further Commencement Order and as a result of this certain provisions relating to mergers of charities are now in force. These apply where one charity has transferred to it all the property of the other and the transferring charity ceases to operate and also where both of the charities cease to exist and transfer their property to a new charity.
There are two issues which these seek to address:-
Certain property can only be transferred across to the continuing/new entity with legal documentation, which can be expensive.
There is a risk that legacies to the transferring charity will fail if the organisation ceases to exist by the time that the testator has died.
The provisions to deal with these issues are as follows:-
A register will be maintained by the Charity Commission in relation to mergers notified to it. A gift to a charity which has merged with another and ceases to exist will take effect as a gift to the charity into which it is merged, so long as the merger is registered.
With regard to land and buildings, it is possible for the property to be transferred by way of a “vesting declaration”. The vesting declaration operates to vest legal title to the transferor’s property in the transferee, without the need for any further documentation. Thus the cost of conveying land and property is reduced.
It should be understood that there are limitations to this process. If the transferring charity has property which is restricted, for example by way of permanent endowment, then it may not be possible for this to be transferred by way of the vesting declaration. Also there may be other formalities which have to be complied with, for example, obtaining the consent of a landlord in relation to a lease. Furthermore, it is not clear how certain liabilities in relation to land may be transferred – for example, restrictive covenants.
Nevertheless it is an important move forward.
There are further provisions which will come into force on the 1st April 2008, and these relate to the regulation of charitable collections and also the statements which are required to be made indicating the benefits for charitable institutions, fund raisers and collectors.
Charities and Public Benefit
The Charities Act 2006 requires that a charity’s aims must be for the public benefit if it is to be a registered charity. There is no longer a presumption in respect of certain charities that a purpose is for the public benefit and the Charity Commission is required to issue guidance to which charity trustees must have regard.
The Charity Commission has just issued its general guidance in which it states that it may consider an organisation’s activities in order to:-
clarify what its aims are;
decide whether those aims are charitable; and
ensure that the aims are, will or may be carried out for the public benefit.
To do this the Commission may consider relevant factual background information.
This test will be applied both in relation to new organisations which are seeking to register and also in the assessment which the Charity Commission will carry out as to whether an existing registered charity’s aims are being carried out for the public benefit. If the Commission is not satisfied that this is the case it may seek the trustees’ agreement that the objects will be altered or that the way in which they carry out the charity’s aims are altered.
There are two key principles which have to be satisfied in order to show that an organisation’s aims are for the public benefit.
The first principle is that there must be an identifiable benefit or benefits, and the following factors must be considered when deciding whether an organisation’s aims satisfy this:-
It must be clear what the benefits are to the public.
The benefits must be related to the aims.
The benefits must be balanced against any detriment or harm.
The second principle is that the benefit must be to the public or a section of the public. The factors which will be considered here in deciding whether this is satisfied are as follows:-
The beneficiaries must be appropriate to the aims.
Where benefit is to a section of the public the opportunity to benefit must not be unreasonably restricted and this includes by the ability to pay any fees charged. This aspect has been the subject of considerable discussion and controversy in the press. The Commission will consider whether the level at which fees are set have the effect of preventing people who are unable to pay the fees from benefiting from the services or facilities and if this is the case whether it is possible to show that people who are unable to pay the fees are not excluded from the opportunity to benefit. In addition whether and how many people who are unable to pay the fees may otherwise benefit from those services or facilities and the nature and extent of the other benefits provided.
People in poverty must not be excluded from the opportunity to benefit.
Any benefits must be incidental.
There is a general duty on the part of trustees to report on public benefit in their annual report. The Charity Commission’s approach to assessing the public of new and existing Charities is set out in Section H and in particular a useful list of the criteria for assessing public benefit is set out in paragraph H4.
We would urge you to look at the Charity Commission’s Guidance which can be downloaded from their website:www.charitycommission.gov.uk.
