Our charity and not for profit team is shining a light on the changes brought in by the Charities Act 2022 as a practical guide for charity trustees and those working with charities.
Today Associate, Ellie Williams, focuses on the changes effecting legal proceedings and charity names.
Legal proceedings; expected to come into effect Autumn 2022
The Charities Act 2022 (“ChA 2022”) will bring in some changes to the powers the Charity Tribunal has.
The Charity Tribunal will have a power to make an authorised costs order (an “ACO”). An ACO will:
- (The purpose of bringing a Beddoe application is for Trustees to obtain court approval for steps taken or to be taken in litigation in order to obtain costs protection.)
The procedure for applying for an ACO will be included in the Tribunal Procedure Rules. These applications will not be charity proceedings and, as such, will not require prior permission from the Charity Commission or the court.
Charity names; expected to come into force Spring 2023
The Charity Commission currently has the power to direct a charity to change its formal name (i.e. the name that would appear on official documents). The Charities Act will extend the scope of this power to enable the Charity Commission to direct exempt and unregistered charities, as well as registered charities, to change their working name(s) as well as their formal name.
The Charity Commission will no longer have to give its direction within 12 months of the name being entered on to the register of charities. Charities will also have a new right to appeal against a direction not to use its working name.
- For CIOs: The Charity Commission can refuse registration of a CIO, whether for a new registration, conversion or amalgamation of CIOs, where the proposed name is the same as, or too similar to, both a formal and working name of another charity.
- For charitable companies: An amendment to the Companies Act 2006 will enable the directors to resolve to change the name of a charitable company where the Charity Commission has directed a change of name. Previously, a resolution of the members would be required.
- Power to delay registration: The Charity Commission will also be able to delay the registration of a charity where a change of name direction has been issued. The Charities Act specifies how long the delay will remain.
- Power to delay change of name: A new power for the Charity Commission to delay the registration of an unsuitable change of name by a registered charity. As for the above, the Charities Act specifies how long the delay will remain.
- Exempt charities: A new power for the Charity Commission to issue a change of name direction to exempt charities (charities that are exempt from registration with the Charity Commission on the basis they are regulated by another regulator). The Charity Commission must consult the exempt charities principal regulator (if one is in place) before exercising this power.
Incorporation and mergers; expected to come into force Autumn 2023
The provisions introduced by the Charities Act aim to address difficulties with the current rules relating to incorporations (where an unincorporated charity becomes an incorporated charity) and mergers (where one charity merges into another or two charities (charity A and B) merge to form a new separate charity (charity C)).
- Gifts to a merged charity – Currently, if charity A merges into charity B and that merger is registered on the Register of Mergers, any legacy left to Charity A is treated as a legacy to Charity B, thus protecting future legacies. However, not all legacies are protected. For example, if a testator specifies that a gift will only take effect if the charity continues to exist, the legacy will not be protected if on the date the gift takes effect Charity A has ceased to exist.
The changes brought in by the Charities Act mean that gifts to a merged charity will take effect as a gift to the new charity (Charity B), even in these circumstances. Similar rules apply where two or more CIOs amalgamate or a CIO transfers its undertaking to another CIO. This will do away with the practice of keeping a “shell” charity to receive legacies post-merger. - Vesting declarations – Recommendations have been accepted to make it easier to transfer property by way of a vesting declaration. The types of property which are excluded from automatic vesting when a vesting declaration is made has been amended.
- Definition of ”relevant charity merger” - An amendment to bring it in line with the new definition of permanent endowment to refer to a charity “which has permanent endowment” rather than “a permanent endowment”.
