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Property Policy – The Charities (Protection and Social Investment) Act 2016

On March 16th 2016 Royal Assent was given to the Charities Act (Protection and Social Investment) Act 2016 ("the Act").

Most of the provisions in the Act will not take effect straight away, but they will be implemented over the next few months.

As Ethical Property Foundation is concerned with property we shall concentrate on the Act as it pertains to property and property issues.

The Act will change the law on charities in four areas. Namely:

1. Fundraising

The Act will:

  • impose more controls over the relationship between charities and commercial organisations that raise funds on their behalf. 
  • require that all charities that have relationships with professional fundraisers and/or commercial participators will need to make sure that their fundraising agreements are compliant under the Act. 
  • require that larger charities include a new statement about their fundraising practices in their annual reports. 
  • include new powers for the Government to give assistance and intervene in the regulation of fundraising.

2. Disqualification of charity Trustees

The Act will:

  • enable more people to be automatically disqualified from acting as charity trustees.
  • give to the Charity Commission a new power to disqualify people from serving as trustees.
  • provide that disqualified trustees will not be permitted to serve in a senior management position in a charity nor to be actively involved in the management of a corporate charity trustee. 

3. Charity Commission powers

The Act will:

  • give the Charity Commission more regulatory powers over charities, such as new power to give official warnings to charities where the Commission has regulatory concerns about a charity. 

4.  Social Investment 

A social investment is an investment which is carried out with a view to both directly furthering the charity’s purposes and achieving a financial return for the charity. A relevant investment is either an  application or use of funds  or other property or the taking on of a commitment in relation to a liability of another person (eg a guarantee) that puts the charity's funds or other property at risk of being applied or used.

The Act will:

  • give an incorporated charity and the charity trustee of an incorporated charity the power to make social investments. This power is additional to any powers that charities may already have to make social investments. 
  • not allow social investment of permanent endowment, unless the trustees expect that making the social investment will not contravene any restrictions on spending the permanent endowment.
  • allow for the statutory power to be excluded or restricted in a charity’s constitution.
  • require trustees before exercising the power to make a social investment, to  consider whether in all the circumstances any advice about the proposed social investment should be obtained; obtain and consider any advice they decide ought to be obtained; and satisfy themselves that it is in the interests of the charity to make the social investment, having regard to the benefit they expect it to achieve for the charity (by directly furthering the charity’s purposes and achieving a financial return).
  • put an obligation on the trustees to review the social investments from time to time. When carrying out such a review the trustees must consider whether any advice about the social investment (or any particular social investment) should be obtained, and obtain and consider any advice the conclude ought to be obtained.
  • not permit these duties to be restricted or excluded by the charity's trusts.
  • in the case of an unincorporated charity, these duties apply in relation to relevant social investments in place of any duties under sections 4 and 5 of the Trustee Act 2000 that would otherwise apply.

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