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7: The Charity Commission’s discretionary power to disqualify charity trustees – a need for more safeguards and less haste

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7: The Charity Commission’s discretionary power to disqualify charity trustees – a need for more safeguards and less haste
Leave your thoughts Nicola Evans

By Nicola Evans

The Charity Commission’s consultation on its draft guidance on its approach to the new power to disqualify people from charity trusteeship (and from senior management positions within charities) closed on 22 August.

The new discretionary power to disqualify, one of a suite of new powers introduced under the Charities (Protection and Social Investment) Act 2016, is due to come into force on 1 October 2016, so the Charity Commission has less than 6 weeks to review consultation responses and finalise its guidance before the provision is due to come into force.

In our view, that gives the Commission too little time to take into account all the aspects which need to be addressed in the guidance in order to provide individuals, charities and advisers with the information they need to understand the power and how the Commission will use it. In our response to the consultation we recommend (as does the Charity Law Association Working Party in their response) postponing the power coming into force, to enable the guidance to be reconsidered and to ensure it is fit for purpose.

The Minister for Civil Society, Rob Wilson, gave assurances to the House of Commons, during the Bill’s Public Bill Committee stage earlier in the year, that the then draft guidance would be “worked up” into “proper draft guidance” and that the Commission would “consult publicly on that guidance before the provision is commenced”. Unfortunately, at present, it is not clear that that process has happened.

The point is important – the new discretionary power is very widely drawn in the legislation, which omits details of criteria to be applied and the process to be followed. The Minister, quite rightly, reassured Parliament that the detail would appear in “appropriate, proportionate and detailed guidance”. But, with the prospect of disqualification notices being served from 1 October, we are in the dark as to the circumstances in which the power would be used, the process which would be followed and the safeguards which would be built into the process. The one clear safeguard at present is an appeal to the Tribunal – after a disqualification order has been made.

The provision’s breadth and lack of detail has given rise to rumour and scare stories suggesting that the new power could be used to disqualify those considered “unsuitable” to be charity trustees. The power could, in theory, be used against anyone – it is not limited to someone who is or has ever been a charity trustee – and would empower the Commission to disqualify for up to 15 years at a time. The power has been referred to as “fundamentally an illiberal power”. Obviously, one would want to assume that the power would not be used disproportionately; but it should not be left to assumption, it should be clear.

It is also worth noting that:

• disqualifying a person under the new power in relation to a charity would also disqualify them from “holding an office or employment in the charity with senior management functions”,

• unless the Commission decides to disapply that extension, generally or in particular respects.

Such an extension naturally has significant implications for any individual disqualified under the provision, but can also have knock-on effects for any charity which falls within the scope of the disqualification and which may employ the individual at any point during the disqualification period.

• What are the obligations of the charity trustees of such a charity and what are the employment law implications?

The legislation and, at present, the guidance are silent on the point.

As the Commission notes in its draft guidance, it has “long argued” for a discretionary power to disqualify, so it clearly sees a need for an appropriate power to enable the Commission to act to protect charity beneficiaries and assets. In such circumstances, what should not be allowed to happen is that the effectiveness of the power is undermined by unnecessary haste in its implementation before the appropriate criteria and process are in place to underpin the power’s proper use.

24 August 2016

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