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Charity GovernanceFROM £90.00
A practical guide to the legal and regulatory framework within which charities operate and its impact on their governance
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Key features of the new edition include:
- updated to reflect the consolidation of the Charities Acts 1993 and 2006 into the Charities Act 2011
- revised to reflect changes in the Charity Commission's guidance for trustees (eg, in relation to investment, trustee decision making, and charity reporting and accounting)
- brought up to date in line with changes to the Commission's policies and guidance in the new "risk" framework in which the Commission operates
- includes commentary on the long-awaited Charitable Incorporated Organisation (CIO), now available as a legal vehicle for charities
- updated to reflect the wider legal framework in which charities operate, including the Equality Act 2010 and the Bribery Act 2010
- the section on taxation has been updated in line with changes to tax legislation and HMRC guidance affecting charities (eg, in relation to trading by charities)
- updated to reflect the implications of the ISC case in relation to public benefit and the Charity Commission's new public benefit guidance
- the chapter on borrowing by charities has been updated to reflect the harsher financial environment in which charities must now operate
- What is a charity?
- Charitable companies and trusts, charitable incorporated organisations and other types of charity
- The modern legal and regulatory framework for charities
- The role and powers of the Charity Commission
- A charity's members, including their rights and duties
- Governance structures
- Trustees’ duties and liabilities
- The exercise of trustees’ powers
- Trustees’ appointment and retirement, decision-making and other aspects of trustee governance
- Income and endowment, reserves, acquiring and disposing of land and other aspects of asset-holding by charities
- Investment, including "programme related investment"
- Trading by charities
- Borrowing by charities
- Reporting and accounting
- Constitutional changes, mergers, incorporations and other forms of
restructuring, including insolvency
That rare thing - an accessible legal tome
The new book by Con Alexander and the charities team at law firm Veale Wasbrough Vizards provides a user-friendly guide to charity governance, writes Sam Burne James.
The second edition of Charity Governance, by Con Alexander and the charities team of the law firm Veale Wasbrough Vizards, sets out the fundamentals of charity law, the responsibilities of the Charity Commission, the role of trustees and seven key governance areas, namely assets, investment, tax, borrowing, trading, reporting and restructuring.
A key balance in such a tome will always be between user-friendliness on the one hand and technical detail on the other. The balance is weighted towards the former, applying the sort of language that Alexander et al might use at meetings with clients rather than with fellow members of the Charity Law Association. This is not to say that everything in the book makes immediate sense on first reading, but then it's hard to imagine such a thing ever really being possible in the world of charity law.
The emphasis is on the practice of governance, with decision-making nudges, checklists of steps to be taken in a particular scenario and detail on how a particular issue relates to different legal structures. Technical matters are approached in terms of their practical application, with the aim of explaining the fundamentals as simply as possible.
Detailed but clear definitions of matters such as classes of investment and forms of taxation will be welcomed by readers who are forever hearing technical phrases thrown about in meetings with the assumption that everyone must know what they mean.
Pleasingly, the book has a larger font size and more spacious layout than is commonly found in legal handbooks – doubtless something to do with the fact that it is also available as an e-book; but it helps to make Charity Governance unintimidating and accessible.
Sam Burne James
Con Alexander and the Charities Team at Veale Wasbrough Vizards.
Con Alexander is Head of Charities and a Partner at Veale Wasbrough Vizards. He acts for a wide range of charities, social enterprises and other not for profit bodies.
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This chapter is intended to summarise the legal basis on which charities hold assets. As we will explain, there are a number of legal concepts in this area that are unique to charities. This is of more than simply academic interest. The basis on which a charity holds a particular asset will determine the powers and duties its trustees have in relation to it. It may mean that the asset in question can only be applied for a particular charitable purpose within a wider range of purposes for which the charity has been established. Or it may mean that the charity has no power to sell the asset or, if it does, that there will be restrictions on the way in which it can apply the proceeds of sale.
The basis on which assets are held will also have an impact on the way in which the trustees of a charity formulate their reserves policy. This is explained in detail. We also go on to explain some of the specific considerations that apply to charities holding land, including the restrictions on its disposal imposed by the Charities Act 2011.
Understanding the way in which a charity holds it assets is an important governance issue for its trustees. Failure to observe particular legal restrictions may mean that the trustees act in breach of trust, with the potential for personal liability as a consequence (see 6.18 for more on this). As importantly, the trustees must understand the way in which a particular asset can be used as part of their strategic planning for the charity generally. For example, trustees who wish to raise finance to develop one aspect of their charity's activities by using the proceeds of sale of a particular asset will be frustrated by a restriction on their ability to sell that asset or, if it is capable of being sold, on their ability to apply the proceeds of sale. Trustees must also be able to formulate a reserves policy for their charity, something that will be difficult to do unless the basis on which assets are held is clear and understood.
In looking at the way in which charities hold their assets, there is a fundamental distinction to be drawn between incorporated and unincorporated charities. Broadly, the assets of an unincorporated charity are almost invariably held on trust. A trust is a legal relationship where one or more persons (the trustees) hold property for the benefit of others (the beneficiaries). The assets of a charitable trust are, as the name suggests, always held on trust. And while the assets of an unincorporated association can be held in a number of different ways, assets held by a charitable unincorporated association will generally be held on trust for its charitable purposes. This is consistent with the fact that the individual members of a charitable unincorporated association have no personal entitlement to its assets.1
1Re Morrison (1967) 111 SJ 758; Re Finger's Will Trusts  Ch 286.
The assets of a charitable company are almost invariably held as corporate, rather than trust, assets. In other words, the assets are beneficially owned by the company itself rather than being held on trust by it. The constitution of the company will oblige it to apply its assets for its charitable purposes. In that sense, the company's ‘beneficial' ownership of the assets is qualitatively different to the beneficial ownership of a commercial company's assets. But while the company's trustees can be liable for a ‘breach of trust' if they mis-apply its assets, the assets themselves are not held on a trust of the kind found in the context of unincorporated charities.
The leading case in this area confirms that, while a company may hold its assets as a ‘trustee' for charitable purposes where its constitution places a binding obligation on it to apply its assets for exclusively charitable purposes, a company is not a ‘trustee' in ‘the strict sense' of its corporate assets. Rather, the company is in a position ‘analogous to that of a trustee in relation to its corporate assets'.1 This decision was at least partly based upon the inconsistency that the court thought would arise if a company could incur liabilities without holding any of its assets beneficially, so that they were available to meet those liabilities. This distinction is important for charities operating on the ‘corporate trustee' model, where a corporate body acts as the sole trustee of an unincorporated trust (see 9.9).
The position is less clear in relation to other charitable corporations. In particular, there has historically been some uncertainty around the basis on which Royal Charter corporations hold their assets, with some taking the view that they hold their assets on trust. The approach the court will take to CIOs remains to be seen, but the likelihood is that, given their limited liability status, this will be the same as the approach to charitable companies.
1Liverpool and District Hospital for Diseases of the Heart v Att-Gen  Ch 193.
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