Simplifying the Rules for Charities: Some welcome recommendations

LCVS broadly welcomed the recently published Law Commission report, which proposed simplifying how charities are run.

The report, “Technical Issues in Charity Law”, contains 40 proposals indented to simplify many of the more complex elements of running a charity, as well as trying to reduce costs. Many of these will provide relief to charity trustees and staff that can sometimes find the regulatory regime difficult to navigate.

One proposal is the simplification of the process when making changes to a charity’s governing document. At present, all charities seeking to change their purposes must seek Charity Commission consent. However, the criteria used by the Commission when deciding to consent to prosed changes to a charity’s purposes depend on the legal form of the charity making the request. This can lead to inconsistency and frustration amongst the groups we support.

The report recommends a more unified approach.

“Changing a charity’s purposes impacts fundamentally on what it does and who it is for. These decisions are never made lightly,” said Richard Davies, Capacity Building Team Leader.

“Adding another layer of complexity to the process can reduce a charity’s capacity to respond to changing needs within the community it serves”.

Another proposal relates to situations where too much, or too little, money is raised by a charity in response to a fundraising appeal. Where too much is raised, the Charity Commission can direct that the surplus is applied to purposes similar to the original one (known as cy-près). Currently, when too little is raised, the funds cannot usually be applied cy-près and the trustees must instead attempt to contact the donors to offer them a refund.

This can take time and cost money. The report recommends that where the amount of funding in question is under £1,000 the charity can simply be applied for new purposes without Commission consent.

“Raising funding is one of the greatest challenges a charity has and setting targets for funding can really inspire support and concentrate the efforts of those generating money,” Richard Davies continued.

“When a campaign falls just short, it can become costly, particularly for smaller charities, to be able to get consent to apply the money in a way that still achieves the general outcome that most supporters would want. This recommendation is very welcome.”

Other recommendations include making it easier for charities to make “small ex-gratia payments” without needing to obtain permission from a regulator, new powers for the Commission to prevent the use of misleading names and giving the regulator the ability to confirm if trustees are properly appointed.

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