Charities Act 2022: new provisions introduced

What do the latest provisions mean for your charity?

The new Charities Act received Royal Assent in February 2022 and the technical changes are being implemented over several stages. As of 7 March 2024, new provisions are in force, including those relating to charity constitutions, charity land and appointment of trustees.
Here, we provide an overview of the key changes introduced in March and the potential impact for your charity.

Charity constitutions

The rules which apply to both incorporated and unincorporated charities when amending their governing documents have been revised. Although some changes may make things easier, other amendments may now require prior consent of the Charity Commission.
We have highlighted the key changes relevant to the different charitable structures below.

Charitable companies

For an application for ‘regulated alteration’ consent to amend the charity’s objects (also known as its charitable purposes) the Charity Commission must now consider the original and current purposes of the charity, as well as the suitability and effectiveness of the proposed objects. This is a broader remit than the previous regime and gives the Charity Commission greater scope to refuse consent if the proposed objects are significantly different.
However, the definition of a regulated alteration has been changed in respect of a charity’s objects so it is now defined as an amendment which “alters the charitable purposes” of the company (rather than “adding, removing, or altering”). This means that changes to other sections of a charity’s articles of association which affect the charity’s purposes will need the Charity Commission’s authority. Some minor administrative changes such as correcting a typographical error in a charity’s objects will now fall outside the regulated alteration regime.

CIOs

As with charitable companies, for an application for regulated alteration consent to amend a CIO’s objects, the Charity Commission must consider (as far as is possible and desirable) whether the new objects are similar to the original and current purposes, as well as the suitability and effectiveness of the proposed objects in the current social and economic circumstances.

There is also a change to when an amendment to a CIO constitution takes effect, to bring this in line with the regime for charitable companies. Now, any resolutions to change a CIO’s constitution will take effect immediately, rather than on registration with the Charity Commission. There is one exception for an alteration of the CIO’s purposes, which takes effect only when registered by the Charity Commission, or on a later date specified in the resolution.

Unincorporated charities

The process to amend the governing documents of unincorporated charities has changed. The Charities Act 2022 replaces the previous patchwork regime with a single statutory power for unincorporated charities to amend their governing documents (notwithstanding any express power in their governing document). Now the amendment must be approved by the majority of the trustees, and by the members (if any):

• By a 75% majority vote at a general meeting; or

• By decision without a vote at a general meeting where no members present object in response to the change put to the meeting; or

• By a unanimous decision of the members outside a general meeting (e.g. a vote held in writing).

The new statutory power brings unincorporated charities in line with the regulated alteration consent regime for charitable companies and CIOs. However, it also goes further by listing other areas which also require consent. For example, changes which affect the rights of third parties, or which alter restrictions that make property permanent endowment.
For any changes to an incorporated charity’s objects, as above, the Charity Commission must also consider (as far as is possible and desirable) whether the new objects are similar to the original and current objects, and the suitability and effectiveness of the proposed objects in the current social and economic circumstances.
The Charity Commission encourages trustees to seek professional advice if they are in any way unsure about the right steps to follow when amending their charity’s governing document.

Charity land

Sections relating to charity-to-charity transactions, and protections of purchasers, are now in force. You can read our earlier recap of all of the charity land provisions in our article Charities Act 2022: Changes to the Law on Dispositions of Charity Property.

New Charity Commission powers to confirm trustee appointments

These new provisions give the Charity Commission broader powers to remedy defective trustee appointments.
Appointments may be defective if they did not comply with the necessary appointment procedure in the charity’s governing document, or because the trustees making the appointment were not validly appointed themselves.

Charity mergers

New provisions relating to charity mergers will ensure that a merged charity (or an unincorporated charity in the case of an incorporation) that is placed on the Charity Commission’s register of mergers is treated as continuing to exist for legacy purposes, which is helpful and may in some circumstances remove the need to keep a ‘shell’ charity.

What other changes are due to come into force?

Final provisions which are yet to come into force include new powers for ex gratia payments. An ex gratia payment is where trustees wish to make a non-charitable payment out of moral obligation but do not have the power to do so. Examples of ex gratia payments may include a cash payment to a retiring member of staff, or a payment to a family member where a legacy has been left to the charity under a will and there is evidence to suggest that the person who died had changed their mind since making the will. Subject to certain conditions, the new rules will allow trustees to make some ex gratia payments without first seeking approval from the Charity Commission.

The introduction of these provisions have been delayed due to concerns about how such powers will apply to national museums and galleries. The final tranche is expected to come into force later in 2024.