Office of Public Sector Information
PART 2 continued CHAPTER 5 continued
(1) After section 31 of the 1993 Act insert—
(1) A justice of the peace may issue a warrant under this section if satisfied, on information given on oath by a member of the Commission’s staff, that there are reasonable grounds for believing that each of the conditions in subsection (2) below is satisfied.
(2) The conditions are—
(a) that an inquiry has been instituted under section 8 above;
(b) that there is on the premises to be specified in the warrant any document or information relevant to that inquiry which the Commission could require to be produced or furnished under section 9(1) above; and
(c) that, if the Commission were to make an order requiring the document or information to be so produced or furnished—
(i) the order would not be complied with, or
(ii) the document or information would be removed, tampered with, concealed or destroyed.
(3) A warrant under this section is a warrant authorising the member of the Commission’s staff who is named in it—
(a) to enter and search the premises specified in it;
(b) to take such other persons with him as the Commission considers are needed to assist him in doing anything that he is authorised to do under the warrant;
(c) to take possession of any documents which appear to fall within subsection (2)(b) above, or to take any other steps which appear to be necessary for preserving, or preventing interference with, any such documents;
(d) to take possession of any computer disk or other electronic storage device which appears to contain information falling within subsection (2)(b), or information contained in a document so falling, or to take any other steps which appear to be necessary for preserving, or preventing interference with, any such information;
(e) to take copies of, or extracts from, any documents or information falling within paragraph (c) or (d);
(f) to require any person on the premises to provide an explanation of any such document or information or to state where any such documents or information may be found;
(g) to require any such person to give him such assistance as he may reasonably require for the taking of copies or extracts as mentioned in paragraph (e) above.
(4) Entry and search under such a warrant must be at a reasonable hour and within one month of the date of its issue.
(5) The member of the Commission’s staff who is authorised under such a warrant (“the authorised person”) must, if required to do so, produce—
(a) the warrant, and
(b) documentary evidence that he is a member of the Commission’s staff,
for inspection by the occupier of the premises or anyone acting on his behalf.
(6) The authorised person must make a written record of—
(a) the date and time of his entry on the premises;
(b) the number of persons (if any) who accompanied him onto the premises, and the names of any such persons;
(c) the period for which he (and any such persons) remained on the premises;
(d) what he (and any such persons) did while on the premises; and
(e) any document or device of which he took possession while there.
(7) If required to do so, the authorised person must give a copy of the record to the occupier of the premises or someone acting on his behalf.
(8) Unless it is not reasonably practicable to do so, the authorised person must comply with the following requirements before leaving the premises, namely—
(a) the requirements of subsection (6), and
(b) any requirement made under subsection (7) before he leaves the premises.
(9) Where possession of any document or device is taken under this section—
(a) the document may be retained for so long as the Commission considers that it is necessary to retain it (rather than a copy of it) for the purposes of the relevant inquiry under section 8 above, or
(b) the device may be retained for so long as the Commission considers that it is necessary to retain it for the purposes of that inquiry,
as the case may be.
(10) Once it appears to the Commission that the retention of any document or device has ceased to be so necessary, it shall arrange for the document or device to be returned as soon as is reasonably practicable—
(a) to the person from whose possession it was taken, or
(b) to any of the charity trustees of the charity to which it belonged or related.
(11) A person who intentionally obstructs the exercise of any rights conferred by a warrant under this section is guilty of an offence and liable on summary conviction—
(a) to imprisonment for a term not exceeding 51 weeks, or
(b) to a fine not exceeding level 5 on the standard scale,
or to both.”
(2) In Part 1 of Schedule 1 to the Criminal Justice and Police Act 2001 (c. 16) (powers of seizure to which section 50 applies), after paragraph 56 insert—
56A The power of seizure conferred by section 31A(3) of the Charities Act 1993 (seizure of material for the purposes of an inquiry under section 8 of that Act).”
(1) Section 38 of the 1993 Act (restrictions on mortgaging) is amended as follows.
(2) For subsections (2) and (3) substitute—
“(2) Subsection (1) above shall not apply to a mortgage of any such land if the charity trustees have, before executing the mortgage, obtained and considered proper advice, given to them in writing, on the relevant matters or matter mentioned in subsection (3) or (3A) below (as the case may be).
(3) In the case of a mortgage to secure the repayment of a proposed loan or grant, the relevant matters are—
(a) whether the loan or grant is necessary in order for the charity trustees to be able to pursue the particular course of action in connection with which they are seeking the loan or grant;
(b) whether the terms of the loan or grant are reasonable having regard to the status of the charity as the prospective recipient of the loan or grant; and
(c) the ability of the charity to repay on those terms the sum proposed to be paid by way of loan or grant.
(3A) In the case of a mortgage to secure the discharge of any other proposed obligation, the relevant matter is whether it is reasonable for the charity trustees to undertake to discharge the obligation, having regard to the charity’s purposes.
(3B) Subsection (3) or (as the case may be) subsection (3A) above applies in relation to such a mortgage as is mentioned in that subsection whether the mortgage—
(a) would only have effect to secure the repayment of the proposed loan or grant or the discharge of the proposed obligation, or
(b) would also have effect to secure the repayment of sums paid by way of loan or grant, or the discharge of other obligations undertaken, after the date of its execution.
(3C) Subsection (3D) below applies where—
(a) the charity trustees of a charity have executed a mortgage of land held by or in trust for a charity in accordance with subsection (2) above, and
(b) the mortgage has effect to secure the repayment of sums paid by way of loan or grant, or the discharge of other obligations undertaken, after the date of its execution.
(3D) In such a case, the charity trustees must not after that date enter into any transaction involving—
(a) the payment of any such sums, or
(b) the undertaking of any such obligations,
unless they have, before entering into the transaction, obtained and considered proper advice, given to them in writing, on the matters or matter mentioned in subsection (3)(a) to (c) or (3A) above (as the case may be).”
(3) In subsection (4) (meaning of “proper advice”)—
(a) for “subsection (2) above” substitute “this section”; and
(b) for “the making of the loan in question” substitute “relation to the loan, grant or other transaction in connection with which his advice is given”.
(1) Section 43 of the 1993 Act (annual audit or examination of accounts of charities which are not companies) is amended as follows.
(2) For subsection (1) substitute—
“(1) Subsection (2) below applies to a financial year of a charity if—
(a) the charity’s gross income in that year exceeds £500,000; or
(b) the charity’s gross income in that year exceeds the accounts threshold and at the end of the year the aggregate value of its assets (before deduction of liabilities) exceeds £2.8 million.
“The accounts threshold” means £100,000 or such other sum as is for the time being specified in section 42(3) above.”
(3) In subsection (2) (accounts required to be audited) for paragraph (a) substitute—
“(a) would be eligible for appointment as auditor of the charity under Part 2 of the Companies Act 1989 if the charity were a company, or”.
(4) In subsection (3) (independent examinations instead of audits)—
(a) for the words from “and its gross income” to “subsection (4) below)” substitute “but its gross income in that year exceeds £10,000,”; and
(b) at the end insert—
“This is subject to the requirements of subsection (3A) below where the gross income exceeds £250,000, and to any order under subsection (4) below.”
(5) After subsection (3) insert—
“(3A) If subsection (3) above applies to the accounts of a charity for a year and the charity’s gross income in that year exceeds £250,000, a person qualifies as an independent examiner for the purposes of paragraph (a) of that subsection if (and only if) he is an independent person who is—
(a) a member of a body for the time being specified in section 249D(3) of the Companies Act 1985 (reporting accountants);
(b) a member of the Chartered Institute of Public Finance and Accountancy; or
(c) a Fellow of the Association of Charity Independent Examiners.”
(6) For subsection (8) substitute—
“(8) The Minister may by order—
(a) amend subsection (1)(a) or (b), (3) or (3A) above by substituting a different sum for any sum for the time being specified there;
(b) amend subsection (3A) by adding or removing a description of person to or from the list in that subsection or by varying any entry for the time being included in that list.”
(1) After section 44 of the 1993 Act insert—
(1) This section applies to—
(a) a person acting as an auditor or independent examiner appointed by or in relation to a charity under section 43 above,
(b) a person acting as an auditor or examiner appointed under section 43A(2) or (3) above, and
(c) the Auditor General for Wales acting under section 43B(2) or (3) above.
(2) If, in the course of acting in the capacity mentioned in subsection (1) above, a person to whom this section applies becomes aware of a matter—
(a) which relates to the activities or affairs of the charity or of any connected institution or body, and
(b) which he has reasonable cause to believe is likely to be of material significance for the purposes of the exercise by the Commission of its functions under section 8 or 18 above,
he must immediately make a written report on the matter to the Commission.
(3) If, in the course of acting in the capacity mentioned in subsection (1) above, a person to whom this section applies becomes aware of any matter—
(a) which does not appear to him to be one that he is required to report under subsection (2) above, but
(b) which he has reasonable cause to believe is likely to be relevant for the purposes of the exercise by the Commission of any of its functions,
he may make a report on the matter to the Commission.
(4) Where the duty or power under subsection (2) or (3) above has arisen in relation to a person acting in the capacity mentioned in subsection (1), the duty or power is not affected by his subsequently ceasing to act in that capacity.
(5) Where a person makes a report as required or authorised by subsection (2) or (3), no duty to which he is subject is to be regarded as contravened merely because of any information or opinion contained in the report.
(6) In this section “connected institution or body”, in relation to a charity, means—
(a) an institution which is controlled by, or
(b) a body corporate in which a substantial interest is held by,
the charity or any one or more of the charity trustees acting in his or their capacity as such.
(7) Paragraphs 3 and 4 of Schedule 5 to this Act apply for the purposes of subsection (6) above as they apply for the purposes of provisions of that Schedule.”
(2) In section 46 of the 1993 Act (special provisions as respects accounts and annual reports of exempt and excepted charities)—
(a) in subsection (1) for “sections 41 to 45” substitute “sections 41 to 44 or section 45”; and
(b) after subsection (2) insert—
“(2A) Section 44A(2) to (7) above shall apply in relation to a person appointed to audit, or report on, the accounts of an exempt charity which is not a company as they apply in relation to a person such as is mentioned in section 44A(1).
(2B) But section 44A(2) to (7) so apply with the following modifications—
(a) any reference to a person acting in the capacity mentioned in section 44A(1) is to be read as a reference to his acting as a person appointed as mentioned in subsection (2A) above; and
(b) any reference to the Commission or to any of its functions is to be read as a reference to the charity’s principal regulator or to any of that person’s functions in relation to the charity as such.”
(1) After section 49 of the 1993 Act insert—
The provisions of Schedule 5A to this Act shall have effect with respect to—
(a) the preparation and auditing of accounts in respect of groups consisting of parent charities and their subsidiary undertakings (within the meaning of that Schedule), and
(b) other matters relating to such groups.”
(2) Schedule 6 (which inserts the new Schedule 5A into the 1993 Act) has effect.
(1) Section 64 of the 1993 Act (alteration of objects clause etc.) is amended as follows.
(2) For subsection (2) substitute—
“(2) Where a charity is a company, any regulated alteration by the company—
(a) requires the prior written consent of the Commission, and
(b) is ineffective if such consent has not been obtained.
(2A) The following are “regulated alterations”—
(a) any alteration of the objects clause in the company’s memorandum of association,
(b) any alteration of any provision of its memorandum or articles of association directing the application of property of the company on its dissolution, and
(c) any alteration of any provision of its memorandum or articles of association where the alteration would provide authorisation for any benefit to be obtained by directors or members of the company or persons connected with them.
(2B) For the purposes of subsection (2A) above—
(a) “benefit” means a direct or indirect benefit of any nature, except that it does not include any remuneration (within the meaning of section 73A below) whose receipt may be authorised under that section; and
(b) the same rules apply for determining whether a person is connected with a director or member of the company as apply, in accordance with section 73B(5) and (6) below, for determining whether a person is connected with a charity trustee for the purposes of section 73A.”
(3) In subsection (3) (documents required to be delivered to registrar of companies), for “any such alteration” substitute “a regulated alteration”.
(1) In section 249A(4) of the Companies Act 1985 (c. 6) (circumstances in which charitable company’s accounts may be subject to an accountant’s report instead of an audit)—
(a) in paragraph (b) (gross income between £90,000 and £250,000) for “£250,000” substitute “£500,000”; and
(b) in paragraph (c) (balance sheet total not more than £1.4 million) for “£1.4 million” substitute “£2.8 million”.
(2) In section 249B(1C) of that Act (circumstances in which parent company or subsidiary not disqualified for exemption from auditing requirement), in paragraph (b) (group’s aggregate turnover not more than £350,000 net or £420,000 gross in case of charity), for “£350,000 net (or £420,000 gross)” substitute “£700,000 net (or £840,000 gross)”.
After section 68 of the 1993 Act insert—
(1) Section 44A(2) to (7) above shall apply in relation to a person acting as—
(a) an auditor of a charitable company appointed under Chapter 5 of Part 11 of the Companies Act 1985 (auditors), or
(b) a reporting accountant appointed by a charitable company for the purposes of section 249C of that Act (report required instead of audit),
as they apply in relation to a person such as is mentioned in section 44A(1).
(2) For this purpose any reference in section 44A to a person acting in the capacity mentioned in section 44A(1) is to be read as a reference to his acting in the capacity mentioned in subsection (1) of this section.
(3) In this section “charitable company” means a charity which is a company.”
Schedule 7, which makes provision about charitable incorporated organisations, has effect.
In section 72 of the 1993 Act (disqualification for being trustee of a charity) after subsection (4) insert—
“(4A) If—
(a) a person disqualified under subsection (1)(d) or (e) makes an application under subsection (4) above five years or more after the date on which his disqualification took effect, and
(b) the Commission is not prevented from granting the application by virtue of paragraphs (a) and (b) of subsection (4),
the Commission must grant the application unless satisfied that, by reason of any special circumstances, it should be refused.”
After section 73 of the 1993 Act insert—
(1) This section applies to remuneration for services provided by a person to or on behalf of a charity where—
(a) he is a charity trustee or trustee for the charity, or
(b) he is connected with a charity trustee or trustee for the charity and the remuneration might result in that trustee obtaining any benefit.
This is subject to subsection (7) below.
(2) If conditions A to D are met in relation to remuneration within subsection (1), the person providing the services (“the relevant person”) is entitled to receive the remuneration out of the funds of the charity.
(3) Condition A is that the amount or maximum amount of the remuneration—
(a) is set out in an agreement in writing between—
(i) the charity or its charity trustees (as the case may be), and
(ii) the relevant person,
under which the relevant person is to provide the services in question to or on behalf of the charity, and
(b) does not exceed what is reasonable in the circumstances for the provision by that person of the services in question.
(4) Condition B is that, before entering into that agreement, the charity trustees decided that they were satisfied that it would be in the best interests of the charity for the services to be provided by the relevant person to or on behalf of the charity for the amount or maximum amount of remuneration set out in the agreement.
(5) Condition C is that if immediately after the agreement is entered into there is, in the case of the charity, more than one person who is a charity trustee and is—
(a) a person in respect of whom an agreement within subsection (3) above is in force, or
(b) a person who is entitled to receive remuneration out of the funds of the charity otherwise than by virtue of such an agreement, or
(c) a person connected with a person falling within paragraph (a) or (b) above,
the total number of them constitute a minority of the persons for the time being holding office as charity trustees of the charity.
(6) Condition D is that the trusts of the charity do not contain any express provision that prohibits the relevant person from receiving the remuneration.
(7) Nothing in this section applies to—
(a) any remuneration for services provided by a person in his capacity as a charity trustee or trustee for a charity or under a contract of employment, or
(b) any remuneration not within paragraph (a) which a person is entitled to receive out of the funds of a charity by virtue of any provision or order within subsection (8).
(8) The provisions or orders within this subsection are—
(a) any provision contained in the trusts of the charity,
(b) any order of the court or the Commission,
(c) any statutory provision contained in or having effect under an Act of Parliament other than this section.
(9) Section 73B below applies for the purposes of this section.
(1) Before entering into an agreement within section 73A(3) the charity trustees must have regard to any guidance given by the Commission concerning the making of such agreements.
(2) The duty of care in section 1(1) of the Trustee Act 2000 applies to a charity trustee when making such a decision as is mentioned in section 73A(4).
(3) For the purposes of section 73A(5) an agreement within section 73A(3) is in force so long as any obligations under the agreement have not been fully discharged by a party to it.
(4) In section 73A—
“benefit” means a direct or indirect benefit of any nature;
“maximum amount”, in relation to remuneration, means the maximum amount of the remuneration whether specified in or ascertainable under the terms of the agreement in question;
“remuneration” includes any benefit in kind (and “amount” accordingly includes monetary value);
“services”, in the context of remuneration for services, includes goods that are supplied in connection with the provision of services.
(5) For the purposes of section 73A the following persons are “connected” with a charity trustee or trustee for a charity—
(a) a child, parent, grandchild, grandparent, brother or sister of the trustee;
(b) the spouse or civil partner of the trustee or of any person falling within paragraph (a);
(c) a person carrying on business in partnership with the trustee or with any person falling within paragraph (a) or (b);
(d) an institution which is controlled—
(i) by the trustee or by any person falling within paragraph (a), (b) or (c), or
(ii) by two or more persons falling within sub-paragraph (i), when taken together;
(e) a body corporate in which—
(i) the trustee or any connected person falling within any of paragraphs (a) to (c) has a substantial interest, or
(ii) two or more persons falling within sub-paragraph (i), when taken together, have a substantial interest.
(6) Paragraphs 2 to 4 of Schedule 5 to this Act apply for the purposes of subsection (5) above as they apply for the purposes of provisions of that Schedule.”
After section 73B of the 1993 Act (inserted by section 36 above) insert—
(1) This section applies to any charity trustee or trustee for a charity—
(a) who is or would be entitled to remuneration under an agreement or proposed agreement within section 73A(3) above, or
(b) who is connected with a person who is or would be so entitled.
(2) The charity trustee or trustee for a charity is disqualified from acting as such in relation to any decision or other matter connected with the agreement.
(3) But any act done by such a person which he is disqualified from doing by virtue of subsection (2) above shall not be invalid by reason only of that disqualification.
(4) Where the Commission is satisfied—
(a) that a person (“the disqualified trustee”) has done any act which he was disqualified from doing by virtue of subsection (2) above, and
(b) that the disqualified trustee or a person connected with him has received or is to receive from the charity any remuneration under the agreement in question,
it may make an order under subsection (5) or (6) below (as appropriate).
(5) An order under this subsection is one requiring the disqualified trustee—
(a) to reimburse to the charity the whole or part of the remuneration received as mentioned in subsection (4)(b) above;
(b) to the extent that the remuneration consists of a benefit in kind, to reimburse to the charity the whole or part of the monetary value (as determined by the Commission) of the benefit in kind.
(6) An order under this subsection is one directing that the disqualified trustee or (as the case may be) connected person is not to be paid the whole or part of the remuneration mentioned in subsection (4)(b) above.
(7) If the Commission makes an order under subsection (5) or (6) above, the disqualified trustee or (as the case may be) connected person accordingly ceases to have any entitlement under the agreement to so much of the remuneration (or its monetary value) as the order requires him to reimburse to the charity or (as the case may be) as it directs is not to be paid to him.
(8) Subsections (4) to (6) of section 73B above apply for the purposes of this section as they apply for the purposes of section 73A above.”
Charities Act 2006