SI 2007 No. (N.I. )

© Crown Copyright 2007

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This Explanatory Memorandum refers to the Charities (Northern Ireland) Order 2007 - 2007 No. (N.I. )

THE CHARITIES (NORTHERN IRELAND) ORDER 2007

2007 NO. (N.I. )

EXPLANATORY MEMORANDUM

INTRODUCTION

1.     The above Order is being made under the Northern Ireland Act 2000 and is subject to affirmative resolution.

2.     This Explanatory Memorandum has been prepared by the Department for Social Development ("the Department") in order to assist the reader in understanding the Order. It does not form part of the draft Order.

3.     Many (though not all) of the measures in this Order replicate measures included in the Charities Act 1993 and Charities Act 2006 (both GB Acts).

BACKGROUND AND POLICY OBJECTIVES

4.     This Order provides a definition of "charity" and "charitable purpose", establishes the Charity Commission for Northern Ireland (CCNI) and the Charity Tribunal for Northern Ireland, creates a register of charities, provides for a new form of charitable body (a charitable incorporated organisation) and deals with the regulation of charities and public charitable collections.

5.     In 2000, the Minister for Social Development gave a commitment to review Charities legislation in Northern Ireland, to consider changes as to how the voluntary and community charitable sector is regulated and whether to establish a Northern Ireland Charity Commission.

6.     In March 2004 the Department for Social Development established an Advisory Panel to consider the advantages and disadvantages relating to various options including the retention of the present Northern Ireland system and a move to a system of wider supervision. The Advisory Panel recommended that a system similar to that proposed for England and Wales should be adopted for Northern Ireland, with three significant differences. First, the introduction of a rigorous public benefit test to determine whether technically a charitable purpose actually produces a benefit to the public. Second, all charities operating in Northern Ireland should be registered (there should be no exemption of certain types of charity as in other jurisdictions). Finally, it was intended to apply different financial thresholds in terms of the accounting procedures and audit requirements placed on charities operating in Northern Ireland.

CONSULTATION

7.     The Department carried out a public consultation on the principles underlying the proposals from 11 February to 3 June 2005, and 106 responses were received from a wide range of bodies and individuals, with the majority being broadly favourable. Reservations were expressed about a number of individual proposals, and in four cases the proposals were changed.

8.     The Department carried out a public consultation on the draft Charities Order itself from 17 July to 13 October 2006. A total of 97 responses were received from a wide range of bodies and individuals, with the majority being broadly favourable. There were two main areas of concern, and the draft Charities Order has been amended to deal with these by bringing the accounting/audit levels into line with England and Wales and Scotland, and by applying the certificate of fitness/permit system governing public charitable collections to door to door collections.

FINANCIAL EFFECTS OF THE ORDER

9.     It is expected that there will be no significant costs to the public; additional costs to the Exchequer arising from the proposals set out in this Order in Council will arise mainly from the administration of the new Charity Commission and costs related to the operation of the Appeals Tribunal. It is estimated that the overall additional cost will be circa £800,000 per annum plus start-up costs of circa £300,000.

EUROPEAN CONVENTION ON HUMAN RIGHTS

10.     The provisions of the Order are compatible with the Convention on Human Rights.

EQUALITY IMPACT ASSESSMENT

11.     A screening exercise was undertaken on the proposals in accordance with Section 75 of the Northern Ireland Act 1998. This indicated that all of the categories to be considered under section 75 are equally likely to be involved with charities as beneficiaries or otherwise. These proposals were developed with the objective of increasing cooperation with and credibility of the charity sector in an equality context. Public consultation did not identify any issues selectively affecting any Section 75 groups that would change this view. It was not considered necessary, therefore, to prepare a full Equality Impact Assessment.

SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

12.     The measures included in the draft Charities Order are designed to strengthen the vibrant and diverse voluntary sector, giving it a legal and regulatory framework that will be empowering and facilitate long-term growth. Overall the impact on small business is expected to be minimal. The views of Business in the Community NI and the Federation of Small Businesses were sought as part of the consultation process. Neither organisation commented. While the Order will impact on the charitable and voluntary sector, the changes envisaged will improve the processes for delivering the various objectives of the sector and it is considered that the benefits justify the cost.

13.     Copies of the Regulatory Impact Assessment can be obtained directly from the Department, or its website (http://www.dsdni.gov.uk), and have been placed in the Libraries of the House of Commons and the House of Lords.

MAIN ELEMENTS OF THE ORDER

14.     The Order has 183 Articles and 9 Schedules and is divided into 14 Parts. A commentary on the provisions follows. Comments are not given where the wording is self-explanatory.

COMMENTARY ON ARTICLES

PART I: INTRODUCTORY

15.     Part I comprises Articles 1 to 7 and deals with the definition of "charity" and "charitable purpose". Article 5, which sets out the public benefit test in relation to charitable purpose, specifies that no particular purpose is to be presumed to be for the public benefit and that when determining whether a body provides public benefit, regard must be had to how any benefit gained by non-beneficiaries and disbenefit incurred by the public compares with the benefit gained by the public.

PART II: THE CHARITY COMMISSION FOR NORTHERN IRELAND

16.     Part II comprises Articles 8 to 13 (and Schedule 1) and provides for the establishment of a body corporate to be known as the Charity Commission for Northern Ireland. Articles 9 to 11 deal with the Commission's objectives, functions, and general duties. Article 13 provides for an "official custodian" for charities in Northern Ireland

PART III: THE CHARITY TRIBUNAL FOR NORTHERN IRELAND

17.     Part III comprises Articles 14 to 17 (and Schedules 2, 3 and 4) and covers the creation of a Tribunal to hear appeals against some types of decision made by the Commission.

PART IV: REGISTRATION OF CHARITIES AND CHARITABLE NAMES

18.     Part IV comprises Articles 18 to 23 and requires the Commission to keep a register of charities. The Order does not provide for any exemptions from the requirement to register.

PART V: COMMISSION'S INFORMATION POWERS

19.     Part V comprises Articles 24 to 27 and empowers the Commission to institute inquiries into any aspect of the work of a particular charity or class of charities. The Commission will able to call for the disclosure of documents and to disclose information in pursuit of its functions.

PART VI: APPLICATION OF PROPERTY CY-PRES AND ASSISTANCE AND SUPERVISION OF CHARITIES BY COURT AND COMMISSION

20.     Part VI comprises Articles 28 to 59 and covers the powers of the Commission and the Court to make schemes for the protection of charities. Articles 43 and 44 deal with the circumstances in which property can be vested in the official custodian while Articles 45 and 46 enable the Commission or Court to make "common investment schemes" and "common deposit schemes".

PART VII: CHARITY LAND

21.     Part VII comprises Articles 60 to 65 (and Schedule 5) and allows charities to dispose of charity property in most circumstances. Charities must seek an order of the Court, or of the Commission, before disposing of charity property in certain circumstances, for example, where the disposal is to a connected party.

PART VIII: CHARITY ACCOUNTS, REPORTS AND RETURNS

22.     Part VIII comprises Articles 66 to 75 (and Schedule 6) and deals with the duty of charities to keep accounting records, issue statements of accounts and arrange for their accounts to be audited. Article 67 empowers the Department for Social Development to prescribe the form and contents of such accounts for a charity with an annual income in excess of £100,000. Articles 68 and 69 further specify the auditing requirements to be placed on a charity in accordance with its income. Articles 71 and 72 set out the requirement on charities to prepare annual reports and specify the arrangements for public inspection of such reports.

PART IX: CHARITY TRUSTEES

23.     Part IX comprises two Chapters covering Articles 76 to 97. Chapter I deals with the incorporation of charity trustees and in particular, Article 77 empowers the Commission to issue a certificate of incorporation establishing the trustees of a charity (not the charity itself) as a body corporate. Chapter II sets out a number of other provisions relating to charity trustees, including provisions concerning persons disqualified for being trustees and remuneration, etc.

PART X: CHARITABLE COMPANIES

24.     Part X, which comprises Articles 98 to 106, makes provision with respect to charitable companies including rules covering amendments to their constitutions and the audit and examination of their accounts.

PART XI: CHARITABLE INCORPORATED ORGANISATIONS

25.     Part XI comprises Articles 107 to 123 (and Schedule 7) and provides for the constitution of charitable incorporated organisations, a new legal entity for charities. Its purpose is to avoid the need for charities that wish to benefit from incorporation to register as companies and be liable to dual regulation.

PART XII: POWERS OF UNINCORPORATED CHARITIES

26.     Part XII comprises Articles 124 to 131 and deals with the rules under which small unincorporated charities may transfer their property to other charities, replace their current charitable purposes with new ones or modify their constitutional powers or procedures.

PART XIII: FUNDING OF CHARITABLE INSTITUTIONS

27.     Part XIII comprises four Chapters covering Articles 132 to 162. Chapter I provides definitions for "charitable institution" and "collector". Chapter II deals with the regulation of public charitable collections - both those that are termed "street collections" and those conducted "door-to-door". Articles 136 to 144 cover the need for individuals or organisations that wish to promote collections to obtain a public collections certificate and empowers the Commission to either issue or refuse such a certificate. Articles 145 to 148 deal with the requirement on promoters to obtain a permit for most public collections and empower the Commission to issue such permits. Chapter III provides for the detailed regulation and control of fund raising and Chapter IV empowers the Department to give financial assistance to bodies whose activities directly or indirectly benefit the whole of Northern Ireland.

PART XIV: MISCELLANEOUS AND SUPPLEMENTARY

28.     Part XIV comprises Articles 163 to 183 (and Schedules 8 and 9) and covers a range of technical provisions relating to the Commission, together with minor and consequential amendments and repeals.

COMMENCEMENT

29.     In order to accommodate the complex arrangements that will be needed to establish the new Charity Commission and the Charity Tribunal for Northern Ireland, the main provisions of this Order are to be brought into operation on a day or days appointed by order of the Department.