Less charitable times lie ahead

The draft Charities Bill, published on 27 May, attracted a lot of press attention. Most of the reports concentrated on the element of "public benefit" that must be shown for all charities (HT 4 June, page 10).

But the draft bill also contains a number of measures that would affect registered social landlords.

As anticipated, the bill extends the list of purposes that qualify as charitable. After the initial consultation on the proposed changes to charity law, the government confirmed that it wanted to add a reference to social housing to the list of charitable activities.

But the bill does not expressly do this. Instead it refers to "the relief of those in need by reason of youth, age, ill health, disability, financial hardship or other disadvantage" – and then makes it clear that this includes relief given by the provision of housing or care to these people.

So the bill does not expand the list of which RSL activities qualify as charitable, nor does it necessarily equate charitable housing provision with the Housing Corporation's definition of "social housing".

The wider inventory of charitable activities does, however, cover areas that an RSL may be involved in.

These include the prevention or relief of poverty, the advancement of citizenship or community development – including rural or urban regeneration – the progression of environmental protection or improvement and the betterment of education or health.

Think you're exempt?
Under existing charity law, all industrial and provident societies with charitable objectives are classified as "exempt charities", which means they are excluded from the requirement to register directly with the Charity Commission. Under the draft bill, only societies with charitable objectives that are also RSLs would be exempt.

Where an RSL has a charitable non-RSL society within its group, it would need to register the society with the Charity Commission, which will regulate it.

But RSLs should note that the bill does not include a proposal for RSLs that are companies limited by guarantee, and therefore already registered with the Charity Commission, to become exempt charities.

These charities would, unfortunately, still have a dual regulatory system comprising the Housing Corporation and the Charity Commission.

For industrial and provident societies that are RSLs, the bill makes it clear that the Housing Corporation would become their principal charity law regulator. The Housing Corporation would assume a new statutory duty to do all that it reasonably can to increase compliance by RSL boards with their legal obligations in exercising control and management of administration of the charity.

The days when charitable industrial and provident societies had an easier ride than registered charities may well be over

This will mean the Housing Corporation would need to have serious regard to charity law obligations and will need to ensure that RSLs that are charitable industrial and provident societies comply with these.

The days when charitable industrial and provident societies had an easier ride than registered charities may well be over.

Another important aspect of the Charities Bill is that it establishes a charity appeal tribunal, enabling registered charities to dispute Charity Commission regulatory decisions.

But where exempt charities fall under the charity regulation of the Housing Corporation it is not made clear what appeal mechanism, if any, is going to apply.

Take their advice
An important protection for those sitting on the boards of charities and working for, or with, charities is the strengthening of the Charity Commission's power to give advice and guidance under section 29 of the Charities Act 1993.

As before, registered and exempt charities can both apply for guidance. The new bill allows not just charity trustees to apply for guidance but also officers, agents or staff.

Another significant aspect of the new bill is the provision for charitable incorporated organisations. This is a new legal format designed specifically for charities.

One of the reasons behind the proposal was the feeling that structures for companies limited by guarantee were over-complex and created ambiguity about how the duties imposed on directors by company law overlapped with those imposed on trustees by charity law. The problems arising from needing both a board of directors as well as members were also a consideration.

It will be interesting to see how suitable charitable incorporated organisations will be for RSL groups when the detail underlying the new structure is fleshed out .

One positive aspect of the bill is that there will be statutory procedures for the conversion of charitable companies or industrial and provident societies into charitable incorporated organisations.