Charity purposes and rules

Published by Lucy Hammond on 10 May 2022

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Charities are required to follow a number of laws and regulations as well as act in accordance with their governing document. These rules help to ensure that the funds they are entrusted with are properly used in line with their objectives.

However, recently charities have been reacting quickly to major global events and in their desire to help they may forget to check they are still complying with these rules.

We have set out below a few points for trustees to consider across two key areas.

Does your charity purpose cover your planned fundraising?

It is natural for many charities to be considering whether they can help those affected by the war in Ukraine. However, charities must be careful to ensure any new activities are within the objects and purposes set out in their governing document. Provided the objects in the governing document allow, charities can start new activities to help those affected straight away. If the objects in the governing document do not allow the activity your charity was hoping to undertake, then the governing document can be amended. However, before changes are made to the governing document, the Charity Commission advises trustees to consider whether this is in the best long-term interests of your charity and whether there are already existing charities who may be more suited to take action.

While fundraising continues to be challenging in the sector, charities must also maintain good governance surrounding the funds they receive. This includes consideration of anti-money laundering and legal restrictions on the use of funds. Trustees must consider the source and planned application of funds before accepting them. Charities should have in place procedures to consider potential money laundering including appropriate checks on individuals and organisations that give money to the charity and also those who are beneficiaries of the charity.

Charities must not accept funds with restrictions of use that it will not be able to meet. Instead, it would be better to decline the donation so another charity can use those monies more quickly to deliver the impact to beneficiaries.

Are your Trustee Meetings compliant?

Other areas of a charity’s operations are also dictated by the governing document, such as the frequency and method of meetings. During the Covid-19 pandemic, the Charity Commission relaxed its approach regarding charities holding meetings by methods not allowed in the governing document. This meant that meetings could be held virtually (e.g. online or via telephone), allowing charities and trustee boards to continue functioning during the worst stages of the pandemic.

At various points during the past two years charities may have needed to postpone or cancel meetings due to the impacts of Covid-19. Again, the Charity Commission relaxed its approach to such postponements and cancellations where these were not permitted in the governing document.

However, with restrictions lifted and face to face meetings resuming, the Charity Commission is ending their flexible approach. After 21 April 2022 charities must ensure that their governing document allows them to hold meetings online, by telephone or with a mixture of face to face attendees and other joining virtually, if they wish to use these methods. Similarly, charities wishing to cancel or postpone a meeting should ensure their governing document allows them to do so. If the governing document does not allow these methods, it should be updated as soon as possible.

If your charity has held a meeting on or after 22 April 2022 which was not in a format permitted by the governing document, then trustees must meet again in a permitted format in order to formally re-approve decisions agreed upon.

No matter the format of the meeting it is always good governance to ensure appropriate minutes are kept of meetings and the decisions made. These can be referred to in case of query or challenge at a later date.

We recommend that trustees regularly review how the charity ensures compliance with their relevant rules to avoid any accidental breaches of laws or regulations. In addition to the above, you may find the Charity Commission 5-minute guide on charity purposes and rules a useful prompt.

For more information about the topic explored in this article, contact us here.

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