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06 January 2021

22: Charity law in 2021 – what might we expect?

Happy new year and welcome to 2021. With the country in lockdown again and concerns over mounting coronavirus cases, it can be difficult to think about anything else which might be coming our way. And, after what 2020 threw at us, it is tempting not to go too far in trying to predict what we might expect from 2021. However, there are some charity law developments which we can expect in coming months and, if 2020 has taught us anything, it is the importance of being prepared.

A quick look back at some other things that happened in 2020

Obviously the pandemic and its effects were the dominant features in most of our lives in 2020, requiring emergency legislative and ‘unprecedented’ economic responses and even pushing the all-encompassing Brexit further down the government and news agendas. Given these challenges, it is perhaps surprising that many of the legal developments which, in the innocent days of December 2019, we were expecting to happen in 2020 did carry on. For example:

  • in January 2020, the Supreme Court heard the case of Lehtimӓki v Cooper, on members’ duties and the court’s charity jurisdiction, and gave judgment in July (see our blog for further details);
  • on business rates, the government proceeded, with only a short delay, with its fundamental review of business rates in England, the Welsh government consulted on charity rates relief in respect of independent schools and hospitals and the Scottish government proceeded with legislation to remove charity rates relief from mainstream independent schools in Scotland;
  • the government has continued with its significant proposals to change the UK’s company registration framework and how Companies House operates (on which more below);
  • a review into judicial review was also begun; and
  • the case brought by the Official Receiver seeking disqualification orders against certain former directors and the CEO of Keeping Kids Company came to court.

Given that the machinery of government, the courts and, as noted below, the regulators does not stop even in the face of a global pandemic, what likely changes should we be aware of in 2021?

Some things we can expect in 2021

A (non-exhaustive) sample of likely developments in 2021 is set out below:

The Charity Commission

Governance, risk management and assurance

Throughout 2020, a consistent message has been coming through the Commission’s inquiry reports – in particular, raising concerns about:

  • unauthorised trustee benefits;
  • conflicts of interests not recognised and/or managed;
  • financial control failures; and
  • failure to make serious incident reports.

In July 2020, the Commission also published a regulatory alert to 600 large, service delivery charities, following its RNIB statutory inquiry report, and will now be in the process of following up with a sample of those charities to review their approach to governance, risk management and assurance mechanisms.

We can, therefore, expect to hear more on these themes in 2021, and charities should aim to schedule some time to review their own governance arrangements.

Responsible investment

We also expect to hear more from the Commission on responsible investment by charities. The Commission launched an informal consultation on responsible investment in a January 2020 blog and followed this up in a blog of 24 November 2020 on the barriers to responsible investment. It is not yet clear what the Commission has in mind in the ‘next stage of our work on responsible investments’, but we should hear something in the coming months.

Charity pay

We may also hear the results of a ‘study of pay in charities’ which the Commission referenced in a decision of 20 December 2019 relating to Marie Stopes International over CEO pay. The Commission originally expected to publish its findings in 2020.

?Guidance on member duties

The Supreme Court judgment in the Lehtimӓki case, mentioned above, suggested that the Charity Commission could issue guidance on charity members’ duties and some of the associated practicalities. It is not yet clear if the Commission is minded to do so.

A new Chair

Much of the above will happen, of course, under the auspices of a new Chair, as Baroness Stowell’s term ends in February 2021.

The Scottish Charity Regulator

The Scottish Charity Regulator, OSCR, has just announced a consultation on Strengthening Scottish Charity Law. The consultation, which closes on 5 February 2021, will be of relevance to those charities which are dual-registered in England/Wales and Scotland. It could also have wider implications if, for example, OSCR were to obtain powers which extend beyond those of the Charity Commission, which might then form a basis for the Commission to seek equivalent power.

Business rates

A final report setting out the full conclusions of the English fundamental review of business rates is due to be published in ‘spring 2021’. In Scotland, the withdrawal of charity rates relief from mainstream independent schools is due to take effect from 1 April 2021. There are also some charity rates relief cases which are due to be heard in the Court of Appeal during 2021.

?A government response to the Law Commission’s charity law project

Perhaps more in hope than in expectation but, with all the challenges charities are facing, it would be a positive development if the government were to respond, more than 3 years after the event, to the reform proposals put forward by the Law Commission in its September 2017 report.

Decision in the Kids Company director disqualification case

The court case finished just before Christmas after a 10-week trial. The decision is likely to be significant as it will involve consideration of the criteria for director disqualification in the context of (volunteer) charity trustees, as well as whether the former CEO was a ‘de facto’ charity trustee.

Companies House and company reforms – consultations close on 3 February 2021

In December 2020, BEIS launched 3 further consultations as the next stage in implementing new measures for greater corporate transparency and reform of the company register and registrar’s powers (referenced above).

The individual consultations are on: Implementing the ban on corporate directors; Improving the quality and value of financial information on the UK companies register; and Powers of the Registrar.

All 3 consultations contain proposals which will affect charities which are companies or which have companies within their structures. Any such charities should consider, therefore, whether they wish to input in to the consultation process, either directly or via a wider sector response, to help ‘charity-proof’ the proposals. We intend to submit a response to the consultations.

More detail on these consultations will follow in next week’s blog.

And, of course, something else which will be playing out in coming months (as well as the ongoing impact of the pandemic) will be the effects of Brexit. Charities are already finding challenges arising from it, but it is hoped that there must be opportunities too, all of which are likely to start becoming more apparent as the effects bed in. 2021 already looks set to have its challenges for the sector.

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