The Charities (Amendment) Act 2024 (the "Act") has recently been signed into law.
The Act has been welcomed by the Minister of State with responsibility for Community Development and Charities and by various charities' representative bodies.
The Act amends certain provisions of the Charities Act 2009 (the "2009 Act"), the Charities Act 1961 and the Taxes Consolidation Act 1997 and aims to enhance accountability and transparency whilst improving public trust in a sector that has been the subject of a number of recent controversies.
It will be formally brought into operation by way of a Ministerial commencement order.
We will now consider a number of key changes included in the Act which charity trustees, those involved in the running of charitable organisations and advisors ought to be aware of.
Some Key Changes:
1. Definition of charity trustees and members
The Act makes changes to the definition of charity trustees and introduces a new definition of a member of a charity. It clarifies that a secretary is not automatically regarded as being a charity trustee, unless they are also a member of the board or governing body. It is worth noting that registers of charity trustees may need to be updated to reflect this change once the new section is commenced.
The duties of trustees are now also clearly laid out in the Act.
A new definition of members has also been introduced. For charities that are companies, the members are persons who come within the definition of company members within the Companies Act 2014.
For charities that are not companies, the members are those with the power to appoint, nominate or vote for the appointment of a person as a charity trustee of that organisation.
Charities must now keep a register of all members, regardless of their legal structure.
2. Constitutional amendments
The Act provides clarification on what types of constitutional amendments will require the consent of the Charities Regulatory Authority (the "Authority").
Prior consent from the Authority will be required in the case of changes to the charitable purpose of the charity or to certain "specified clauses", which includes the charity's objects clause, income and property clause and winding up clause.
In the case of changes to these specified clauses, the Authority may withhold consent if the proposed amended clause is contrary to the 2009 Act.
If a charity seeks to amend its charitable purpose, the Authority may withhold consent where it considers that the proposed purpose is not a charitable purpose, or the charity has not demonstrated that it has or will have the "organisational structure or expertise" to advance the proposed amended charitable purpose.
This qualitative assessment and determination by the Authority as to an organisation's set up and operation where changes are being made to governing documents is a new development and it will be interesting to see how it is dealt with by the Authority in practice.
3. Financial reporting
The Act will take more charities outside of the scope of the requirement to prepare a full statement of accounts, raising the income and expenditure threshold from €100,000 to €250,000 for charities which are not companies. Charities which are companies must prepare financial statements in line with the requirements under the Companies Act 2014.
While the requirement to have annual accounts audited currently applies when the gross income of a charity surpasses the current threshold of €250,000, the maximum threshold that the Minister may set is now increased under the Act from €500,000 to €1,000,000. The Minister has indicated that he intends to set this threshold at an increased figure of €500,000.
4. The advancement of human rights as a charitable purpose
The inclusion of "the advancement of human rights" as a charitable purpose is a welcome development. This will give greater scope for human rights organisations to be classed as a charity under the legislation, and such organisations ought to begin preparing themselves for registration as a charity and familiarising themselves with the legislation that they will now find themselves subject to.
5. Authority approval for certain agreements and appointments
The 2009 Act envisaged a charity being allowed, in certain circumstances, to enter into agreements with its trustees, members and people personally connected to them for the provision of goods and services to or on behalf of the organisation, subject to various restrictions. The provision was never however commenced.
The Act regulates such agreements more closely, and whilst such agreements can be entered into without the approval of the Authority, there are specific conditions which must be met, including declaring that the agreement is in the best interests of the charity etc.
Care will need to be taken to ensure that all of the qualifying conditions are met in relation to the agreements and appointments that may be allowed.
It will also be now permissible to appoint paid employees as a charity trustee, which provides useful clarity for boards. While the Act allows this, the charity's governing instrument would need to be reviewed to see if it is allowed.
A key factor which charities must also bear in mind is the requirement for remuneration for any such agreements to be reasonable and proportionate having regard to the service provided. Charities must also keep a register of any such agreements and appointments.
A breach of any of the requirements set out in the legislation can render the agreement null and void and the charity trustees shall be guilty of an offence. Persons guilty of an offence under the 2009 Act are liable on summary conviction to a fine of up to €5,000 and/or a term of imprisonment of up to 12 months, or on conviction on indictment to a fine of up to €300,000 and/or a term of imprisonment of up to 10 years.
6. Mandatory notification to the Charities Regulatory Authority
The Act introduces mandatory written notification to the Authority in the following scenarios:
- the resignation or appointment of a charity trustee;
- the charity breaches a condition of its registration;
- information provided in an application for registration as a charity or on the register of charities ceases to be correct; and
- it is proposed to wind up the charity.
Charities will need to keep these notification requirements in mind when any such situation arises and arrange for the appropriate notification to be made. Failure to notify the Authority is an offence on the part of the charity trustees and the charity where it is a body corporate.
7. Removal from the Register
Concerns had been raised as to the potential ease at which charities could be deregistered where the Authority formed the opinion that the charity should be removed from the Register.
The Act now provides a clear framework for the process of removal from the Register, and sets out that the approval of the High Court will be required in most cases for the removal of a charity from the Register to take effect. Until such time as the more robust removal notice procedure is commenced it would seem that any current removal applications that the Authority may be pursuing should be stayed in the interests of fairness.
Will There be Guidance for Charities to Assist with Good Governance?
The Authority has welcomed the introduction of the new legislation and has announced plans to develop guidance for charity trustees and those involved in managing or advising charities as the changes being introduced under the Act are commenced.
While any such guidelines or codes of conduct developed by the Authority will not have the same effect as legislation, the Act provides that charities and charity trustees shall have regard to them. It is therefore clear that it will be expected of charities that any such guidelines or codes of conduct will be taken into account and adhered to by charity trustees and this is something which they must bear in mind when ensuring that they meet their annual governance code compliance requirements.
Conclusion
While it remains to be seen whether the new legislation improves public trust in the sector or not, charity trustees need to be preparing their organisations for the new measures which are the first major revamp of charities law in Ireland since the Charities Act 2009 was commenced a little over a decade ago.
Co-authored by Evan Fitzgerald
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