Updated rules on disqualification of charity trustees and senior managers
25 January 2018
It is currently the case that almost anyone can run a charity however, this has always been subject to rules that automatically mean charity trustees can be disqualified from acting.
New legislation, coming into force on 1 August 2018, will extend the grounds for automatic disqualification, and it is important that charities act now to ensure they are prepared well in advance of the summer deadline.
The new “automatic disqualification” grounds will now not only apply to charity trustees but also to “senior management” positions. These will necessarily include the Chief Executive and Finance Director positions; but it is the function and responsibilities of the role that are key, as opposed to the job title. Accordingly, the application of these new disqualification grounds may well extend beyond these specific named roles.
In addition to the existing disqualification grounds of deception and dishonesty, bankruptcy and disqualification as a company director, new grounds that will result in automatic disqualification, as of 1 August 2018, include being on the sex offenders register, and unspent convictions for offences relating to terrorism, money laundering and bribery, misconduct in public office, perjury and perverting the course of justice.
If a charity, or the individual themselves, becomes aware that or an individual involved in a senior management role within the charity now faces automatic disqualification, that individual must not continue to act unless they have obtained a waiver from the Charity Commission. If a trustee is required to resign, the charity should check its governing documents to ascertain whether any such resignation will affect the minimum number of trustees that must attend meetings (the quorum) so that decisions can be properly made. Further, it is a criminal offence, punishable by either a custodial sentence or a fine (or both), for an individual to act as a charity trustee whilst disqualified.
Trustees and other affected senior managers will be able to apply for a waiver from the Charity Commission from 1 February 2018. If a waiver is not obtained, a serving trustee or relevant senior manager cannot continue in their role. Charity trustees should formally resign and a charity should take specific employment law advice if a senior manager becomes disqualified, as a result of the changes and is unable to continue in their role.
The Charity Commission has advised that it will only give a waiver where it considers that it is in the best interests of the charity and is not likely to damage public trust and confidence in the charity. To ensure that a decision is received in good time, the Charity Commission “strongly suggest” that waivers are applied for by 1 June 2018.
The key message here is that charities need to act now. Relevant senior manager positions within the charity should be identified to ensure that the individuals are not affected by the new rules. Recruitment processes for both trustees and senior managers should also be reviewed and updated accordingly. Trustee declaration forms will need to be amended and relevant managers’ employment contracts (or consultancy agreements) will need to be scrutinised and potentially consultation entered into with affected employees to incorporate necessary changes.
There might be a great deal of work that needs to be carried out within the next 6 months and charities will need to take steps now to deal in advance with situations where a current trustee or senior manager will become disqualified as of 1 August 2018.
This article is for general information only. If any of your trustees or senior managers are affected by the new rules and you would like advice on your specific circumstances, please contact Sonya O’Reilly (for employment matters) or Liz Brownsell (for trustee matters) or another member of the Charities Team.
If you are making changes to your board of trustees or senior management team as a result of the new rules and/or would like a refresher on the role and responsibilities of charity trustees, you might also interested in attending our Charity Trustee Induction and Refresher Training or enquiring about in-house training. Please contact Liz Brownsell to discuss your training needs.
This article is from the January 2018 issue of Essential Trustee, our newsletter for charity trustees and senior management.. To download the latest issue, please visit the newsletter section of our website. Law covered as at January 2018.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2018.