Presentation from Trustee Conference, 7 November 2016 Thea Longley Hannah Lyons

1. Drinks sponsors:
CHARITY LAW AND
REGULATION UPDATE
THEA LONGLEY AND HANNAH
LYONS (BWB)
7 NOVEMBER 2016
Partner sponsor:
Media partner:
Lead sponsor:

2. WHAT WE WILL COVER:
- THE CHARITY COMMISSION
- NEW 2016 CHARITIES ACT
- COMPANY LAW CHANGES
- COMMON REPORTING STANDARDS
- IICSA
- FUNDRAISING LAW & REGULATION
- DATA PROTECTION UPDATE
Drinks sponsors:
Partner sponsor:
Media partner:
Lead sponsor:

3. CHARITY COMMISSION

5. COMMISSION STRATEGIC
PRIORITIES
1. Protecting charities from abuse
or mismanagement
2. Enabling trustees to run their
charities effectively
3. Encouraging greater
transparency and accountability
4. Operating as an efficient,
expert regulator with
sustainable funding

6. CHARITY COMMISSION
ACTIVITY
₋ 53 inquiries opened (down from 103)
₋ 14 notices of intention to remove trustee
(up from 4)
₋ 1,582 permissions cases (up from 1,169)
₋ Charity registration up 14% to 8,198
applications

7. SIR (1)
- Serious incident reports
- 2015/16 - 2,117 SIRs
- Duty on trustees to submit an
annual return if income over
£25k
- Annual Return includes a
declaration that there are no
unreported serious incidents
- Charity Commission want SIRs
reported promptly

8. SIR (2)
- Wide definition includes:
- Fraud/illegality/harm to
beneficiaries
- Not having a safeguarding policy
- Losses of property to fire, flood or
conflict
- Deliberate use of charities for
significant private benefit
- Anonymous donation of £25k or
more
NB: CC currently consulting on SIR
guidance

9. TIPS FOR DRAFTING A SIR
- Keep it factual and consider
anonymising personal details
- Set out steps taken to deal with
issue
- Do not defame anyone
- Remember the SIR could be
subject to FOI and made public

10. CIOs (CHARITABLE
INCORPORATED
ORGANISATIONS)
- Conversion provisions for
charitable companies and CICs
to become CIOs imminent
- April 2016 Government
announced they’d bring in the
provisions in October 2016
- Draft regulations consulted on
- Likely role out next year – exact
timings tbc.

11. CHARITY COMMISSION
GUIDANCE (1)
NEW OR UPDATED:
-- CC 38 Charities and Litigation
- CC 35 Trustees, trading and tax
- CC 19 Charities reserves: building
resilience
- CC 12 Managing a charity’s finance
- CC 14 Charities and Investment
matters
- CC 20 Charity Fundraising

12. CHARITY COMMISSION
GUIDANCE (2)
- Renewed emphasis on CC 27 It’s your
decision: charity trustees and
decision making
- Grant funding non-charities new
guidance consulted on but not
finalised

13. CHARITIES ACT 2016

14. 2016 ACT – CHARITY COMMISSION
DISQUALIFICATION POWERS
₋ Charities (Protection and Social Investment) Act
2016
₋ Longer list of offences leading to automatic
disqualification of trustees (formerly dishonesty
offences and company law-related issues only.
Now includes terrorism and sex offenders)
₋ Charity Commission powers to suspend and
disqualify trustees, including on grounds of past or
continuing conduct which may be damaging to
public trust and confidence in charities
₋ This leads to disqualification from holding a senior
management position in a charity

15. 2016 ACT – OFFICIAL WARNINGS
₋ Power to issue official warning to charity
or trustee(s) (and to publicise it) for
misconduct, mismanagement or breach
of trust or duty
₋ No minimum notice (minister has said
normally at least 14 days)
₋ No right of appeal
₋ Notice must say what Commission
believes should be done to rectify the
position

16. 2016 ACT REGULATION OF
SOCIAL INVESTMENT
₋ A statutory power to do social investment
₋ Allows charities, including incorporated and
unincorporated, but not those created by statute or Royal
Charter, to invest
“with a view to both (a) directly furthering the charity’s
purposes; and (b) achieving a financial return for the
charity”.
₋ Intention to remove uncertainty over the ability of
charities to make social investments – and particularly
“mixed-motive” investments

17. HOW MIGHT THE NEW
POWER BE USED?
₋ The full spectrum of social investments is permitted
₋ Where trustees consider investment to be in the interests
of a charity
₋ Primarily financial, or for primarily social, reasons
₋ A combination of mission benefit and financial return - no
minimum degree of mission benefit before the power is
engaged
₋ Charity’s purposes need not be advanced on an exclusive
basis
₋ Investments made using the power will not have to be
restricted for the investor’s objects

18. EXAMPLE: PURPOSES NEED
NOT BE EXCLUSIVELY
ADVANCED
“A CHARITY MIGHT HAVE THE CARE OF HORSES AS ITS
CHARITABLE PURPOSE. IT MAY WISH TO INVEST IN A HORSE
AND DONKEY SOCIAL ENTERPRISE, WHICH PROVIDES JOINT
FACILITIES FOR BOTH. THE SOCIAL ENTERPRISE MAY ALSO
EXPECT TO MAKE A FINANCIAL RETURN, PERHAPS FROM
CHARGING VISITORS. HAVING WEIGHED THE BENEFITS TO
HORSES ALONG WITH THE EXPECTED RISK-ADJUSTED
FINANCIAL RETURN, THE HORSE CHARITY IS ABLE TO INVEST IN
THE HORSE AND DONKEY SOCIAL ENTERPRISE. SO LONG AS
THE TRUSTEES HAVE SATISFIED THEMSELVES THAT THE
COMBINATION OF EXPECTED FINANCIAL RETURN AND
MISSION BENEFIT IN RELATION TO HORSES IS APPROPRIATE,
THIS IS COVERED UNDER THE SOCIAL INVESTMENT POWER.”
LORD BRIDGE
HANSARD

19. HOW SHOULD TRUSTEES
CHOOSE TO USE POWER
₋ Trustees must “satisfy themselves that it is in the
interests of the charity to make the social
investment, having regard to the benefit they
expect it to achieve for the charity…”
₋ Balancing act for trustees between mission benefit
and financial return – but no need to quantify each
in making a precise calculation
₋ The power can be excluded by express
constitutional provision
₋ Does not apply to the use of assets held as
permanent endowment

20. COMPANY LAW CHANGES

21. SMALL BUSINESS, ENTERPRISE
AND EMPLOYMENT ACT 2015
₋ Affects charitable companies and charities with
subsidiary trading companies
₋ Register of people with significant control (PSC
Register). Broadly:
- Individuals with more than 25% of voting
rights or shares
- Control over appointment and removal of a
majority of directors
- Other significant influence or control over
the company

22. SMALL BUSINESS, ENTERPRISE
AND EMPLOYMENT ACT 2015 (2)
- Ban on corporate directors
- Annual Returns to become Confirmation
statements
- Central Register – statutory registers can be
maintained online at Companies House

23. COMMON REPORTING
STANDARDS

24. COMMON REPORTING
STANDARD (CIS)
₋ New Rules from May 2017
₋ If regime applies charity has to
collect information from
beneficiaries it is giving grants to
about tax residency and keep it for
6 years
₋ Some information must be
disclosed to HMRC

25. CIS – WHICH CHARITIES
DOES IT APPLY TO
1) Unincorporated charities which:
a) derive at least 50% of their income
from investments;
b) use discretionary investment
managers
c) make grants to their beneficiaries
1) Incorporated charities (e.g.) CLGs, CIOs and
Royal Charter bodies) which hold restricted
funds or endowment to which criteria
above applies
HMRC guidance published August 2016 soft
landing if charity is engaging with
requirements…

26. IICSA

27. IICSA
₋ Goddard Inquiry now led by Professor
Alexis Jay
₋ Inquiry covers:
• Schools;
• Hospitals;
• Children’s homes;
• Churches;
• Mosques, places of worship; and
• charities/voluntary organisations

28. IICSA (2)
₋ Some charities may receive questions or
requests for information from the inquiry
₋ Renewed focus on safeguarding generally
₋ We recommend reviewing safeguarding policies
and procedure
₋ Consider document retention policy and
preserving potentially relevant information (be
proportionate)
₋ Trustees need to be engaged

29. FUNDRAISING

30. CHANGES IN FUNDRAISING
LAW AND REGULATION
- Amendments to Code of Fundraising Practice
- Establishment of Fundraising Regulator
- Fundraising Preference Service
- Charities (Protection and Social Investment) Act
2016

31. CHANGES TO CODE OF
FUNDRAISING PRACTICE
• Must not make marketing calls to TPS registered
numbers without consent
Code no.
8.2.3 b)
• Must include an opt-out statement on all fundraising
communications to named individuals
• Must be same size as donation text or min font 10
Code no.
6.6(a)
• All permission statements on fundraising materials
must be same size as data collection/ donation text or
minimum font size 10
Code no.
5.2 (o)

32. • Must not share personal data for payment for
marketing purposes
Code no.
6.5(a)
• Must not share personal data for marketing
purposes without explicit consent
Code no.
6.5(b)
• Must comply with all legal requirements relating
to data protection and have regard to ICO
guidance
5.2(a)
and L14

33. FUNDRAISING REGULATOR
₋ New Fundraising Regulator established 7
July 2016 following Etherington Report
₋ Voluntary, independent, non-statutory
regulator of charitable fundraising
₋ Registration opened October 2016
₋ Funded by levy on all charities with and
annual fundraising expenditure of
£100,000 or more
₋ Sliding scale dependant on total
fundraising spend

34. FUNDRAISING PREFERENCE
SERVICE
₋ A fundraising “reset” service to stop
fundraising communications from
charities in a single step
₋ Will cover all channels- addressed mail, e-
mail, phone and text, but not face to face
₋ Narrower definition of “fundraising
communications”
₋ Charities required to screen against FPS
₋ Ability to “check in” with donors
₋ Likely to be in introduced in 2017

35. CHARITIES ACT 2016
₋ Commercial participator and professional fundraising
agreements will need to include:
₋ details of voluntary fundraising scheme/standards to
which CP/ PFundertakes to be bound by
₋ details of how the CP/ PF will protect vulnerable people
and others from:
₋ unreasonable intrusion on privacy
₋ unreasonably persistent fundraising
₋ undue pressure to donate
₋ details of arrangements to enable the charity to
monitor compliance with the agreement
₋ Failure to comply- the CP/PF is unable to enforce
charity may be in breach

36. CHARITIES ACT 2016
Charities which have their annual accounts audited must
include the following in trustees annual report:
The charity’s “approach” to fundraising, especially if a CP/PF was
used
Details of fundraising scheme/standard which it or its fundraisers have
agreed to and any failures to comply with these
Whether and how the charity monitored fundraising activities carried
out on its behalf
How many complaints the charity has received about fundraising
What the charity has done to protect vulnerable people and others
from unreasonable intrusion or persistence, or undue pressure
Sanctions are light touch – request to comply, but double defaulters
are investigated

37. DATA PROTECTION
- Updates to ICO Guidance
- ICO investigations
- General Data Protection Regulation

38. UPDATED ICO GUIDANCE
Direct Marketing Guidance (31 March 2016)
₋ Reliance on “indirect consent” for electronic
communications is unlikely to be valid unless
“specific organisation was named or is within
a precisely defined category”.
₋ Expanded section on charities - “not-for-
profit organisations need to ensure that they
clearly and prominently explain to supporters
what their details will be used for…”
₋ Greater clarity on difference between
marketing and administrative calls.
Privacy notices – code of practice (7 October
2016)

39. ICO INVESTIGATIONS
− Operation Cinnabar – calls to supporters
on TPS
− Operation Linden – data sharing
Other areas of ICO focus:
− Tele-matching (and other “data-
matching”)
− Wealth screening and legacy predicting

40. GENERAL DATA
PROTECTION REGULATION
₋ 260 pages long (nearly three times the
length of the DPA 1998)
₋ Four years in the pipeline – enacted
May 2016
₋ Comes into force May 2018
₋ Subject of much negotiation and
rumour
₋ Principles largely remain the same as
before
₋ How will Brexit affect this?

41. GDPR – KEY CHANGES
₋ Data processors now covered by some aspects of the regulations
₋ Additional requirements for contracts with data processors
₋ Wider application to non-EU data controllers
₋ Notification of some types of security breach now mandatory
₋ New rights for individuals including the right to be forgotten and
to object to processing
₋ Removal of requirement to register (aka “notify”) with the ICO
₋ Changes to how consent can be obtained
₋ Changes to subject access requests
₋ Higher fines
₋ Some organisations must have a nominated Data Protection Officer

42. GDPR – TOP TIPS
1. Review your charity’s data protection statements
and privacy policy ahead of May 2018 to ensure
that they include the additional information
required under GDPR.
2. Check that you have valid consents to send
contacts direct marketing (where consent is
required).
3. Review contracts with data processors to check
that they contain the prescribed clauses, especially
if the contract term goes beyond May 2018
4. Carry out an audit of data security practices and
policies and procedures for safeguarding data in
order to avoid the much higher fines for breaches.

43. CONTACT DETAILS
Thea Longley
Hannah Lyons
Bates Wells & Braithwaite London
LLP
10 Queen Street Place, London
EC4R 1BE
Tel: 020 7551 7777
Website: www.bwbllp.com
Email: t.longley@bwbllp.com
h.lyons@bwbllp.com