There are rules which disqualify certain people from being a trustee or senior manager of a charity.
Until 1 August 2018, the reasons for disqualifications were narrow. They were mainly relating to bankruptcy, unspent convictions for crimes involving dishonesty or deception.
The rules which come into effect on 1 August 2018 as part of the charities (Protection and Social Investment) Act 2016 made two significant changes.
Changes on 1 August 2018
The new rules have increased the number of legal reasons that disqualify an individual from acting as a trustee, including being on the sex offenders register, and certain unspent convictions (such as for terrorism or money laundering). The new rules also mean those disqualified from acting as a trustee are also disqualified from holding certain senior manager positions in a charity (including chief executive and director/chief finance officer roles). However, it is important to understand it is the function of the role and not the job title that this new rule would apply to. You can check the senior manager position visual as set out in the Charity Commission’s guidance to ascertain whether a person in a charity is acting as a Senior Manager.
It is important to note that the disqualification rules will not prevent disqualified people from working in charities at all. They can still work in junior roles, as volunteers and any other role that is not subject to the disqualification rules.
Steps that a Charity should now take
As per the new rules the Charity Commission recommends that charities ask an individual who applies for a charity trusteeship to complete a further declaration to confirm that they will not be disqualified under the new rules.
It is normally an offence to act whilst disqualified. Conviction may lead to a fine, imprisonment or both. If a Trustee acts whilst being disqualified, the charity may also have to repay any money received during this period of any sums of the benefit received from the charity in connection with acting as a trustee while disqualified.
If a trustee is disqualified, they can apply to the Charity Commission to waive the disqualification. If a waiver is given by the Charity Commission, this will bring the disqualification to an end in respect of the charities named in the waiver.
It is important that Charities carry out checks on their trustee declarations to make sure that they meet the requirements of the new automatic disqualification rules. Sample declarations are available to download from the Charity Commission’s website, which can be accessed from the link below. Although, current trustees would have signed declarations previously, they will need to complete new ones in line with the new rule changes. You should also carry out checks in official registers, such as the Insolvency Register, Companies House, “Removed” Trustee Register, to check if disqualifications have been recorded.
If a person will become disqualified by the new rules then they must not act to continue in their position and should resign formally.
The charity may consider supporting a waiver application made by the disqualified trustee, but the Charity must consider a range of factors before agreeing to support a waiver to ensure that they discharge their duty of care correctly.
When considering waiver applications, the Charity Commission will look at factors such as the seriousness of the conduct and the circumstances that led to the disqualification. This will be dealt based on merits on each separate case.
You must also make sure that the Charity periodically reviews the statuses of the trustees by periodically signing declarations.
New Trustees and Senior Managers
Charities must update the pre-appointment checks they make on prospective charity trustees and relevant senior managers. Charities should also check that systems are in place before appointment to ensure that prospective trustees and senior managers are not disqualified.
Charites should also make sure that any new prospective trustees and senior managers make declarations to state that they are fit to act and that they sign the new automatic disqualification declaration. Also, make sure that checks are undertaken in official registers to ascertain that the information provided by them in the declarations are verified.
Useful guidance and links
The Charity Commission has produced comprehensive guidance on the new rules, such as:
Automatic Disqualification Rules
Disqualification Reasons Table
How Charity Commission makes decisions relating to waiver applications:
If you think that your Charity is affected by the new rules it is important that you seek legal advice immediately. You can also contact us for help and advice.
For further information relating to this article or any aspect of Charity Law, please contact Partner, Mr Khalid Sofi on 020 3490 1475 or via email to firstname.lastname@example.org