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23rd February 2017

Changes to Charity Trustee Disqualification Rules

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The Charities (Protection and Social Investment) Act 2016 (C(P&SI)A 2016) received Royal Assent on 16 March 2016 and inserts new provisions into the Charities Act 2011.
With effect from 1 October 2016 the Charity Commission (‘Commission’) has new discretionary powers to disqualify an individual from being a charity trustee where it is satisfied that a) one of six conditions applies b) the person is unfit to be charity trustee and c) the order is desirable in the public interest to protect public trust and confidence in charities. Additional powers for the Commission to remove disqualified persons if they remain in post once disqualified and to continue with the removal process if they resign to avoid this sanction are also now in force. An individual subject to a disqualification order is also disqualified from holding an office or employment in the charity with senior management functions.

An individual who is disqualified can apply to the Commission for an order to vary or waive the disqualification and also has a right of appeal to the First-tier Tribunal (Charity). The procedures include that the individual is entitled to receive at least one month’s notice of the Commission’s proposals to make such an order, inviting representations to be made to it within a specified period.

Although this provision is not yet in force (implementation having been delayed until at least September 2017), C(P&SI)A 2016 also expands the criteria for automatic disqualification from charity trusteeship and extends disqualification to senior management positions. These expanded criteria include terrorism offences, money laundering offences, bribery offences and misconduct in a public office, perjury and perverting the course of justice.

A person holds a ‘senior management function’ if the function relates to the ‘management of the charity and the individual is not responsible for it to another officer or employee (other than a charity trustee or trustee for the charity)’ or ‘it involves control over money and the only officer or employee (other than a charity trustee or trustee for the charity) to whom the individual is responsible for it is a person with senior management functions other than ones involving control over money’.

A person whose name has been placed on the sex offenders register will also be disqualified from being a charity trustee or holding a senior management position in a charity.

These new disqualification rules have employment law implications both in terms of the drafting of termination provisions within employment contracts, as well as the termination of employment itself. Charities need to be wary of not falling foul of an individual’s employment rights (such as unfair dismissal protection) as automatic disqualification from holding a senior management position in a charity does not equate to automatic dismissal. If an individual is no longer able to perform their senior management role as a result of the new disqualification provisions, continuing to employ them could involve breaching a statutory enactment. The nature of the expanded criteria for disqualification are also likely to mean that the individual is guilty of gross misconduct, other fundamental breach of their employment contract and/or that the dismissal could fall under the ‘some other substantial reason’ category for dismissal. These reasons could potentially be relied upon as fair reasons to dismiss but a fair dismissal procedure must also be followed.

For more information please contact Elizabeth Swinburn on 01223 461155 or click here to email Elizabeth.