UK Charities Consider Trustee Disqualification Powers

The UK Charity Commission has begun public consultations on new discretionary powers to disqualify charity trustees – powers the Australian regulator already has, but is yet to use.

The new powers would allow the UK commission to disqualify certain people from being trustees for a period of up to 15 years, in circumstances where they are judged not fit to act.

The rules are included in the Charities (Protection and Social Investment) Act 2016 which will come into effect in July 2016 as part of the commission’s latest regulatory work following a storm of public protest around trust and confidence in UK charities.

The Australian Charities and Not-for-profits Commission (ACNC) already has the power to suspend and remove board members of charities where the organisation is a “federally regulated entity”.

“The ACNC said it had not yet used this power, however it had used other compliance powers, such as the ability to issue a warning, enter into an enforceable undertaking and revoke charitable status,” an ACNC spokesperson said.

“This is a strong and invasive power and the ACNC would only consider doing so where there was serious misconduct and a real need to act to protect assets or beneficiaries. A consequence of the removal of a board member is that they are disqualified from acting in this capacity in another charity.”

The spokesperson said the question of the suitability of the ACNC’s regulatory powers is a matter for Parliament.

“The ACNC Act provides for a review after a period of five years. These matters may be considered as part of that review.”

In the UK consultation paper the commission sets out its approach and the factors it will take into account before making a disqualification order.

The chair of the UK Charity Commission William Shawcross said recent scandals in charities threatened to undermine their work, and good governance was the key to the long-time health of charities in that country.

“It is crucial that charities invest in governance, with time as much as money. Trustees make a vast contribution to society, but our regulatory work shows that too many of them rely on their passion for the cause, without fully understanding their duties,” Shawcross said.

“Even competent, active trustees sometimes face problems they cannot solve and contingency plans must be in place, particularly when vulnerable beneficiaries are concerned.

“Successive revelations and high-profile collapses have hit public trust in charities. The level of outrage at fundraising practices and the high-profile collapse of Kids Company, was so great due to the gulf between expectation and reality.”

He said there are signs, however, that charities are taking steps to address public concern but warned of further consequences if the sector did not effectively self regulate.

“A new fundraising regulator is now being established… and has received the backing of most large charities. I hope all charities will embrace this last chance for self-regulation. It is in the best interest of charities to be make this work. Otherwise the commission will be required to regulate fundraising.”