SocialEconomyIssue no. 91March - May 2008

A quarterly bulletin of information for charities,voluntary organisations and social enterprises

To view SocialEconomy online visit:www.unity.co.uk or www.wrigleys.co.uk

The Charity Commission has nowpublished its statutory guidanceon public benefit. In the last issueof Social Economy, the timetablefor the publication of the UmbrellaGuidance and the supplementaryguidance against each charitablehead was given. We are pleased thatthe final version of the UmbrellaGuidance has taken account of themany comments which have beenmade and trustees can be moreconfident that the guidance is inaccordance with existing law.

The Charity Commission hasdivided its guidance into threedifferent documents. Charities andPublic Benefit: Summary Guidancefor Charity Trustees is a four pagesummary of the key principles ofthe Charity Commission’s generalguidance about public benefit.This document should be issuedto all trustees by charities andthis guidance should be thetouchstone for trustees whenexercising their powers or duties onpublic benefit. It will assist trusteesin fulfilling the new duty to haveregard to the Charity Commission’sguidance on public benefit.

Charities and Public Benefit is theful l statutor y guidance and,therefore, will give a more nuancedand deeper illustration of what theCharity Commission expects oftrustees. The summary guidance isthe day-to-day working tool oftrustees but if there are difficultissues for interpretation, thentrustees will need to refer to thisdetailed statutory guidance.

Finally, the Charity Commission haspublished an analysis of the lawunderpinning charities and publicbenefit which provides the summaryof the principal cases from which the

guidance is derived. There has beenconcern from statements made byCharity Commission officials that theCommission was seeking to departfrom the law on its guidance onpublic benefit, rather than set outthe principles of case law on whichpublic benefit should be based.Whilst there is room for interpretationof the guidance at specific points,on the whole the Commission hasprobably got the balance right. TheCharity Commission’s decision onthe recent application for acharitable registration by OdstockPrivate Care Limited demonstratesthat the Commission will followexisting case law.

Odstock Private Care Limited -Private BenefitOdstock was established by SalisburyNHS Foundation Trust to undertakeprivate healthcare work in SalisburyDistrict Hospital. There is a statutorylimit on the capacity of foundation

trusts to benefit from privatehealthcare work, and the hospitalsought to earn more than the statutorylimit through the establishment ofa separate charitable company. Itwas intended that Odstock wouldenter into agreements with patientsand insurance companies for theprovision of private care and contractwith the foundation trust forthe provision of staffed facilities.Partly, the arrangement was tosatisfy consultants’ desire forprivate patient work. The CharityCommission rejected the applicationand that decision was thenappealed for review by three Boardmembers of the Commission.

Odstock was established so that itsincome would be derived from privatepatients who received the benefit ofmedical insurance. It appeared thatOdstock was not in a position toaccept poor patients for whom no feewas payable and, perhaps, more

importantly in this case, there was noevidence produced that throughmedical insurance plans some poorpersons were able to obtain benefit.

The reviewers considered the PrivyCouncil case of Re: Resch where, inan analogous situation relating to apublic hospital and its associatedcharity, public benefit was found inthat the poor were not excluded.

This decision of the Commission iscomforting, since they have simplyapplied the case law as it stands,without gilding it. If better evidencehad been produced, for example,that through employer paid medicalinsurance poor people could haveused those facilities of Odstock,or some charitable bursary fundwas offered by Odstock for privatecare, then it is Wrigleys’ viewthat Odstock might have beenfound to have been charitable.www.charitycommission.gov.uk

Charities...Public Benefit - Statutory Duty Guidance Published - three page special edition

SocialEconomy is published byWrigleys Solicitors in association with Unity Trust Bank

40702 Newsletter Issue 91:. 4/4/08 12:39 Page 3

Consultation on SupplementaryGuidance - Poverty and ReligionThe Charity Commission, on 29Feb r u a r y, i s s u ed i t s d r a f tsupplementary guidance for publicconsultation on Public Benefitand the Prevention or Relief ofPoverty and Public Benefit andthe Advancement of Religion. Theconsultation period on the draftguidance will last until the endof June 2008. The draft guidanceon Pub l i c Bene f i t and thePrevention or Relief of Poverty isaccompanied by an analysisof the law in this area, as well as afurther document on the promotionof social inclusion. It’s a pitythat the Charity Commissiondid not publish its guidance onthe relief of those in need byreason of youth, age, ill health,disability, financial hardship orother disadvantage at the sametime as issuing draft guidance onthe prevention or relief of poverty,since the first head of relief inneed is largely a derivation from reliefof poverty. The distinction betweenthese two heads is important,for example, in categories such askey workers forwhom affordablehousing might bedifficult to obtain.It is possible that ahousing charity forthe p reven t i onor relief of poverty would not beable to assist a key worker.However, a relief of need charitymight be able to assist a keyworker for whom affordableaccommodation is difficult to comeby. The draft guidance on povertyalso includes public benefit ofbenevolent funds and familypoverty trusts.

Charities for the advancement ofreligion for their objects will beinterested in this draft guidance,

since religion, by virtue of theCharities Act 2006, includesreligion which involves belief inmore than one god and a religionwhich does not involve belief ina god. Wrigleys will be consideringthe draft guidance in the nextedition of SocialEconomy.

Charities and Substantial DonorsThe Finance Act 2006, Section 54,introduced a new hurdle forsubstantial donors to charitieswhere the donor may haveinvolvement with the charitysubsequently. The Government’sintention in the introductionof this section was to ensurecharities were not used for taxavoidance. There is, however,concern for the scope of this section.

A substantial donor is a personwho gives £25,000 or more toa c h a r i t y i n o n e y e a r o r£100,000 over six years. If adonor or a connected person,as defined in tax law, receives abenefit from the charity, thenthat benefit may be treated asnon-charitable expenditure bythe charity. The legislation is far

reaching andc a n h a v ea s t r a n g ee f f e c t , f o rexample, if aperson gavea substantial

donation to a charity working in thedeveloping world and then thedonor took a sabbatical to workwith the charity and received amodest living allowance during thesabbatical, the living allowancewould be defined as a benefit andthe charity would have a taxliability under Section 54. It is,therefore, important when charitiesare working with substantial donorsthat they bear these rules in mind.(www.sheen-stickland.co.uk onaccount)

Charities in ScotlandThe OSCR (Office of the ScottishRegulator) has announced aconsultation on its current guidancefor meeting the charity test. Initialguidance was published at thetime the Charities and TrusteeInvestments (Scotland) Act 2005came into force in April 2006 butthe OSCR has now itself obtainedmore knowledgeand experienceof the provisionsof the Act. Tod a t e , i t h a smade decisionsin over 1,600applications forcharitable status. The consultationwill last until 7 April 2008 withOSCR intending to publish asummary and analysis of theresponses on its website by 30 April,with a view to revised guidancebeing published in the summer.

One particular area on whichcomments are invited is theconcept of “disbenefit” i.e. whether“the (prospective) charity, in pursuingits purposes, causes disbenefit tothe public, and the extent to whichthat is the case compared to thepublic benefit that is provided”.Disbenefit is a concept that is notapplied in England and Wales.

A joint statement has also beenissued by OSCR and HMRC to clarifythe requirement of “definition” clauses(defining the meaning of the words“charitable”, “charitable purpose” or“charity” in constitutions of bodies onthe Scottish Charity Register that alsowish to seek tax relief from HMRC,and therefore must comply with boththe provisions of what is “charitable”under both the Charities and TrusteeInvestment (Scotland) Act 2005 andthe Taxes Acts. It has been agreed thatnot all charities on the Register thathave been established underScottish law need a definition of the

terms “charitable” or “charitablepurpose” to be included in theirconstitution in order to be able tomeet the requirements of HMRCand qualify for tax relief. Fore xamp l e , whe r e t he t e rms“charitable” or “charitable purpose”are not used in the constitutionthere is no need to add a definition.Any definition adopted prior to

February 2008wh i c h i sdifferent to thatcontained int h e j o i n tstatement dono t need tochange in orderto benefit from

tax relief. (LMSC 14 January 08)

Charity Commission: complaintsand customer feedbackThe Commission has revised itsprocedures for deal ing withcomplaints and customer feedback.The new system launched at thestart of 2008 replaces the 2003system. Key features of the newservice are described as being:

• enhanced emphasis on localresolution aimed at resolvingcustomers’ concerns as quicklyas possible with the originalbusiness team;

• the opportunity for a light-touchreview of the outcome of acase where a decision is noteligible for a formal DecisionRev iew but the cus tomerremains dissatisfied with it. Thereview will be conducted by aPanel of Commission experts;

• an arm’s length examinationby the Commissioner’s CustomerService Team of complaintsabout the standard of serviceprovided by the Commission;

• active encouragement of alltypes of feedback about theCommission services.

www.charitycommission.gov.uk

Public Benefit - Statutory Duty Guidance Published (continued)

“A substantial donoris a person who gives£25,000 or more to acharity in one year”

“The Commission hasrevised its proceduresfor dealing withcomplaints andcustomer feedback”

40702 Newsletter Issue 91:. 4/4/08 12:39 Page 4

Public Benefit - Statutory Duty Guidance Published (continued)

New trustee guide to fundraisingand FSBThe Institute of Fundraising hasissued a new online guide called“Trustees Guide to Fundraising”to encourage trustees to play amore prominent role in supportingthe fundraising initiatives oftheir charities. The guide coverssuch areas as trustee obligations,sustainable funding, fundraisingtechniques, tax-effective giving, aswell as legal and ethical issues.

The Fundraising Standards Boardwhich has been establ ishedby the Institute of Fundraisingto assist in the self-regulation ofcharities to fundraising has nowgot 800 charities as members.Membersh ip cos t s be tween£30 and £1,800 and commitss i g n a t o r i e s t o u ph o l d t h eFundraising Standards Board’spromise to follow the Instituteof Fundraising’s Codes of Practice.Complaints are handled in threestages: people are first told toresolve their differences internallywithin a charity. If that doesn’t work- and the fundraising promise or anyof the Institute’s Codes have beenbroken - the Fundraising StandardsBoard mediates. If that also doesn’twork, Fundraising Standards Boarddirectors adjudicate.

In January 2008, the FundraisingStandards Board published itsfirst adjudication rejecting acomplaint against Cancer ResearchUK. The Fundraising StandardsBoard is seen as the charitysec to r ’ s approach to avo idGovernment regulation and it willclearly need more charities tosign up for self-regulation withinthe next two years for it tobe seen to work. Third Sector 13February 2008

Charity Commission Consultationon Financial ThresholdsThe Charity Commission haspublished consultation proposalsto increase various financialthresholds for charities. It iss u g g e s t e d t h a t i n c r e a s i n gthresholds will ease the burdenof charities, but its also the casethat it will ease the burden ofthe Charity Commission which hashad year-on-year cuts in its

funding over the last three years,notwithstanding its increasedobligations under the Charities Act2006. Many of the changes whichhave been proposed relate tothe accounting and annual returnrequirements of charities.

It is suggested that the incomethreshold for charities to have theira c coun t s aud i t e dshou l d be r a i s edfrom £500,000 to£1 million or, if theassets of a charity aregreater than £3.26m i l l i o n a n d t h eincome is £250,000,the char i ty wouldrequire an audit inthose circumstancestoo. At the lowerend, it’s suggestedthat charities withi n c om e s b e l o w£25,000 would notneed an independentexaminer and wouldnot need to submitannual accounts to theCharity Commission ata l l . Fu r t h e rmo r e ,charities with incomebelow £25,000 a yearwould not be required to produce atrustees’ annual report and thosewith income of less than £25,000would not need to submit it to theCharity Commission. Whilst thenumber of charities which would becovered by these increasingthresholds is relatively small, thereis concern that the standards ofprudential controls in smallercharities might drop as a result ofsome of these proposed changes.www.charitycommission.gov.uk

The Big Give - Howto find charit iesseeking donationsThe Big Give; awebsite aimed atphilanthropists toprovide them withinformation aboutcharitable causes towhich they may wish

to donate, has upgraded its reviewand search facilities. More qualitycontrol will be enforced to stopsome charities giving themselvesunfair advantage in searches or toprevent poorly presented and low-value projects. Site users will alsobe able to grade the projectsthey know about - similar to thepo in t s sys tem used in theAmazon website.

T h e C h a r i t y C omm i s s i o n ,responding to users of CharityCommission information, hasstar ted to publish details ofnew registrations on a daily basis.This will permit umbrella advisorybodies, such as National Councilfor Voluntary Organisations, totarget new charities more quickly.

Political CampaigningChar i t i e s and the i ssue o fpo l i t i ca l campa ign ing haverecently been in the news for tworeasons. First ly, the Chari tyCommission has written to 16Musl im char i t ies to remindthem that its not permissible forcharities to affiliate themselveswith or suppor t a par ticularpolitical party or candidate. Thiswas after the charities, in anopen letter, set out their supportfor London mayoral candidate,Ken Livingstone, which wasp o s t e d i n T h e G u a r d i a nnewspaper’s blog on 3 January.The Commission has since beenassured that those who signedd i d s o a s i n d i v i d u a l s n o ta s cha r i t y r ep r e sen t a t i v e s .Third Sector 23 January 2008

In addition; the Commissionitself is producing a revised versionof its guidance on campaigning.The new draft guidance makes adistinction between “campaigningact iv i t ies which can fur thercharitable purposes” and “politicala c t i v i t i e s ” w h i c h c a n b eundertaken by a charity onlyin the context of suppor tingcharitable purposes. Some of theCommission Board members hadfelt that further clarification was

needed to make distinct thedefinitions of “furthering” and“supporting” charitable purposes.The draft guidance has beendelayed until March 2008, in partdue to confusion created by a storyappearing on 24 January in theDaily Telegraph, to the effect thatthe new guidance would permit

charities for the first time beable to devote most of their energiesa n d t im e t o c amp a i g n i n gcontentious political issues. Theguide will be called “SpeakingOut”: Guidance on Campaigningand Political Activities by Charities.LMSC (21 & 24 January 2008and 1 February 2008)

Online Charity ApplicationIt is now possible for prospectivecharities to apply for registrationonline. It is not yet, however,possible for al l chari t ies touse this service. The Commissionhas only launched what it’scalling “the first stage” in a processto allow new charities to register.At present, only those charitieswhich are able to use approvedgoverning documents, as areproduced by some large charitiesand umbrella bodies, are able touse the service. The systemprovides online guidance and allowsapplicants to save the applicationform and return to complete it ata later date. Using the onlineapplication system should reducethe time it takes for the Commissionto assess the application andcomplete charity registration.www.charitycommission.gov.uk

“new guidance would permitcharities for the first timebe able to devote most oftheir energies and time tocampaigning contentiouspolitical issues”

40702 Newsletter Issue 91:. 4/4/08 12:39 Page 5

One of the big questions in redundancy is at what point is an employerobliged to start the consultation process. Guidance is drawn from thecollective redundancy provisions set out in the Trade Union Labour Relations(Consolidation) Act 1992 (TULRCA) which requires consultation wherean employer proposed to make 20 or more employees redundant at oneestablishment within 90 days or less. In these cases consultation must begin“in good time”.

Since the case of Vardy (1993),Tribunals and employment advisershave worked on the basis thatconsultation does not includel o o k i n g a t t h e r e a s on f o rredundancies. This substantiallylimits the value of consultationsince it focuses on how redundancymay be implemented rather thatwhether it can, in truth, be avoided.

A recent case challenged andoverturned this principal drawingupon t h e I n f o rma t i o n andConsultation of Employee Regulationswhich sets out a regime whereemployers may be required toconsult about economic issues.

The Employment Appeal Tribunal(EAT) has now held that Vardy isno longer good law and subsequentchanges in legislation have widenedthe scope of the consultationobligation to include ways ofavoiding dismissals which meantconsultation on the reason for theredundancy dismissal. The EAT tookthe view that redundancies wereproposed at the point where theclosure itself was proposed andnot at the later stage arising as aresult of the closure. (UK CoalminingLimited -v- National Union ofMineworkers September 2007)

How to lose yourredundancy entitlementWhere an employee accepts anoffer of alternative employment astatutory four week trial periodruns. If the contract is terminatedduring that tr ia l per iod theemployee is deemed dismissed ongrounds of the original redundancyand retains the right to theredundancy payment. An employeereluctantly accepted an offerof alternative employment whenfaced with redundancy. During thetrial period the employee identifiedconcerns about the suitability ofthe new role and two weeks afterthe end of the trial period theemployee resigned.

The EAT held that the statutoryprovisions were clear and that wherethey applied there was no separatecommon law trial period. The trialperiod limit is four weeks and itcan only be extended in limited

circumstances, for example to allowretraining for the new job. In thiscase the employee had failed toterminate within the statutoryperiod and therefore had lost theprotection and the entitlement toredundancy pay. Optical ExpressLimited -v- Williams (July 2007)

Even had the employee givennotice within the statutory trialperiod they would only havebeen entitled to the redundancypayment if the new job was notsuitable alternative work or theyhad acted reasonably in leaving it.These issues did not need to beconsidered. The loss of theredundancy entitlement and theprovisions relating to statutory trialperiods would not prevent aclaim being brought generally inrelation to an unfair dismissal,challenging the redundancy (ormore likely the procedures appliedto selection) itself.

Failure to follow policiesrendered a dismissal unfairAn employer's failed to follow its ownalcohol policy when dismissing anemployee with an alcohol problem.Not surprisingly, this failure renderedthe dismissal unfair. On a better notefor employers it was also held that theemployee's unacceptable conduct(including being unfit to work) was arelevant factor and could amount tocontributory conduct for the purposeof assessing (reducing) compensation(Sinclair -v- Wandsworth CouncilNovember 2007)

Whilst this particular case dealtwith an alcohol policy the samecould be said of any policyintroduced by an employer. If apolicy exists it needs to becommunicated and applied in aconsistent manner. Alcoholism isexpressly excluded from conditionswhich can amount to a disabilityunder the Disability DiscriminationAct, however its important torealise that medical conditionswhich may arise as a resultof alcoholism may amount toa disability.

Immigration - Employer obligationsand unfair dismissalFrom 29 February 2008 there willbe new criminal and civil penaltieson employers who employ illegal

worke rs unde r Immig ra t i onlegislation with fines of up to£10,000 for each employeeworking illegally. Draft codes ofpractice have been issued foremployers by the Borders andImmigration Agency as to how tocomply with these obligations. Thecase of Klusova adds to anemployer's understanding.

An employee failed to producesatisfactory evidence of their rightto work and was summarilydismissed by letter. The employeeappealed but again failed toproduce satisfactory evidence oftheir right to work. Subsequentlyt h e emp l o y e e p r o d u c e dconfirmation that an in timeapplicationfor leaveto remainin the UKhad beenmade andthat theywere entitled to continue in workuntil the application had beenprocessed. The Court of Appeal heldthat as there was no actualrestr ict ion on the employeecontinuing to work (regardless of theemployer's belief) the employercould not rely upon the argumentthat continued employment wouldcontravene a statutory restriction, apotentially fair reason for dismissal.However, the genuine belief thatit was unlawful did amount tosome other substantial reason,and therefore was a potentiallyfair reason for dismissal. In thiscase the employer's failure to followthe statutory dismissal procedurerendered the dismissal automaticallyunfair in any event. The disputeresolution procedure does notapply to a statutory restrictiondismissal but as the Tribunal hadfound that this did not apply thedefence was not available to theemployer. Klusova -v- LondonBorough of Hounslow 2007,www.bia.homeoffice.gov.uk

Third Party Pressure to DismissIn the case of Doby -v- BurnsInternational Security Services

(1984) the Cour t of Appealconfirmed that pressure from a thirdparty could justify dismissal butthat “a very important factor” waswhether there would be injusticeto the employee and the extentof that injustice.

In a recent case the EAT overturnedthe Tribunal's finding that thedismissal had been fair. A shopfitter was dismissed after beingeffectively banned from the storesof the employer's major customer.Whilst the Tribunal had consideredthe steps taken by the employerto find alternative work therewas no evidence that the questionof injustice had been considered.I t was recognised that had

the i s sue o finjustice beenconsidered thesame decisionto dismiss mayhave been made,but as no finding

on this point had been made by theTribunal the decision could notstand. Greenwood -v- WhiteghyllPlastics Limited (August 2007)

Whilst the case is remitted to adifferent Tribunal, i.e. the issueswould have to be reheard, there is adifficulty for employers in thissituation. In considering thequestion of injustice the employer isforced to consider whether it maybe more unjust to dismiss anemployee, whether rightly orwrongly, falling on the wrong sideof an influential customer againstanother employee who hasotherwise done nothing wrong. Forthe employer the question is howfar the i r obl igat ion to lookelsewhere goes and whether theycan effectively “bump” someoneelse who, in their view, would notsuffer as great an injustice. Doesbumping in this situation amountto some other substantial reason?The safer course would be toconsider injustice but to giveeater weight to the injustice ofbumping someone else.

Employment...There is a duty to consult overthe reason for redundancies

“there will be new criminaland civil penalties onemployers who employillegal workers”

40702 Newsletter Issue 91:. 4/4/08 13:14 Page 6

Environment…Charity’s responsibility to the environmentTrustees of charities and directors of charitable companies who want to address the environmental impact of what they do - but the objects of theircharity are not environmental ones - might be interested to know that the Charity Commission is beginning to cast a more generous eye overenvironmental activities as a way for charities to, albeit indirectly, realise their objects.

At the Charity Commission's seminar‘Environmental Responsibilitiesand the Role of Char i t ies ’ ,which took place last October,Charity Commission representativesadv i sed de lega tes tha t theCommission would take a flexibleapproach to the issue. Whilereiterating the need for trusteesto work within the constraints oftheir charity's objects, that despitelegal constraints, the Commissionadvised it “would encourageflexibility and innovation” so thatchar i t ies that did not haveobjects for the preservation ofthe environment could nonethelesscarry out environmental work.

The Commission has given threeinteresting examples of how thiscould work in practice: A religiouscharity could take the view that,because God made the earth, therel ig ious char i ty was a keystakeholder in the environmentand could therefore take onenvironmental projects. Meanwhile,the Commission, in its onlineguidance has given the examplesof a charity with ‘relief of poverty’objects delivering environmentalprojects because it has evidencethat the effects of climate changeare contributing to the poverty incertain parts of the world, and acharity with ‘relief of sickness’ or‘promotion of health’ objectsresearching the effects of pollutionon the causes of sickness, orhow environmental factors affectthe recovery of those with aparticular illness.

What is the reason then forall this ‘flexibility’? TheCommission says it’sa combination ofthe importanceof being greenobserving that,“there is increasingexpectation for charities tolook at this if they are to be seenas organisations upholding goodvalues,” and the increasing impactof environmental issues on the law.

The Government has a duty underits European Climate Changeobligat ions to make a 60%reduction on 1990 levels in carbondioxide emissions by 2050. Itcannot do that without legislation.Hence, the new duty the CompaniesAc t 2006 has imposed o ndirectors: they must have regardto the impact of their company'soperations on the community andthe environment when they actto ach ieve the i r company ' spurposes. (The Charity Commissionbelieves this duty will soonapply to trustees of unincorporatedassociations as well)

Trustees with an eye on theircharity’s sustainability or its carbonfootprint, who do not wish tochange their charity’s objects,might do well instead to ‘thinkoutside the box’ to see howenvironmental projects or policiesmight tie in with delivery of publicbenefit through their charity’sobjects or operations.

Community Renewables in SpainWe have previously reported oncommunity-owned wind farmsand community hydro schemesin the UK, but in Spain,the leading examplesare in community solargardens. The sunnySpanish climatehelps as

does the subsidised price whichproducers of solar energy receivefrom sales of electricity to theSpanish electricity grid. Companiessuch as Acciona Solar develops,builds and services photovoltaicpower plants. Small scale investorsare organised to put down 20%of the purchase price of thedevelopment and the balance canbe obtained by way of a bankloan which is repayable over tenyears from the electricity sold. Theplants are either located onotherwise unproductive land orin roof installations.

As with the UK and its grant regimefor solar panels, the enthusiasmfor solar panels is causingembarrassment to the SpanishGove rnmen t wh ich i sseeking to rein in thesubsidies, but risktaking a stop-goapproach to the

development of the Spanishphotovoltaic industry. Whilst itcould be some t ime beforecommunity solar gardens are seenin the UK some of the communityowned Scottish islands without gridconnections may have communitysolar as part of their renewable mix.(new energy December 2007)

40702 Newsletter Issue 91:. 4/4/08 12:40 Page 1

Housing and Regeneration…Charitable HousingAssociationsOver two thirds of registeredsocial landlords are eitherregistered charities or enjoychar i tab le status. Hous ingassociations, depending on theirstatus, may be regulated by theCharity Commission, HousingCorporation, Companies House orthe Financial Services Authorityif they are charitable industrialand provident societies.

The Housing and Regeneration Bill,currently going through Parliament,introduces legislation to combinethe Housing Corporation andE n g l i s h Pa r t n e r s h i p s , t h eGovernment’s property regenerationbody. The new regulator ofhousing has the attractive title ofthe Office for Tenants and SocialLandlords (OFTSL). It will havenew powers to set compulsorystandards for providers of socialhousing at the direction of theSecretary of State. The CharityCommission is concerned that the

new regulator might require ahousing charity to under takepurposes beyond its powers,which would mean it would loseits charitable status. It is alsoconcerned that the independenceof charities would be undermined,even though this would notamount to a loss of charitable status.

The Charity Commission, aspromised when introducing theCharities Act 2006, is seeking tomake OFTSL the principal charityregulator for charitable industrial

and provident societies whenthe relevant part of the CharitiesAct 2006 comes into force.Interestingly, it is also suggestingthat OFTSL becomes the principalregulator for charitable housingcompanies too. In both cases,if the principal regulator, throughits monitoring, identifies a charitylaw issue that needs to beaddressed, it can call on theCharity Commission’s expertise.www.charitycommission.gov.uk

Companies...Companies Act 2006April Implementation

Many of the changes to beintroduced in April 2008 relating tothe Companies Act 2006 relate toaccounting matters. The periodallowed for filing accounts forprivate companies will be reducedfrom ten to nine months after theend of the relevant accountingreference period which, in respect offinancial years beginning on or after6 April 2008, its very likely that onthe next change to the charity'sstatement of recommended practicethat the Charity Commission will

seek to reduce the obligation oncharities for filing accounts to ninemonths too. Section 388 of theCompanies Act 2006 introduces therequirement for the accountingrecords of the company on whichaudits are based to be kept fromthree years from the date on whichthey are made, however, it is goodpractice to keep accounting recordsfor at least six years for taxationpurposes, whilst for negligencepurposes the retention period wouldhave to be as long as 15 years.

Auditors are increasingly looking toreduce the limit of their liabilityby agreement with the company.

Under these new provisions ofthe Companies Act 2006, anagreement will not be possibleunless it’s fair and reasonable. Theindemnity may be given for costsof an auditor successfully defendingproceedings or in which relief isgranted to the auditor by the court.The liability limitation agreementagreed by a company with itsaudi tors can only be for afinancial year at a time. Theliability limitation agreement hasto be authorised by a company'smembers in accordance withSection 536 Companies Act 2006unless the members have waivedthe need for approval. Since the

agreement can be approved by acompany's members both beforeor after the agreement is enteredinto, companies might expectauditors to try and fit theseagreements with companies at thetimes of general meetings.

Finally, from 6 April 2008 it isno longer a requirement for apr ivate company to have acompany secretary. However, manyarticles of association provide fora company secretary. Companysecretaries who are in office arenot affected by this provision andcan remain in their office untilthe appointment comes to an end.

Could we help with your banking needs?Contact Unity Trust Bank, Nine Brindleyplace, Birmingham, B1 2HB, tel: 0845 140 1000 or visit www.unity.co.uk

If you require legal advice on charity and social economy lawPlease contact Malcolm Lynch at Wrigleys Solicitors, 19 Cookridge Street, Leeds, LS2 3AG, tel: 0113 204 5724, or visit www.wrigleys.co.uk

40702 Newsletter Issue 91:. 4/4/08 13:09 Page 2