Certificate in Charity Law and Governance
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1 Short course qualification Certificate in Charity Law and Governance Study support guide January 2015
2 ICSA study text charity law and governance cecile Gillard and kirsty semple
3
4 Contents How to use this study text iv Charity Law and Governance aims and learning outcomes 1 Chapter 1 Charity law 2 Chapter 2 Structures and legal forms 3 Chapter 3 Regulation and compliance 5 Chapter 4 Governance 7 Chapter 5 Sources of income 8 Chapter 6 Stewardship of funds and assets 10
5 How to use this study text This guide has been developed to accompany Charity Law and Governance: A Practical Guide for candidates taking the ICSA Level 4 Certificate in Charity Law and Governance. It sits alongside the book and the syllabus for the Charity Law and Governance qualification. The guide includes learning outcomes and a range of navigational, self-testing and illustrative features to help you get the most out of the support materials. The book is set out in six chapters, each exploring key themes within the subject matter. Each chapter covers one module of the Charity Law and Governance qualification. This study guide outlines the key learning outcomes for each part of the book, then sets out Test your knowledge questions and Stop and think challenges. The introduction, glossary and appendices in the book contain explanations of all acronyms, governance codes and frameworks, guidance and reference materials, and key terms. Candidates should be familiar with the key aspects of these codes, frameworks and guidance as they are referred to within the book. However, candidates are not required to quote sections of the codes, frameworks or guidance verbatim. Other reference material contained within the book includes a glossary of key terms, a directory of further reading, web resources and a comprehensive index.
6 Charity Law and Governance aims and learning outcomes The ICSA Level 4 Certificate in Charity Law and Governance explores the legal and regulatory framework within which charities in England and Wales are obliged to operate. It also looks at the meaning of governance in the charity sector and reflects upon the link between law, good governance and the role of trustees in the stewardship of charitable funds and assets. Unique in the sector, the qualification is aimed at individuals working in charities (registered and unregistered) in England and Wales and in particular, those working in roles affected by legal regulation and governance issues and those with governance responsibilities.
7 1 Charity law Summary This chapter explores the legal basis of charity law and charity regulation in England and Wales and the core legal elements of what is capable of being charitable under English law. It also addresses core trust law aspects of charity law and the fundamental legal aspects of charity trusteeship. This chapter is intended to give students a broad understanding of the legal framework within which the regulation of charities and charitable activity in England and Wales is set. Learning outcomes In this module you will: Know the fundamental legal requirements of charitable status in English law; Understand the legal framework within which the law and regulation of charities in England and Wales is set; and Understand key legal aspects of charity trusteeship. stop and think 1.1 Think of your own charity or one you know about is it obvious to you what its charitable purposes are? Can you see which legal description of charitable purpose that fits within? stop and think 1.2 Think of your own charity or one you know about what are its activities? Can you see how those relate to its charitable purposes? Describe how the activities provide public benefit, including who benefits and how? Describe how that benefit relates to the charity s charitable purposes. TEST YOUR KNOWLEDGE What are the main sources of charity law? 2 Can you list the principal charity law statutes? 3 What body or bodies principally regulate and oversee charities in the United Kingdom? 4 List the statutory functions of the Charity Commission. 5 What is the legal definition of charity under English law? 6 List examples of the descriptions of charitable purposes under the Charities Act Describe the public benefit requirement. 8 What are the legal duties of trustees in relation to public benefit? 9 Describe the key consequences of charitable status. 10 What is a community interest company? List its legal features. Can a CIC be a charity? 11 What is the legal definition of a charity trustee? List the general duties of trustees. 12 What is a special trust? 13 What is a permanent endowment? 14 What is functional permanent endowment?
8 Structures and legal forms 2 Summary This chapter explores the different legal forms that are available for charities and the principle of incorporation. It explains in more detail the legal forms of charitable incorporated organisations, and companies limited by guarantee. This includes the duties of company directors. It explains the nature of a constitution and its typical content. It concludes by outlining group structures and how they work. The chapter is intended to give students a broad understanding of the advantages and disadvantages of each legal form, the nature of their constitutions and a more detailed understanding of the law relating to charitable incorporated organisations, and companies limited by guarantee. Learning outcomes In this module you will: Understand the principle of incorporation Know the legal forms and structures available to charities Know about the law in the most relevant legal forms Understand the nature of a constitution. stop and think 2.1 Do you know of a charity that is unincorporated? Would it benefit from incorporation? What risks does it face as an unincorporated body? stop and think 2.2 Compare the duties of a company director with the duties of charity trustees. Think of three possible actions that a charity trustee could take that would be a breach of their duties. Then identify which of the company director duties listed would also be breached by each action. stop and think 2.3 Make a list of five charities. Try and list ones that have different sizes and different types of charitable purpose and way of working. Next try to identify what legal form each of the charities has taken. You can do this by looking at the charity s own website, or using the methods set out in the chapter. Were you aware of the legal form of each charity before you looked? Were there any surprises?
9 4 charity law and governance stop and think 2.4 If you were setting up a new charity what legal form would you suggest that it take? What are the reasons for your recommendation? stop and think 2.5 Locate a copy of the constitution of a charity that you are familiar with. Read through it, and identify as many of the typical components listed as you can. Do you think that the constitution has any gaps? Are there any areas where you would want to amend it? TEST YOUR KNOWLEDGE What is the difference between an unincorporated and incorporated organisation? What are the benefits of incorporation for a charity? 2 What is the difference between a company limited by guarantee and a company limited by shares? Why are companies limited by guarantee a more suitable form for charities? 3 Why were charitable incorporated organisations developed as a legal form? What are the advantages and disadvantages of adopting such a form? 4 Why would a charity create a subsidiary? List four reasons. 5 Why does a trading subsidiary need to be kept at an arm s length from a charity? List some of the ways that this can be ensured. 6 List the types of legal form that are available for charities, and the names of the constitutions for each legal form. 7 How does a CIO amend its constitution? What changes require the agreement of the Charity Commission?
10 Regulation and compliance 3 Summary This chapter explores the regulatory framework for charities and the role of charity regulators across the UK. It outlines the requirements for charity registration in England and Wales, and the exemptions to this. It then goes on to give a more detailed understanding of the regulatory requirements for charities, and charitable companies. Next, it explains the role of the Charity Commission in undertaking investigations and inquiries into the actions of charities, and how you can challenge a decision of the Charity Commission. As well as the information that needs to be filed with the regulators the chapter explains the records and registers that need to be kept by charities. It also outlines the reporting and accountability obligations in regard to statutory accounts and reports. It concludes with an overview of the legal requirements regarding names and stationery. Learning outcomes In this module you will: Understand the role of charity regulators Know how charities are registered and the criteria for exemptions Understand how to meet the regulatory requirements for charities and charitable companies Understand statutory reporting and accountability obligations and how these differ from private sector organisations. stop and think 3.1 Think of a charity that you know is registered with the Charity Commission. Look it up on the Register of Charities. What information can you find out about it? See if you can see the names of its trustees; its last annual report and accounts; and its charity purposes. stop and think 3.2 The Charity Commission publishes reports on inquiries on its website. Take some time to read a couple. What type of issues are being dealt with? stop and think 3.3 If you work within a charitable company take some time to look at the changes that were made by the Small Business, enterprise and employment Act Will this make a difference for your charity? do you think you will move your registers to Companies House?
11 6 charity law and governance stop and think 3.4 Many organisations are not fully aware of the legal requirements regarding their name and company details on their letterhead; s and website. Think of two or three charities that you know are companies. Look on their website. Can you see all of the information required of charities and companies? Are they meeting their legal requirements? TEST YOUR KNOWLEDGE What are the objectives and functions of the Charity Commission? 2 If a charitable company operated across the UK who would regulate it? 3 What types of charity in England and Wales would not need to register with the Charity Commission? 4 What information can you update online on the Register of Charities? 5 What registers and records does an association CIO need to keep? 6 On what, and where, does a charitable company need to display its name?
12 Governance 4 Summary This chapter explores the concept of corporate governance including its history; the current key themes; and its application to charities. It then moves on to look in more detail at the key components of effective governance including governance processes, boardroom behaviour and the role of the board. Finally it looks at accountability and the importance of this for charities. This chapter should help students to understand the history and background to charity governance, including the prevalent standards and codes and the key components of effective governance. Learning outcomes In this module you will: Understand the history and background to charity governance, including the prevalent standards and codes. Know the key components of effective governance. Understand how to apply the principles of effective governance in charities. stop and think 4.1 Read the Charity Governance Code. Consider your own charity, or one that you are familiar with. How well do you think it complied with the code? stop and think 4.2 Review the board papers for your own charity, or a charity that you can get access to. How does this board carry out its monitoring? Are there improvements that it could make? TEST YOUR KNOWLEDGE Define corporate governance. 2 Explain one of the events in the 1990s that led to the development of corporate governance in the UK. 3 What is the difference between a general meeting and a board meeting? 4 Explain the legal rules on proxy voting at general meetings of companies. 5 What are some of the matters that would usually be reserved by a board? 6 Identify five actions that you could take to make board meetings more effective. 7 In what ways do charities report back to stakeholders?
13 5 Sources of income Summary Most charities rely on funding from a mix of sources, including voluntary income, such as donations and legacies, and self-generated income. This chapter explores some of the most fundamental and common sources of income for charities and the means by which they generate those financial resources. It also explores the most important legal and governance issues relating to those income sources and the activities charities participate in to access them. This chapter is intended to give students a broad understanding of the typical charity funding sources and their key legal and governance implications. Learning outcomes In this module you will: Understand the main sources of charity funds and how charities generate funds from those sources Understand the key differences between sources of income Know the key legal and governance issues associated with sources of income for charities. stop and think 5.1 Think of two or three charities you know what are their main sources of income? What are some key legal, regulatory, governance issues in relation to those sources of income and how they are managed and used? stop and think 5.2 If you were interested to find out the main sources of a charity s income and how it went about generating those, how might you seek to find out? What public sources of information could you look at? As a member of the public, what if any information could you ask the charity itself to provide you with about this? stop and think 5.3 Think about your charity or one you know then list the main trading activities it undertakes. Separate the primary purpose trading activities from the non-primary purpose activities and make notes on why you have put each activity into the chosen category.
14 chapter 5 Sources of income 9 TEST YOUR KNOWLEDGE Can charities trade? 2 What is primary purpose trading and what is non-primary purpose trading? 3 What are the key issues for trustees in trading matters? 4 What is a donation? List some examples of types of donations. 5 Can a charity use loan funding? If so, when might it do so? 6 What are the main conditions for an individual making a Gift Aid donation to a charity? 7 What is a failed appeal? List some examples of why an appeal might fail. 8 List examples of types of charity fundraising that are subject to specific charity law rules and regulation. 9 What areas of risk are there for charities in fundraising? 10 How are public collections regulated? 11 What is a contract? How could a charity sign or execute a contract? 12 What is a grant and how does it differ from a contract?
15 6 Stewardship of funds and assets Summary This chapter explores the principles of stewardship of charitable funds and assets, including their protection and correct application. It also examines the role of charity trustees, as those principally responsible for this stewardship. This chapter is intended to give students a broad understanding of those key principles and how they affect the trustees as they seek to discharge their principal legal duties and responsibilities in practice Learning outcomes In this module you will: Understand the key principles of stewardship of charitable funds and assets Know the legal responsibilities of trustees with regard to the custodianship of charitable funds and assets Understand the relationship between legal principles and governance in practice. stop and think 6.1 What are the main ways in which your charity identifies and manages key risks? stop and think 6.2 What does good stewardship involve in your charity? What do you identify as key factors for your organisation? stop and think 6.3 Read the Charity Commission guidance for charity trustees on conflicts of interest. How do the good practice suggestions relate to what your charity does to identify and deal with conflicts?
16 chapter 6 Stewardship of funds and assets 11 TEST YOUR KNOWLEDGE What key principles are most relevant to the stewardship of a charity s funds and assets? 2 How do the charity s purposes relate to stewardship of its funds and assets? 3 Why is public benefit relevant to stewardship of charitable funds and assets? 4 What is the overriding legal rule on payment of trustees? 5 What duties and obligations do company directors have under the Companies Act in relation to conflicts of interest? 6 What is a conflict of interest? List some examples. 7 What is an investment for charity law purposes? 8 Who has overall responsibility for the management of a charity s investments? 9 Which charities are automatically subject to the Trustee Act 2000? 10 Describe the trustees statutory duty of care under the Trustee Act What controls apply to the disposal of charity land? 12 Are there exceptions to those? If so, can you list some of those exceptions? 13 Are there any additional controls in some situations? If so, can you give examples? 14 What are the key aspects of trustees stewardship of charitable funds? 15 Why should charities manage risks and what approach should they take to risk management? 16 List key risk areas for charities.
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