Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012

Lord Methuen Excerpts

Tuesday 27th November 2012 Grand Committee

[Lord Hodgson of Astley Abbotts]

My Lords, I welcome the regulations. They are an extremely useful and important addition to the charity regulation framework. I have carried out two reports for the Government, the first called Unshackling Good Neighbours and the second the review of the Charities Act, Trusted and Independent—I should like to say to the Minister how helpful his staff were in the preparation of that; they worked very on it and were of great assistance. In both those reports, it was clear that the absence of any legal air cover was a considerable deterrent to people serving as trustees. People feel, rightly or wrongly—despite the lawyers saying that there are no cases—that there is a risk. The regulations provide an important bit of air cover that will encourage them to come forward and serve as trustees.

I hope, however, that the Government will not forget about the importance of finding ways in future to afford additional protection to volunteers. I know that the provision of protection is not part of these statutory instruments and I understand why it could not be included. However, volunteers remain concerned about what they see as counterintuitive judicial decisions that leave people feeling exposed when they are undertaking one sort of volunteering activity or another.

These statutory instruments are important, valuable and welcome. As my noble friend on the Front Bench said, the protection carries with it privileges—and with privileges comes responsibility. We need to stress this is because there cannot be a register of charges. Therefore, to some extent creditors between each annual report are flying blind. That is inevitable; we cannot get round it. We must emphasise to trustees of CIOs that they have a responsibility to behave properly. It would be a terrible shame if this new and very valuable corporate form were to be damaged by early malfeasance and misadventure. Equally, it would be helpful if the Minister would confirm that the normal provisions of corporate behaviour will apply to trustees of CIOs. As any director of a limited company knows, trading while insolvent is the most serious thing for which you are personally liable. This should apply to CIOs that act improperly.

I was pleased to hear the Minister talk about the ability to disqualify trustees of CIOs, and to apply the disqualification regulations to them. Perhaps I could nudge his elbow again. The Charity Commission is very limited in its powers to stop trustees of charities—not CIOs—who have behaved badly from becoming trustees of other charities. Trustees can move around quite easily. We need to find ways to ensure that the Charity Commission can keep the rotten apple out of the barrel, and prevent it finding somewhere else in the barrel a bit later.

I share the Minister’s view that this has been a long time coming. The Charities Act became law in November 2006. It is now the end of November 2012. Even by the standards of Whitehall, progress can best be described as glacial. As he warned us, some timetabling issues lie ahead. The Explanatory Notes make it clear that new CIOs will come into force reasonably quickly. Perhaps the Minister will confirm when the commencement provisions will be laid. Obviously we are some way away from the conversion of existing CIOs. After six years it is not surprising that there is a certain amount of pent-up water behind the dam. I hope that the Government will find ways to encourage the Charity Commission to use modern, online techniques and proceed as quickly as possible to a situation where every trust that wishes to convert to a CIO is able to do so.

Perhaps I may raise with the Minister another bee in my bonnet. It concerns repetitive, duplicative and overlapping returns. I am not sure where we are on the return that a CIO will make to the Charity Commission. We want to make sure that it is as focused as possible. Less is often more. There is the example where we have our credit cards changed and we get four pages of closely packed type telling us that there have been changes, not particularly identifying what is what and what has been changed.

I hope that when the new forms are prepared, we really focus on what is needed, not just have a splash of paint across the whole of the subject. Information takes a lot of getting together for charities; it is a great source of economic friction for them. Sometimes they feel that a hell of a lot of information has to be collected for not much purpose other than ticking a box. We want to ensure that we are gathering information that really helps the monitoring—for the public and the supporters of those organisations to decide whether they are good and worth while.

The Minister will not expect me to leave the subject without saying that, for a year and a half now, we have been pressing the Charity Commission and Companies House to find a way to agree an individual return. There are more than 30,000 charitable companies who are making two separate returns. It cannot be beyond the wit of man, let alone the wit of Companies House and the Charity Commission, to find a single form that could serve both purposes. That would be 30,000 forms in the bin.

With that rather disobliging remark at the end, I entirely welcome the regulations, but they will reach their full flowering only when every charitable trust that wishes to convert anywhere in the country, whether old or new, big or small, rich or poor, can do so. I hope that the Government will ensure that pressure is kept on the Charity Commission so that that happens as soon as possible.

[Lord Methuen]

My Lords, as chairman of the trustees of an almshouse trust, we have been considering going the alternative way of incorporation. We welcome the measures and shall be examining them at our meeting on 7 December. We think that this is a much better way to go than the current incorporation methods. We welcome the protection that this will give our trustees and hope, as the noble Lord said, that it will encourage more people to come forward as trustees.

[Baroness Hayter of Kentish Town]

My Lords, I will try to resist the temptation to say that if the wit of man cannot get those two bodies to work together, perhaps the wit of women in the two organisations may be able to achieve that.

First, I should declare my interest as a trustee of various charities now and of even more over many years previously. Indeed, I have been caused much pain at earlier times by running non-incorporated charities, which often meant scuttling around London trying to get trustees’ signatures on property deals and, sadly, occasionally, trying to get death certificates for recently deceased trustees, often at a very sensitive time for the family, because there was some urgent legal or Charity Commission document that needed completing. In one case, I was dealing with a potential £1 million liability on individual trustees—one of them at that time a Member of your Lordships’ House—who, before I had advised them, had signed a document for a rather silly 25-year lease with, I believe, the Duke of Westminster, on a rather large property in Grosvenor Crescent. I should add that, once I took over, we rapidly incorporated it and that was the end of that.

I very much welcome the introduction of the charitable incorporated organisation structure, which, as has been said, will make this easier to access and cut out dual regulation on SORPs as well, on all the accounting rules which are also not quite the same for the two types of organisation.

As both the Minister and the noble Lord, Lord Hodgson of Astley Abbotts, said, the regulations are long overdue in introducing the new regime. They were legislated for in 2011, but the first will roll off the assembly line only early in spring of 2013. Given the Government’s desire, I am sure, to champion enterprise and the big society, we hope that they will move as fast as they can to facilitate the work of charities.

As the noble Lord, Lord Hodgson of Astley Abbotts, has said, the slow introduction has been a source of frustration for many charities, some of which unfortunately could no longer afford the wait or uncertainty and have had to incur the expense of becoming a company limited by guarantee under the existing rules. Nevertheless, single registration will undoubtedly reduce administration time and costs, with only one annual report and all that sort of thing, so we welcome it.