Charity Law Update: Are you amending your constitution?
Charities should consider whether any amendments currently in hand (or planned) to their constitution should be prioritised before the Charities (Amendment) Bill 2022 is enacted.
The current framework for charity regulation in Ireland is set out in the Charities Act 2009 (the “2009 Act”). Brought into operation in 2014, the 2009 Act established the office of the Charities Regulatory Authority (the “CRA”), defined what a charity is and ushered in a new era of regulation in the charity sector. The 2009 Act is undoubtedly the most important development in the area for decades and provides the bedrock for the modern regulation of charities in Ireland.
General Scheme of the Charities (Amendment) Bill 2022
On 29 April 2022, the Minister for Rural and Community Development published the General Scheme of the Charities (Amendment) Bill 2022 (the “Bill”). The proposed Bill plans to update existing charity law and expand the role of the CRA, with the intention of increasing transparency in the way charities report and implementing new provisions that will clarify certain thresholds and the general duties of trustees.
In addition to new provisions on the amendment of charity constitutions, the Bill includes proposals which amongst other amendments:
- includes the advancement of human rights as a charitable purpose;
- aligns the 2009 Act with the Companies Act 2014, by increasing the threshold for filing a full set of accounts from a maximum gross income or expenditure of €100,000 to €250,000;
- releases court appointed charity trustees from liability for actions taken by the charity prior to their appointment;
- ensures company secretaries and auditors are not automatically regarded as trustees of a charity; and
- introduces new CRA approval requirements in respect of any amendment to a registered charity’s constitution.
Provisions on Amending Constitutions
One of the changes in the Bill likely to have a major practical impact is the change to the process of how charities amend or update their constitution.
The Bill provides that a charitable organisation cannot amend its constitution without the prior approval of the CRA and the CRA will not grant approval if the proposed amendment to the charitable organisation’s constitution would be contrary to the 2009 Act. The Bill provides that if a charity fails to obtain the prior consent of the CRA to a change in its constitution, the charity may face removal from the Register of Charities.
As drafted, this provision requires the prior approval of the CRA to any change to a charity’s constitution, however minor or inconsequential. (It is not entirely clear that this is intentional as the explanatory note for one of the relevant heads (Head 8) dealing with the new section 40(9) has a restricted reference to a “change to the main object”.) At present the 2009 Act includes a requirement to obtain the consent of the CRA solely where the name of the charity is being changed.
Whilst it is very unlikely that Charities will seek to amend their constitutions in a manner contrary to the Act, it is questionable whether the CRA will have the resources to manage this increase in consent applications. This could result in charities waiting significant periods of time before receiving approval.
Some commentators have argued that while the CRA has an interest in ensuring that certain constitutional changes are approved in advance, for example proposed changes to charitable objects clauses and dissolution clauses, not every single change to a constitution (e.g. in the recent pandemic to confirm how virtual meetings would be coordinated) should require advance regulatory approval and that a more proportionate approach should be considered by the legislature.
The Bill has been listed in the Government’s Spring Legislative Programme for publication and it is expected to be enacted later this year. In the circumstances, it would be prudent for charities to review their constitutions and determine whether there are any updates or changes that need to made to the constitution in advance of the introduction of this blanket consent requirement, which is likely to significantly slow down the implementation of constitutional changes.
If a constitutional review is underway and minor revisions and updates are in hand there is merit in prioritising completion of the amendment process in advance of the legislature potentially deciding that all amendments (no matter how minor) are required to be considered by the CRA with all the consequences that can be expected will follow from such an approach.
If you have any queries on this briefing or charity law in general, please contact your usual Arthur Cox contact or a member of the Arthur Cox Charity Law Group.