Does Charity Remain a Valuable Legal Concept for the UK in 2006 and for the Future - Article Example

I. Does charity remain a valuable legal concept for the UK in 2006 and for the future? Charity has been a significant sector in the British societyi.It should be noticed however that several disputes has been arisen because of its structure, form and funding. A very common phenomenon in the specific area is that the larger charities concentrate the funds offered by the public or the state and the smaller ones often face severe financial pressure. According to a survey that was published recently (Third Sector, March 1, 2006) ‘0.33 per cent of charities vacuum up 46 per cent of all charitable income’. It is also stated that ‘this trend is unlikely to be reversed whereas the probable result of the increasing plethora of laws is that the larger charities (which can afford the in-house lawyers and external counsel) will become the Tescos of the sector, monopolising the resources, expertise and know-how’. Although the above statistics refer to the specific problem of money accumulation, there is no specific accuse of mal – management of the money offered to the charity sector. Just an issue of distribution of the money offered by the public is being set, highlighting the needs for reform of relevant laws (or of application of existing ones). It has also been observed (Third Sector, March 1, 2006) that the main target of the legislative rules that have being set and applied until today, has been the application of’ accountability and transparency when it comes to regulating the running of charities’. In this context, trusteesii now have greater legislative and moral responsibilities as the guardians of the charitys assets, and so do for the risks involved. Of course, there may be a particular legal framework regarding the disputes which are related with charities (article 1b of Charities Bill Act) however the responsibility for the management of the funds offered by the public or the state continues to exist. Today the charityiii remains a legal entity which is regulated separately and have the right to ask for an ‘autonomous’ legal protection in case that a violation of its rules appear. For the purposes of the law of England and Wales (Charities Bill Act 2005), “charity” means an institution which— (a) is established for charitable purposes onlyiv, and (b) falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities. Regarding the phrase ‘charitable purposev’ this has been explained by the law (article 2, CBA, 2005) as ‘a purpose which— (a) falls within subsection (2), and (b) is for the public benefitvi’. Moreover, it is stated that ‘any reference to the public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales’ (articles 3, 4 CBA 2005). The above terms (charityvii, charitable purposeviii and public benefit) have been under thorough examination from the English courts in cases where their meaning and their role had to be clarified. It has to be noticed that charity can be formulated as a trustix or as an incorporated body. The difference between the above two types of charities involve mainly to taxationx issues (as well as to ownership ones). Another issue is the differentiation of charity from a public authorityxi, a problem that has been sent under the judgment of the English courts. In UK, charities have been traditionally very powerful organisations (at least the larger of them). However, it seems that this condition will change after a specific period of time. On September 2002, the Strategy Unit Report ‘Private Action, Public Benefit’ The specific report proposed the alteration of the existed set of requirements related with the term ‘charitable purposes’ and the abolishment of ‘public benefit test’. Under the current Act, the term ‘charitable purposes’ is formulated under the article 3 and 2(2). Regarding these articles the public benefit test continues to exist combined with the rules of article 2(2). More specifically a private organisation could be registered as charity when belonging to one of the categories of article 2(2) whereas it should also have as reason of existence the service of the ‘public benefit’. In generally, the introduction of Charities Bill (as first placed before the House of Lords on 20 December 2004) resulted to a series of changes (Carton, 2005) to the existed legal framework surrounding the operation of charities. The change in the definition of legal charity and in the general legal environment related with the operation of charities was major developments in this legal area. The above changes helped towards the restructuring of the trust between the public and the charities (which had suffered significant pressures), a fact that also resulted to the increase on the area’s profits (through the relevant increase on the number of volunteers). These assumptions, which have been proved in practice by the increase on charities’ financial performance, prove that the introduction of Charities Bill was not just a common legislative action but a very considered initiative which have led to the development of the specific area and the relevant increase on the support provided under the terms of ‘public benefit’. II. How far do you think the new Charities Bill Act will effectively bring the law of charity into the 21st century? One of the main issues that the Charities Bill Act regulates is the provision of charities with ‘comprehensive guidance that will assist in the creation of contracts that clearly express and truly support the essential working relationship between the parties’. In this direction it has been observed (Third Sector, December 7, 2005) that ‘although regulatory compliance and protective provisions are vitally important and covered within the Code, the emphasis is on a fundraising contract as the manifestation of a balanced, constructive, flexible and co-operative relationship’. Moreover, the Charities Act has provided the necessary rules for the protection related with all areas of such kind of activity (Third Sector, December 7, 2005), like the creation of fundraising contract (regarding all its areas, from the evaluation of risk, the specifications, the standards and the payment measures’. Following the Charities Bill Act (England and Wales), the legislative framework regarding the form and the operation of charities has also changed in Scotland. More specifically, on June 2005 the Scottish Parliament passed a law (Charities and Trustee Investment (Scotland) Bill) which was going to replace the existed legislative text providing stricter rules for charities in Scotland. In the above Act – which was expected to affect more than 25,000 charities - the definition of the charitable organisation has been changed (Currie, 2005) in order to be adapted to the current social conditions. Moreover, according to the above legislative rule every collector has to be licensed. The above changes can also be explained by the fact that in todays British society, charity should have the right to show ‘interests in public benefit, the definition of which is being considerably widened’. This close relationship between the charities and the people can be the basis for the entity’s survival in current and future terms. It should be noticed that on 20 May 2005 a multi-level cooperation established between the charity regulators of England and Wales (Charity Commission) and Scotland (Office of the Scottish Charity Regulator). This cooperation will help to avoid regulation overlap. Moreover, the agreement is expected to ensure ‘greater consistency and co-operation between the two UK charity regulators and fits in with the wider agenda to modernise the regulation of charities across Scotland, England and Wales’ (M2 Presswire). The regulation for charities covers all issues regarding their structure, their form and their daily operations. However, there are some issues that need to be clarified. At a first level, the form of charity is not common for all charities. More specifically, charities have the right to choose from a significant number of legal forms which are divided in two major categories: a) unincorporated (Trust, Unincorporated Association) and b) incorporated (Company, Industrial and Provident Society, Royal Charter, Bodies incorporated directly by statute) (Cabinet Office, 2002). The most preferable legal form for charities is the ‘incorporated’ one and particular the ‘limited by guarantee’ type. The element of ‘incorporation’ offers to charities a series of advantages most important of which are: a) the separation of organisation’s legal personality from the one of its trustees, b) the provision of higher protection to the trustees and the members of the charity in cases of financial liability, c) the provision of higher security to the charity’s creditors, d) the existence of corporate experience to its members and its employees. Until 2005, the existent legal framework regarding the charitable incorporated organisations was rather incomplete. The current corporate forms could not offer a support as they had a series of weaknesses. As a consequence the charitable organizations which were formed in accordance with the corporate entrepreneurial form would face difficulties like the following: the obligation for dual registration, a description of the role of charity’s members based in the existence of a financial interest (from their side) in the company and the lack of detailed rules regarding the liability of trustees. However, the legal form of Charitable Incorporated Organizations offered a series of advantages to the charities that would interested to follow its structure. On the other hand the new Act provides strict rules regarding the structure and the operation of the charitable incorporated organizations, but it also includes rules that help the trustees to avoid liability in accordance with the completion of specific requirements and always after the decision of Commission (article 36). Regarding the above mentioned, it can be made clear that the introduction and the application of the new Act will help the charities to be better organized, the trustees to have specific role and an increased protection regarding their liability. However, for this legal text to produce all its results, there should specific efforts that could ensure its application in practice. References Business Wire. Due to Falling Donations from the UK Population, Charities are Increasingly Targeting the Commercial Sector to Maintain the Levels of Funding they Need, September 23, 2005 Cabinet Office. Private Action, Public Benefit: Charitable Incorporated Organisation, September 2002 Carton, J. (2005). The legal definition of charity and the regulation of civil society. The King’s College Law Journal, 16:29-50 Currie, B. (2005). New crackdown in bid to avoid charity scams MSPs unveil tighter controls to restore faith in good causes, June 9, 2005: 4 Michels, J. R. (2001). U.K. Charity Law: Is It Creating a True Democracy of Giving? Vanderbilt Journal of Transnational Law, 34(1): 169 M2 Presswire. Joined up regulation for charities; Charity Commission and Office of the Scottish Charity Regulator sign memorandum of understanding, May 20, 2005 Third Sector. Law: Warning Regulation Overload, March 1, 2006: 26 Third Sector. Institute of Fundraising: New Code of Practice sets the standards on contracts, December 7, 2005: 32 Winfield, J. (2005). The new public benefit test – an unexploded bomb? The Charity Law and Practice Review, 8(2): 51-54 Statutes Charities Bill Act 2005 Finance Act 2000 Cases Bath and North East Somerset Council v HM Attorney General & Anor [2002] EWHC 1623 (Ch) (31 July 2002) Castle Caereinion Recreation Association v Customs & Excise [2003] UKVAT V18303 (27 August 2003) GAUDIYA MISSION & ORS v. BRAHMACHARY and ORS SIXTH [1997] EWCA Civ 2239 (30th July, 1997) His Beatitude Archbishop Torkom Manoogian, the Armenian Patriarch of Jerusalem v. (1) Yolande Sonsino (2) National Westminster Bank plc (3) Her Majesty’s Attorney General, EWHC 1304 (5 July 2002) Imperial Cancer Research Fund & Ors v Bradley & Anor [2001] EWCA Civ 714 (17 May 2001) Kids Church v Customs and Excise [2003] UKVAT V18145 (16 May 2003) Queen v. Leonard Cheshire Foundation & Anor., R. [2002] EWCA Civ 366 (21st March, 2002) Queen on the application of Elizabeth Heather; Martin Ward; Hilary Callin v. The Leonard Cheshire Foundation and H.M. Attorney General [2001] EWHC Admin 429 (15th June, 2001) Revenue Commissioners v. Sisters of Charity of the Incarnate Word [1998] IEHC 24; [1998] 2 IR 553 (11th February, 1998) Southwood & Anor v Attorney General [2000] EWCA Civ 204 (28 June 2000) The Sheiling Trust (Ringwood Waldorf School) v Revenue and Customs, UKVAT V19472 (27 February 2006) Weth & Ors v HM Attorney General & Ors [2001] EWCA Civ 263 (23 February 2001) http://www.charity-commission.gov.uk/ [1] http://meta.wikimedia.org/wiki/Wikipedia_and_UK_charity_law [2] Read More