Much like an individual can be disqualified from being a company director under the Company Directors Disqualification Act 1986, so too can an individual be disqualified from acting as a charity trustee or from being employed or acting in any senior management function of a charity.
Introduction
While the High Court has an inherent jurisdiction to appoint and remove charity trustees, the focus of this article is on the far wider discretionary powers of the Charity Commission pursuant to section 181A of the Charities Act 2011, which provides the Charities Commissioner with the power to order a disqualification order against any individual on permitted grounds, without the need for court proceedings.
- the Charity Commission is the statutory body responsible for the regulation of charities and protecting the public interest.
- it is in the context of this public interest that these powers are exercised.
Where you have been a trustee of a charity that has been placed in liquidation or in the process of being wound up, it is likely that you will be investigated by the Charity Commission.
This carries the risk of
- a person being removed and disqualified from not only being a registered charity trustee, but also from holding any position with senior management functions (whether paid or unpaid) within all charities, specific charities or a class of charities.
- the disqualification will last for a specified period of time, depending on the terms of the disqualification order or undertaking imposed by the Charities Commissioner.
Circumstances where I could be removed and disqualified
The Charity Commission will seek removal and disqualification if it is satisfied that there are serious and substantial grounds that make it necessary or desirable to do so. In short, this means that any conduct which threatens the public interest can lead to a disqualification order being made against you. The most common circumstances are
- where an incorporated charity is placed into liquidation; or
- where a fraud, theft or some form of misconduct or mismanagement has been committed.
There is no requirement for a court procedure, unlike disqualification orders which must be sought at court by the Secretary of State, but director disqualification will be made public and notice will be circulated to other trustees of any charity the targeted individual is a trustee of.
What is the specific power?
In order to properly exercise this power, the Charity Commission must satisfy all three of the following criteria:
- at least one of six conditions apply;
- the person must be considered unfit to be a trustee; and
- it is desirable in the public interest to make the disqualification order to protect public trust and confidence in charity or charities
The six conditions referred to in criterion 1 are as follows:
- a person has been cautioned for an offence against a charity or in the administration of a charity for which a conviction would bring automatic director disqualification; or
- a person has been convicted of an offence in another country that is against, or involves the administration of, a charity or similar body; and, if committed in the United Kingdom, would bring automatic disqualification from acting as a trustee; or;
- a person has been found by HMRC not to be a ‘fit and proper person’ to be a manager of a body or trust; or
- a trustee, officer, agent or employee of a charity was responsible for, contributed to or facilitated misconduct or mismanagement in a charity or the person knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it; or
- an officer or employee of a corporate trustee was responsible for, contributed to or facilitated misconduct or mismanagement in a charity or the person knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it; or
- other conduct, whether or not in relation to a charity that is, or is likely to be, damaging to public trust and confidence in a charity or charities
As is apparent, the scope of the conditions is cast very wide. If one of these conditions is satisfied, along with a positive finding that the charity trustee’s conduct amounts to ‘unfitness’ and the public interest would be served in their removal, the Charity Commission will not hesitate to make a disqualification order.
The Charities Commission also has the power to seek removal of a Charity trustee who is disqualified.
How will I know if the Charity Commission is looking to remove and disqualify me?
If the Charity Commission is looking to remove and disqualify you, chances are that it has already been in contact with you. In addition, it will also have already been in contact with any other charity trustees of your charity, and given public notice of that intention. In any event, the Charity Commission will give you at least one month’s notice notifying you of its intention to exercise its power to disqualify.
Such a notice will outline the reasons why the Charity Commission intends to exercise that power and will offer you the opportunity to either voluntarily agree (by way of an undertaking) to be disqualified (for a set amount of time) or to make representations within a specified period.
Can I continue to act as a charity trustee having been given notice?
In certain circumstances where notice of an intention to impose a disqualification order is given, the Charity Commissioner may immediately suspend an individual from being a charity trustee.
Otherwise, until disqualification commences, you can continue to act as a Charity Trustee or in a senior management function/employee of a Charity. The notice provides an opportunity to make representations, a point at which you may be able to persuade the Charity Commissioner not to take any such action.
Thereafter, you will not be able to act as a charity trustee, or in any senior management function or as an employee until the disqualification period expires.
How long would I be disqualified for?
The maximum period of disqualification is 15 years. The actual length of the disqualification period will depend on the seriousness of each case, and having regard to any aggravating and mitigating factors.
- in the event you are suspended upon receiving a notice of intended disqualification, the suspension will usually be for up to 12 months initially, with a maximum suspension period of two years.
- accordingly, the Charity Commissioner can use the above powers to prevent an individual from acting as a charity trustee for up to 17 years.
Personal risk to charity trustees
Being removed and disqualified from being a charity trustee or holding a position with senior management functions can have significant risks.
For example
- you will not be able to hold such positions for any current or new charities for the duration of the disqualification.
- additionally, the disqualification order is listed on the public Register of Removed Trustees which may also impact on you personally.
Acting as a trustee or holding a position with senior management functions whilst disqualified is a criminal offence which can result in a term of imprisonment up to two years or a fine, or both.
Variation, revocation and seeking leave to act
An individual subject to a disqualification order imposed by the Charities Commissioner may at any time apply to the Charities Commission for the order to be reviewed, reduced and/or revoked.
Similarly, any individual subject to disqualification of a company by the Secretary of State may seek permission to act as a director of a charitable company under Section 17 of the Company Directors Disqualification Act 1986.
At Francis Wilks & Jones we are able to advise on your duties as charity trustee, and assist with negotiations with the Charity Commission or act for you should you be threatened with removal and disqualification. We can assist with providing representations upon receipt of any notice of an intent to disqualify you, make representations in the event you are already disqualified, seek a variation or revocation or even seek court permission to act as a director notwithstanding disqualification by the Secretary of State.
Our Director Disqualification team has extensive experience providing such services and understand the commercial risks and benefits of all of these procedures.
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