New Charity Legislation on the Horizon

The General Scheme of the Charities (Amendment) Bill 2022 (the Bill) was published on 25 May 2022. The primary purpose of the Bill is to facilitate the introduction of Financial Accounting Regulations for charitable organisations. These regulations are long anticipated and needed but cannot be introduced without the legislative authority that the Bill will bring.

The existing legal framework for charity regulation in Ireland is primarily set out in the Charities Act 2009 (2009 Act), the majority of which became operative in 2014. Given the need for legislation on the accounting and financial side, the Charities Regulator has taken the opportunity to include additional items in the proposed Bill. The Regulator considers these additional items necessary to strengthen the regulatory framework and provide clarity on certain issues which may not have been fully addressed in the 2009 Act.

Timing of the new legislation

Many of our charity clients will have tuned in to a webinar we ran in conjunction with Charities Institute Ireland (Cii) and The Wheel, when Alice Murphy, Partner in our Charities Team, advised on the contents of the Bill. Following that webinar, our Charities Team was invited to submit written input on the Bill to the Joint Oireachtas Committee on Social Protection, Community and Rural Development, and the Islands. We are happy to share that written submission with you, should you wish to receive it – please contact Niamh Callaghan.

On 21 September 2022, Alice Murphy together with a representative from Cii and The Wheel attended in person before the Joint Oireachtas Committee, answering their questions pertaining to the Bill. Other interested parties, including representatives from the office of the Charities Regulator, also made “in person” submissions to the Joint Oireachtas Committee.

Following that engagement, the Joint Oireachtas Committee produced their Report on the Pre-Legislative scrutiny of the General Scheme of the Charities (Amendment) Bill, 2022 in November 2022. The Report contained nine recommendations.

That Report will be laid before both houses of the Oireachtas in due course. Following discussion and possible amendment, the Bill will then pass through the usual legislative process, which requires it to pass through five stages in both the Dail and the Seanad before it can be enacted. To date, we have no confirmation on timing relating to the progress of the Bill. We will keep you updated.

High level Commentary

We feel hugely positive that the Bill has been drafted, is in circulation and is being given the attention it requires. Some of the standout positives of the Bill include the following:

• The inclusion of the advancement of human rights as a charitable purpose
• Clarification that company secretaries are not automatically deemed to be charity trustees
• Releasing court appointed charity trustees from liability for actions taken by the charity prior to their appointment
• The increase of the threshold for filing of a full set accounts to a gross income or expenditure in excess of €250,000

Certain aspects of the Bill, as currently drafted, cause us some concern. It is important that legislation strikes a proportionate and fair balance between policing and imposing sanctions on the one hand, which any regulator is obliged and required to do, and supporting and encouraging compliance by a sector. A small number of the provisions of the Bill, in their present format, raise a concern that they may be disproportionate in their operation including:

• A prohibition on amending any element of a charity’s constitution, however minor in nature, without prior approval of the Charities Regulator. We fully agree that certain changes to a constitution must be pre-approved by the Charities Regulator. However, we believe the prohibition on any amendment to a constitution without the prior consent of the Regulator is excessive. This will delay the introduction of better governance and will result in additional workload for the office of the Charities Regulator in circumstances where their involvement is not needed.
• In addition, the Bill provides that if a charity fails to comply with the requirement to get the prior consent of the Regulator to a change in its constitution, the charity may face removal from the Register of Charities. We consider this to be a disproportionate sanction. Trust is a huge part of life in the charity sector. If a charity is removed from the Register of Charities, this will impact on the level of trust the public has in that charity.
• The Bill has a new obligation that will be imposed on charity trustees to notify the Charities Regulator as soon as is practicable where there are reasonable grounds to believe that a “significant event” has occurred, or is likely to occur in respect of that charitable organisation. The wording relating to this obligation is extremely broad and in our view will result in a burden being imposed on charity trustees and fear of non-compliance. This as currently drafted could hamper a trustee’s ability to act in the best interests of the charity.

Anything missing?

There are some issues that we come across on a very regular basis when advising charities that would be of benefit if they had been addressed and clarified in the Bill. Unfortunately, they were not. We recommended to the Joint Oireachtas Committee that the Bill should address these issues – a sample of which are as follows:

• The definition of the terms “operate” and “carrying on activities” in relation to the requirement to register as a charity, these are currently not defined leading to uncertainty;
• The definition of the term “advertising”;
• The inclusion of a “de minimis” threshold for registration, to avoid organisations carrying out very minimal activities in the State being obliged to register.

Conclusion

The publication of the Bill, our involvement in presenting to the Joint Committee, and the issuing of the Report and Recommendations by the Joint Committee are all very welcome. In our view, quite a bit of further work is needed on the Bill to ensure that regulation continues to be proportionate, fair and therefore implemented without hesitation. We will keep you updated of any changes that will be made to the Bill and when it will be considered by the Dail and Seanad.

For more information and expert advice on the proposed legislation, contact a member of our Charity and Not-for-Profit team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.