Explainer: Charities Amendment Act 2023

April 16, 2024

Last year the government made changes to the Charities Act. The most important changes introduced by the Amendment Act that are already in force are:

·        A requirement for charities to review their governance procedures at least once every three years

·        An expanded definition of ‘officer’

From 5 July 2024, there are expanded objection and appeal rights for certain decisions of the Charities Registration Board (“Board”) and Charities Services.

Charities Services will have the power to exempt certain small charities from financial reporting requirements under the Act, however regulations need to be enacted before this power can be exercised.

Duty to review governance procedures

Registered charities are now required to review their governance procedures once every three years, with the first review due no later than 5 October 2026.‘ Governance procedure’ is not defined in the Act, but Charities Services guidelines suggest it is likely to include a charity’s primary governing document (usually a constitution or trust deed depending on the entity type) Any significant internal guidelines or policies should also be reviewed, particularly if they relate to financial management or conflicts of interest.  

The review must consider whether the rules remain fit for purpose, and whether they continue to assist the charity to meet its charitable purpose and comply with the Act. Beyond this, the Act does not prescribe what must take place.

To ensure a bare minimum of compliance, charities should review at an appropriate meeting, which will vary depending on the type of entity.  Incorporated societies should carry out the review at a members meeting, charitable companies at a shareholders meeting, and charitable trusts at a board meeting.  This discussion must be minuted to demonstrate compliance with the Act.

Change in definition of ‘officer’

Officers are now defined to include “persons able to exercise significant influence over substantial decisions of the charity”.   This is likely to include (among others) chief executives, treasurers, CFOs, and COOs. Such individuals are now subject to the minimum qualification requirements for charity officers, and can be disqualified for serious wrongdoing or significant breaches of the Act.

Entities wanting to register as charities must provide Charities Services with certifications of qualification from the expanded group of people included in the definition. Existing charities are required to notify Charities Services of appointments and resignations of key employees, compared to the prior position where this only applied to members of the charity’s governing body.  

Exemption from financial reporting requirements

Charities Services will be able to exempt certain charities from the significant financial reporting requirements under the Act. Exempt entities will still be required to provide a minimum level of financial information, the specifics of which will be set in the same regulations. Drafting the regulations began in July 2023, but the date of any consultations (if they occur) or when the regulations are expected to be made is currently unknown.

This is a welcome change for small charities, which are the majority of registered charities.  It was widely recognised prior to the amendments that the compliance difficulties for small charities were out of proportion to any transparency and accountability benefits that might arise from stringent reporting requirements. 

Expanded objection procedure and appeal rights

From 5 July 2024, charities and some individuals can object to some decisions of Charities Services and all decisions of the Board by giving notice to the relevant decision-maker in accordance with the statutory procedure.  Notice must be given within the timeframe stated in the preliminary notification of decision or within two months, whichever is earlier.

The grounds for objections are that the reasons for making the decision are unsatisfied, or that it is otherwise not in the public interest that the decision be made. The decision-maker is then bound by certain process obligations when dealing with the objection.

Additionally, the same decisions that are subject to objections may now be appealed to the Taxation Review Authority (“Authority”). There is no requirement to lodge an objection in respect of a decision before it can be appealed.

The procedure and powers of the Authority in respect of appeals is similar to a specialist statutory court – the process is clearly formal and adversarial, but the Authority has wide powers to regulate its own procedure and can relax evidential rules. Additionally, the Authority is empowered to determine appeals without hearing from the parties in person, provided that it consults with the parties before doing so.

Parties dissatisfied with a decision of the Authority have a right of general appeal to the High Court.

To understand more about this issue, please contact Director Brigitte Morten

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