Charities

THE LAW REFORM COMMISSION OF HONG KONG CHARITIES SUB-COMMITTEE

CONSULTATION PAPER

CHARITIES

This consultation paper can be found on the Internet at: <http://www.hkreform.gov.hk>

JUNE 2011

This Consultation Paper has been prepared by the Charities Subcommittee of the Law Reform Commission. It does not represent the final views of either the Sub-committee or the Law Reform Commission, and is circulated for comment and discussion only. The Sub-committee would be rateful for comments on this Consultation Paper by !" September #$!!. %ll correspondence should be addressed to& The Secretary The Charities Sub-committee The Law Reform Commission #$th 'loor, (arcourt (ouse )* +loucester Road ,anchai (on -on Telephone& ./0#1 #0#/ $23# 'a4& 5-mail& ./0#1 #/"0 #*$# h6lrc7h6reform. ov.h6

It may be helpful for the Commission and the Sub-committee, either in discussion with others or in any subse8uent report, to be able to refer to and attribute comments submitted in response to this Consultation Paper. %ny re8uest to treat all or part of a response in confidence will, of course, be respected, but if no such re8uest is made, the Commission will assume that the response is not intended to be confidential. It is the Commission9s usual practice to ac6nowled e by name in the final report anyone who responds to a consultation paper. If you do not wish such an ac6nowled ment, please say so in your response.

THE LAW REFORM COMMISSION OF HONG KONG
CHARITIES SUB-COMMITTEE CONSULTATION PAPER CHARITIES

CONTENTS Chapter Prefa e Introduction Terms of reference Membership of the Sub-committee Format of this paper 1! I"#r$%& #'$" #$ (ar'#'e) '" H$"* K$"* Page 1 1 2 2 3 5 5 % ( ) * 12 12 12 1+ 1+ 1% 1( 1) 1) 1) 1)

What is a charity The !ro"th of philanthropy in #on! $on! The need to re&ie" #on! $on!'s charity la" :ther initiatives in relation to non-profit or anisations in (on -on :b;ectives of the review by the Sub-committee 2! O+er+'e, $f #(e &rre"# -e*a- .$)'#'$" '" H$"* K$"*

Introduction The le!al definition of <charity< The pri&ile!es associated "ith charitable status Ta4 privile es :ther advanta es of charitable status Formation of a charity: the le!al structures a&ailable ,&ersi!ht of charitable or!anisations Charities established by statute Charities receivin +overnment subvention :ther charities

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Chapter :versi ht by the Inland Revenue =epartment :versi ht by the Companies Re istry :versi ht by the Secretary for >ustice as <protector of charities< .parens partriae1 :versi ht by other +overnment departments ,&ersi!ht of fundraisin! acti&ities 54istin oversi ht by the Social ,elfare =epartment, T5L% and other authorities Types of fundraisin activity not sub;ect to +overnment monitorin .issolution of charities and the doctrine of /cy-pr?s/ /! Per e'+e% %ef' 'e" 'e) '" #(e re*&-a#$r0 fra1e,$r2 f$r )&.er+')'$" $f (ar'#'e) '" H$"* K$"*

Page 1* 1* 1* 221 21 22 22 23 23 23 2+ 2+ 25 2% 2( 2) 2) 2) 2* 332 35 3% 3( 3* +2 +2 +2 +2 ++ +( +)

Introduction 0roblems in the o&ersi!ht of charitable or!anisations in #on! $on! :ut-dated definition of charity Lac6 of a coherent system for the re istration of charities Inconsistent standards or re8uirements on overnance, accountin and reportin by charities Limited control of charitable fundraisin 1onclusions 3! O+er+'e, $f #(e -a, $f (ar'#'e) '" $#(er 4&r')%' #'$")

Introduction 2ustralia 1anada 3n!land and Wales Ireland 4e" 5ealand Scotland Sin!apore South 2frica 5! C$" -&)'$") a"% .r$.$)a-) $" #(e %ef'"'#'$" $f (ar'#0

1urrent situation in #on! $on! The le al definition of <charity< (istorical development of the common law position on charities The specific heads of <charitable purpose< at common law Purposes held not to be charitable The e4tent to which <charity< is defined under (on -on ii

Chapter le islation 0roblems "ith the current la" and the need for reform :utdated definition The law is confusin and unclear 0ros and cons of ha&in! a statutory definition Issues to be considered in definin! charitable status 54clusively charitable purposes <Public benefit< versus <private benefit< <Public benefit< rather than <altruism< <Charitable purposes< rather than <charitable activities< :ther considerations 0ossible reform models: definitions in other 6urisdictions 5n land and ,ales Scotland 1ate!ories of charitable purpose - our proposals <The prevention or relief of poverty< /The advancement of education" <The advancement of reli ion< <The ad&ancement of health" <The savin of lives< <The advancement of citi@enship or community development< <The advancement of the arts, herita e, culture or science< <The advancement of public participation in sport< <The provision of recreational facilities, or the or anisation of recreational activities, with the ob;ect of improvin the conditions of life for the persons for whom the facilities or activities are primarily intended< <The advancement of human ri hts, conflict resolution or reconciliation" <The promotion of reli ious or racial harmony< <The promotion of e8uality and diversity< /The ad&ancement of en&ironmental protection or improvement" <The relief of those in need by reason of youth, a e, ill-health, disability, financial hardship or other disadvanta e< <The advancement of animal welfare< <2ny other purpose that may reasonably be re!arded as analogou to an! of the preceding purpo e " 6! C$" -&)'$") a"% .r$.$)a-) $" #(e -e*a- )#r& #&re) $f (ar'#'e) Introduction 1urrent situation in #on! $on! Types of charitable or!anisation structure 7o&ernin! instrument 8e!al structures of charities in other 6urisdictions iii

Page 51 52 52 53 5+ 5+ 5+ 5% 5% 5( 5) 5) %%3 %3 %+ %5 %5 %% %) %* %* (1

(3 (% (( (( (( () ()

)1 )1 )1 )1 )( )(

Chapter ,ur proposal :ption ! A a unitary model for charities :ption # - maintainin a variety of le al forms for charities 1onclusions 7! C$" -&)'$") a"% .r$.$)a-) $" re*')#ra#'$" $f (ar'#'e) Introduction 1urrent situation in #on! $on! Lac6 of a formal re ister of charities 9e!istration systems for charities in other 6urisdictions Should there be a re!ister of charities in #on! $on! The effects of re istration and non-re istration compared Compulsory or voluntary system =ecision on charitable status :b;ection by third parties to re istration 54emption from re ulation and the re ulation of specific charities Charities with an overseas element ,ur proposal 8! Pr$.$)e% fra1e,$r2 f$r *$+er"a" e9 a re.$r#'"* :0 (ar'#'e) $&"#'"* a"%

Page )) )) )* **1 *1 *1 *1 *5 *( *( *) ** ** ** 1-1-1 1-3 1-3 1-3 1-+ 1-+ 1-+ 1-5 1-% 1-( 1-( 1-( 1-) 1-* 1-* 1-* 11111 113 11% 11(

1urrent situation in #on! $on! Inland Revenue =epartment re8uirements Companies :rdinance .Cap )#1 and Societies :rdinance .Cap !0!1 re8uirements Social ,elfare =epartment re8uirements (ome %ffairs Bureau re8uirements 5ducation Bureau re8uirements =epartment of (ealth re8uirements Monitorin! systems of charities in other 6urisdictions 5n land and ,ales Ireland Cew Dealand ,ur proposed frame"or: for reportin! and accountin! by charities in #on! $on! .!1 Compliance with charitable ob;ects .#1 Cotification of chan e of particulars .)1 =isclosure of interests and matters relatin to overnance .21 'inancial reportin .01 Powers of investi ation ."1 Providin false or misleadin information to be an offence 3nforcement and remedies i&

Chapter .!1 .#1 .)1 .21 ;! Removal of charitable status Referrin criminal offences to the appropriate law enforcement a encies Civil actions Protection of the property of a charity

Page 11( 11( 11( 11( 12121212125 1313132 133 135 1+1+1+1+1 1+3 1++ 1+5 1+5 1+% 1+( 1+* 15-

C$" -&)'$") a"% .r$.$)a-) $" #(e re*&-a#'$" $f f&"%ra')'"* a #'+'#'e)

Introduction 1urrent situation in #on! $on! The e4tent of statutory re ulation of charitable fundraisin activities The development of voluntary uidelines on charitable fundraisin Monitorin! of fundraisin! acti&ities in other 6urisdictions 5n land and ,ales Ireland ,ur conclusions and proposals on the re!ulation of fundraisin! acti&ities in #on! $on! :ur recommendations on charitable fundraisin 10! C(ar'#'e) a"% #a<

Introduction 1urrent situation in #on! $on! Ta4 e4emptions for charitable or anisations Ta4 deductions for charitable donations 'ilin of accounts and reports 1harities and ta; in other 6urisdictions 5n land and ,ales Ireland Cew Dealand Scotland ,ur conclusions and proposals on the ta;ation of charities in #on! $on! 11! C$" -&)'$") a"% .r$.$)a-) $" #(e 0-.r=) %$ #r'"e

152 152 152 152 155 15% 15(

Introduction The situation in #on! $on! re!ardin! the cy-pr?s doctrine< resultin! trusts and dissolution of charities The cy-pr?s doctrine and resultin trusts at common law =issolution of charitable or anisations The application of the cy-pr?s doctrine in other 6urisdictions 5n land and ,ales &

Chapter ,ur conclusions and proposals on &ariation of charities in #on! $on! 12! C$" -&)'$") a"% .r$.$)a-) $" #(e e)#a:-')(1e"# $f a (ar'#0 $11'))'$" f$r H$"* K$"* 4eed for a 'one-stop shop' ,&erseas e;perience 5n land and ,ales Ireland Cew Dealand ,ur proposals for the establishment of a charity commission The ob;ectives of the future charity commission The interplay between the role of the future charity commission and the Secretary for >ustice as protector of charities The eneral characteristics of the future charity commission The functions and powers of the future charity commission %ppeal mechanism I"+'#a#'$" #$ $11e"# S&11ar0 $f re $11e"%a#'$") A""e< 1 T(e -a, '" $#(er 4&r')%' #'$") $" #(e %ef'"'#'$" $f (ar'#0 A""e< 2 T(e -a, '" $#(er 4&r')%' #'$") $" #(e -e*a- )#r& #&re) $f (ar'#'e) A""e< / T(e -a, '" $#(er 4&r')%' #'$") $" re*')#ra#'$" $f (ar'#'e)

Page 1%5

1%% 1%% 1%( 1%) 1%) 1%* 1(1(1(1(1 1(2 1(% 1() 1)%

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A""e< 3 T(e -a, '" $#(er 4&r')%' #'$") $" *$+er"a" e9 a re.$r#'"* :0 (ar'#'e) $&"#'"* a"% 22%

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Chapter A""e< 5 S&11ar0 $f #(e -e*a- re>&'re1e"#) f$r f'-'"* $f a""&af'"a" 'a- re.$r#) ,'#( #(e (ar'#'e) 1$"'#$r0 a&#($r'#'e) '" $+er)ea) 4&r')%' #'$") A""e< 6 T(e -a, '" $#(er 4&r')%' #'$") $" #(e re*&-a#'$" $f f&"%ra')'"* a #'+'#'e) A""e< 7 T(e -a, '" $#(er 4&r')%' #'$") $" (ar'#'e) a"% #a< A""e< 8 T(e -a, '" $#(er 4&r')%' #'$") $" #(e c!"pr# %$ #r'"e A""e< ; T(e -a, '" $#(er 4&r')%' #'$") $" #(e e)#a:-')(1e"# $f a (ar'#0 $11'))'$" $r e>&'+a-e"# :$%0

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Prefa e
==========

I"#r$%& #'$"
1> It is estimated that there are appro;imately %<--- charities operatin! in #on! $on!>1 .urin! the course of the fiscal year 2--)-* alone< around ?) billion dollars "as raised in #on! $on! throu!h charitable donations>2 This is more than double the fi!ure for the year 2----1> 3 ,ur &ibrant charity sector therefore has much to be proud of> 2> Faced "ith a similar rapid !ro"th in charitable-!i&in! in recent years< a number of o&erseas 6urisdictions ha&e underta:en ma6or reforms of their la"s on charities> These de&elopments ha&e been aimed at both protectin! the interests of charitable donors and supportin! the acti&ities of charities by pro&idin! a modern and streamlined charity la" frame"or: in "hich they can operate>+ 3> In #on! $on!< such a comprehensi&e le!al frame"or: for re!ulatin! charities does not yet e;ist> There is limited statutory definition of "hat constitutes a <charity< or a <charitable purpose<> There is also a limited system of o&ersi!ht to ensure that donations are properly applied to the purposes for "hich they ha&e been solicited< 5 and le!islation relatin! to charities "hich @ualify for ta; e;emption appears in &arious ad hoc pro&isions>% +> 2n entity is entitled to ta; e;emption if it is reco!nised by the Inland 9e&enue .epartment as a charitable institution or trust of a public character< but that department is not responsible for re!isterin! charities< or
1

2

3

+

5

%

See Inland Revenue =epartment %nnual Report A2--*-2-1-B< at +5< "hich states: <%s at )! Earch #$!$, the number of charities e4empt from ta4 was ",)/$, of which 0/! charities were ranted Fta4G e4emption durin the year. The list of charities e4empt from ta4 is available on the FInland Revenue =epartmentG (omepa e.< 2ccordin! to the data pro&ided by the Inland 9e&enue .epartment< the amounts of appro&ed charitable donations allo"ed under profits ta; and salaries ta; for the year of assessment 2--)--*< "ere ?3>-3 billion and ?5>-1 billion respecti&ely> See Inland Revenue =epartment %nnual Report A2--1--2B< at %)< "here it is stated that: <'or the year of assessment #$$$-$!, the amounts of approved charitable donations allowed under Profits Ta4 and Salaries Ta4 were H$./) billion and H#.$/ billion respectively.< 3;amples include the 1harities 2ct 2--% in 3n!land and Wales< the 1harities 2ct 2--5 in 4e" 5ealand< and in Scotland< the 1harities and Trustee In&estment AScotlandB 2ct 2--5> 7uidelines to promote best practice in charity fundraisin! acti&ities ha&e been introduced in recent years< but adoption of these is purely &oluntary: see: Social Welfare .epartment< Reference +uide on Best Practices for Charitable 'und-Raisin %ctivities A2--+B< a&ailable at: http:CC""">s"d>!o&>h:CenCinde;Csite=pubs&cCpa!e=controlofcCsub=reference!C < and Social Welfare .epartment< +uidance Cotes on Internal 'inancial Controls for Charitable 'und-Raisin %ctivities A2--+B a&ailable at: http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC!nifc=e>pdf> See< for e;ample< sections 2A1B and )) of the Inland 9e&enue ,rdinance A1ap 112B and section 2 of the 9e!istered Trustee ,rdinance A1ap 3-%B>

1

for monitorin! their conduct> There is also no statutory re@uirement in #on! $on! for charitable or!anisations to submit annual reports or accounts reportin! their finances> Instead< the #on! $on! Inland 9e&enue .epartment "ill only call for accounts< annual reports or other documents for the purpose of re&ie"in! the e;emption status of a particular or!anisation so as to ensure that the or!anisation is still charitable and its acti&ities are compatible "ith its ob6ects> #o"e&er< this inspection of accounts of charitable or!anisation is not mandatory under the e;istin! la"> 5> The @uestion of the need for !reater monitorin! of charitable or!anisations has been "idely discussed by the community in recent years< and it has become a matter of ma6or public interest that a system should be put in place to both re!ulate charities and enhance their transparency> The 8a" 9eform 1ommission has therefore been as:ed by the Secretary for Dustice and the 1hief Dustice to re&ie" the la" as it applies to charities in #on! $on!>

Ter1) $f refere" e
%> In Dune 2--(< the 1hief Dustice and the Secretary for Dustice as:ed the 8a" 9eform 1ommission to re&ie" this sub6ect> The terms of reference are: <To review the law and re ulatory framewor6 relatin to charities in (on -on and to ma6e such recommendations for reform as may be considered appropriate.<

Me1:er)('. $f #(e S&:- $11'##ee
(> In September 2--(< a sub-committee "as appointed to re&ie" the sub6ect> The members of the Sub-committee are: Mr Ber"ar% C C(a"9 GBS9 JP A1hairmanB Mr Er' B$(1 Mr J$(" B&%*e9 SBS9 JP Mr) Pa1e-a C(a"9 BBS9 JP M) C(r')#'"e M S Fa"*9 JP Mr G$%fre0 La19 SC 1hairman #on! $on! 1ouncil of Social Ser&ice 13, WWF #on! $on! 0artner Wil:inson E 7rist Former 1hief 3;ecuti&e of 1onsumer 1ouncil 1hief 3;ecuti&e #on! $on! 1ouncil of Social Ser&ice Senior 1ounsel

2

Mr) C$""'e N*a" Auntil May 2-1-B Mr Her:er# T)$'9 BBS9 JP M) F-$re" e Wa' Afrom May 2-1-B Mr Le$"ar% W$"* C('"*-.'"* Afrom September 2--( to September 2--)B Afrom September 2-1-B Mr) We"%0 ?'. S(a1 ?'"-(ar Afrom September 2--) to September 2-1-B

13, A8otteries FundB Sub&entions Franch Social Welfare .epartment 0artner #erbert Tsoi E 0artners 13, A8otteries FundB Sub&entions Franch Social Welfare .epartment 1hief 2ssessor ASpecial .utiesB Inland 9e&enue .epartment

1hief 2ssessor ASpecial .utiesB Inland 9e&enue .epartment

)> Ms $itty Fun!< Senior 7o&ernment 1ounsel in the 8a" 9eform 1ommission Secretariat< is the secretary to the Sub-committee> Ms Dudy 1heun!< Senior 7o&ernment 1ounsel< "as the secretary until May 2--*> The Sub-committee considered the reference o&er the course of t"enty-fi&e meetin!s bet"een ,ctober 2--( and ,ctober 2-1-> The recommendations in this paper are the result of those discussions> They represent the Subcommittee's preliminary &ie"s< presented for consideration by the community>

F$r1a# $f #(') .a.er
*> 1hapter 1 of this paper introduces the types< numbers and nature of charitable or!anisations in #on! $on!< and their impact on #on! $on! society> The chapter also discusses the ob6ecti&es of the re&ie" by the Subcommittee> 1-> 1hapters 2 and 3 consider< respecti&ely< the current le!al position in #on! $on! on charities and the percei&ed limitations in the e;istin! le!al frame"or:> 9ecent de&elopments in other 6urisdictions are considered in 1hapter +> 11> The definition of <charity< is considered in 1hapter 5< includin! the Sub-committee's proposals for reform on this issue> 2n analysis of rele&ant le!al structures and the Sub-committee's discussions on this topic are set out in 1hapter %> The Subcommittee's conclusions and proposals on the re!istration of charities are considered in 1hapters (> The Sub-committee's proposed frame"or: for !o&ernance< accountin! and reportin! by charities is

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the sub6ect of 1hapter )> 12> Issues related to the re!ulation of fundraisin! acti&ities and the Sub-committee's proposals in this re!ard are discussed in 1hapter *> The Sub-committee's conclusions and proposals on charities and ta; are discussed in 1hapter 1-< and the dissolution of charities and the cy-pr?s doctrine in 1hapter 11> The Sub-committee's proposals in relation to establishin! a 1harities 1ommission for #on! $on! are set out in 1hapter 12> 13> The Sub-committee "elcomes any &ie"s< comments and su!!estions on the issues presented in this paper> These "ill !reatly assist the Sub-committee to reach its final conclusions in this important area>

+

C(a.#er 1 I"#r$%& #'$" #$ (ar'#'e) '" H$"* K$"*
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1>1 In this chapter< "e briefly outline the features of a charity< the uni@ue issues "hich arise in relation to charities and "hy there is no" a pressin! need for a re&ie" of the la" in this area>

W(a# ') a (ar'#0A
1>2 1urrently< there are more than %<--- ta;-e;empt charitable or!anisations in #on! $on!>1 These or!anisations are most commonly created in the form of one of the follo"in!:  a company incorporated under the 1ompanies ,rdinance A1ap 32B< "hich may be a company limited by shares or by !uarantee< or a company incorporated o&erseas and re!istered under 0art GI of the 1ompanies ,rdinanceH an unincorporated association "hich may or may not be re@uired to be re!istered under the Societies ,rdinance A1ap 151BH a trustH or a statutory body established under a specific #on! $on! ,rdinance>

  

1>3 In order for an institution or a trust to be considered <a charity<< it must be established <for purposes which are e4clusively charitable accordin to law<.2 1haritable purposes are currently defined by case la" 3 in #on! $on! and include:     the relief of po&ertyH the ad&ancement of education: the ad&ancement of reli!ion: and other purposes of a charitable nature beneficial to the community not fallin! under any of the precedin! heads>

1>+ It is in practice essential that a charity is established by a "ritten !o&ernin! instrument> The type of instrument adopted "ould depend on the
1

2

3

2ccordin! to the statistics of the Inland 9e&enue .epartment< the number of charities !ranted ta; e;emption is %<3)- as at the year endin! 31 March 2-1-> Inland 9e&enue .epartment< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B at http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> Special Commissioners of Income Ta4 v Pemsel I1)*1J 3 Ta; 1ases 53< at *%< per 8ord Macna!hten>

5

particular circumstances of the charity proposed and the preferences of the promoters or founders of the or!anisation> 1>5 2 si!nificant benefit of creatin! a charitable or!anisation is that the or!anisation itself is not !enerally liable to ta; and those "ho ma:e donations to it may claim the amount donated as a deduction from their assessable income> Section )) of the Inland 9e&enue ,rdinance A1ap 112B pro&ides that <any charitable institution or trust of a public character< is e;empt from ta; and shall be deemed al"ays to ha&e been e;empt> Sections 1%. and 2%1 of the Inland 9e&enue ,rdinance allo" a deduction for appro&ed charitable donations to be made by a person durin! the year of assessment> Knder the ,rdinance< the term <approved charitable donation< is defined as <a donation of money for charitable purposes to a charitable institution or trust of a public character which is e4empt from ta4 under section // or to the +overnment, for charitable purposes<. + 1>% 2 common misconception is that a charity is e@ui&alent to a <voluntary< or <non-profit-ma6in < or!anisation or non-!o&ernment or!anisation A47,B> The Inland 9e&enue .epartment notes< ho"e&er: <Cot all 9Ioluntary9 or so-called 9non-profit-ma6in 9 or anisations are charities, however worthy their causes may be. In fact, there is no provision in the Inland Revenue :rdinance which e4empts a 9voluntary9 or 9non-profit-ma6in 9 or anisation from ta4.<0

T(e *r$,#( $f .('-a"#(r$.0 '" H$"* K$"*
1>( The !ro"in! interest in philanthropy in #on! $on! is illustrated by statistics from the Inland 9e&enue .epartment> For the year of assessment 2----2--1< the appro&ed charitable donations allo"ed for deduction under profits ta; and salaries ta; amounted to ?->)3 billion and ?2>-) billion respecti&ely>% These fi!ures had increased to ?3>-3 billion and ?5>-1 billion respecti&ely for the year of assessment 2--)-2--*> ( It is li:ely that the actual amount of donations made each year by donors is si!nificantly !reater than this because some donors may not ha&e lod!ed their claims "ith the .epartment< or they may not ha&e had char!eable income or assessable profits in the rele&ant year< or the amount of their donations may ha&e e;ceeded the ma;imum ceilin! allo"able for deduction on their assessable income>) 1>) The Inland 9e&enue .epartment has pro&ided information from its records on the number of charitable or!anisations reco!nised for ta;
+ 5

% ( )

Section 2A1B< Inland 9e&enue ,rdinance A1ap 112B> Inland 9e&enue .epartment< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B at http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> Inland 9e&enue .epartment< %nnual Report #$$!-$#< at %)> 2ccordin! to the data pro&ided by the Inland 9e&enue .epartment> See sections 1%.A2BAcB and 2%1A22BAbB< Inland 9e&enue ,rdinance A1ap 112B> This ceilin! fi!ure may &ary from year to year> The current fi!ure< <for any year of assessment commencin on or after ! %pril #$$/<, is 35L: see sections 1%.A2BAdB and 2%1A22BAcB< Inland 9e&enue ,rdinance A1ap 112B.

%

e;emption purposes< as at .ecember 2--(< under the four main cate!ories of charitable purpose> ,ut of the 5<123 charitable or!anisations included< the brea:do"n "as as follo"s: 9elief of po&erty 2d&ancement of education 2d&ancement of reli!ion ,thers 1<-3( 1<(*1<((3 523

1>* 2s an indication of ho" rapidly charities are increasin! in #on! $on!< 6ust o&er a year later< at the end of March 2--*< the total number of charities reco!nised for ta; e;emption purposes< accordin! to fi!ures pro&ided by the Inland 9e&enue .epartment< had reached 5<)*)> This fi!ure< "hich does not include charitable or!anisations that ha&e not applied for ta; e;emption< represents an increase of ((5 reco!nised charities Aie< more than 13L of the totalB in 6ust o&er one year>

T(e "ee% #$ re+'e, H$"* K$"*B) (ar'#0 -a,
1>1The ta;-e;empt status of charitable institutions !reatly enhances the !ood "or: that they are able to do for the community> #o"e&er< the rapid rise in philanthropy and the !ro"in! numbers of charities operatin! here has hi!hli!hted the need to ensure that these or!anisations operate properly and the monies they collect are applied to the charitable purposes for "hich they "ere donated> The ,mbudsman has obser&ed: <'und-raisin for charity is part of (on -on 9s way of life. :ur community has a proud record of enthusiastic readiness to help the vulnerable and the under-privile ed. In view of the considerable amount of money involved, there has been community concern from time to time over whether such fundraisin activities are properly run and the donations responsibly used. Eany want to be assured of effective monitorin and e4pect a reasonable de ree of responsible control.< * 1>11 The lac: of co-ordinated o&ersi!ht of charitable acti&ities< and the public's deepenin! concern o&er this< recei&es re!ular mention in the press>1-

*

1-

,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'undRaisin %ctivities AFeb 2--3B< at para 1>1> For e;ample: /2s charity numbers !ro"< so do doubts/< South China Eornin Post A22u! 2--(BH /,ur charitable heart needs loo:in! after/< South China Eornin Post A2- 2u! 2--(BH /1ontrol of charities may be bolstered/< South China Eornin Post A2- 2u! 2--(BH /.onors< aid !roups "elcome proposal to re!ulate charities/< South China Eornin Post A21 2u! 2--(BH /9e!ulation of charitable fund-raisin! acti&ities proposed in #on! $on!/< :riental =aily A21 2u! 2--(BH /Is a la" needed to re!ulate charities /< South China Eornin Post A22 2u! 2--(BH /Fe more open/< South China Eornin Post A23 2u! 2--(BH /9e!ulation proposed as charities !ro" by +-L "ithin ei!ht years in #on! $on!/< Ein Pao A25 May 2--)BH /0resident's messa!e: The re!ulation of charities/< (on -on Lawyer A4o& 2--)BH /2cademic ur!es simplification as re!ulatory authorities duplicate their efforts/< Ein Pao A11 2pr 2--*BH /Fund-raisin! corruptionH se&en cases of understatement in sale of lotteries reported in three years/< Ein Pao A( ,ct 2--*B>

(

Other initiative in relation to non"profit organi ation in $ong %ong 1>12 Since 1**)< "ith the assistance of the #on! $on! Institute of 1ertified 0ublic 2ccountants and the Independent 1ommission 2!ainst 1orruption AI121B< the Social Welfare .epartment has issued a set of 7uidance 4otes on Internal Financial 1ontrols for 1haritable Fund-9aisin! 2cti&ities>11 These 7uidance 4otes <include advice on basic controls to ensure that income and e4penditure enerated from charitable fund-raisin activities are properly documented and that such income is spent for the desi nated purpose.<12 1>13 In Dune 2--2< the Social Welfare .epartment issued a useful boo:let entitled< Leadin your C+:& Corporate +overnance& % Reference +uide for C+: Boards<13 "hich discusses the principles of accountability and corporate responsibility< and corporate !o&ernance !enerally> 1>1+ 0rior to the 8a" 9eform 1ommission's current study< the ,ffice of the ,mbudsman produced a report in 2--3 on the direct in&esti!ation it had initiated into the monitorin! of charitable fundraisin! acti&ities> 1+ The in&esti!ation found that controls on charities "ere inconsistent and incomplete and there "ere insufficient transparency and accountability in the system> The ,mbudsman recommended that in the short to medium term< a 1ode of 0ractice on !ood administration and mana!ement of charities should be dra"n up and that the Social Welfare .epartment should maintain< for public inspection< a central re!ister of charities "hich comply "ith the re@uirements under the 1ode as "ell as introduce a scheme for monitorin! the bona fides of those see:in! to be included in this re!ister> In the lon!er term< the ,mbudsman recommended a "ider and more comprehensi&e re&ie" of charities' re!ulation>15 1>15 In order to stren!then the administrati&e control o&er charitable fundraisin! acti&ities< "ith a &ie" to enhancin! charities' transparency and accountability< the Social Welfare .epartment conducted a public consultation e;ercise in 2--3 and then introduced in 2--+ a 9eference 7uide on Fest 0ractices for 1haritable Fund-9aisin! 2cti&ities for adoption by charities under a self-re!ulatory system>1% The 9eference 7uide su!!ests best practices in the areas of donor's ri!hts< fundraisin! practices and financial accountability> 1( 1>1% More recently< the 1ommissioner for the I121 made the follo"in! statement in the 2--)-2--* 0olicy 2ddress:

11 12 13

1+

15 1% 1(

See http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC!nifc=e>pdf> See 81 0aper 4o> 1FA2B2-+%C-%--(A-5B< at para 25> 2&ailable from the Social Welfare .epartment's "ebsite at: http:CC""">s"d>!o&>h:CdocCn!oCcorp-!o&-en!>pdf> ,ffice of the ,mbudsman< Investi ation report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B> See 3;ecuti&e Summary of the 9eport at: http:CC""">ombudsman>!o&>h:CconcludedC2--3=-2=-1>doc> Same as abo&e> See 3;ecuti&e Summary to the 9eport< at para 1)> See http:CC""">s"d>!o&>h:CenCinde;Csite=pubs&cCpa!e=controlofcCsub=reference!C> See discussion of the 7uide in 8e!islati&e 1ouncil 0anel on Welfare Ser&ices paper< 81 0aper 4o> 1FA2B2-+%C-%--(A-5B< at paras 23 to 2+< a&ailable at: http:CC""">le!co>!o&>h:Cyr-%--(Cen!lishCpanelsC"sCpapersC"s-%11cb2-2-+%-5-e>pdf>

)

<The number of charitable or ani@ations in (on -on has increased from some 2,$$$ in #$$0 to over 0,)$$ in #$$/ and the ta4 deductible charitable donations in #$$"J#$$3 approached H" billion. ,e have to ensure that the enormous amount of public donations are properly safe uarded and used. ,e will conduct a corruption prevention study on the fund raisin activities of these charitable or ani@ations with a view to enhancin the control over the activities and disbursement of donation proceeds. ,e will promul ate a Code of Conduct and a Best Practice +uide to ether with the relevant re ulatory bodies to assist charitable or ani@ations in reviewin and stren thenin their overnance framewor6 and mana ement practices. ,e will also or ani@e seminars for their staff to raise their ethical awareness.<!/ 1>1( In ,ctober 2--*< the I121 published the Fest 0ractice 1hec:list for the Mana!ement of 1harities and Fundraisin! 2cti&ities to help charitable or!anisations in #on! $on! to stren!then internal !o&ernance and impro&e transparency and accountability in fundraisin! acti&ities> The best practice chec:list recommends practical measures to help these or!anisations minimise the ris:s of corruption and other crimes throu!h stren!thenin! internal controls>1* 1>1) The "elfare 47, sector has also initiated a &oluntary online self-disclosure platform A""">"ise!i&in!>or!>h:B to enhance charity accountability standards on !o&ernance< finances< fundraisin!< ser&ice @uality and information transparency> O&'ective of the review &! the Su&"committee 1>1* 0ublic confidence in charities is essential in pro&idin! a &ibrant future for sol&in! some of the "orld's most pressin! problems< such as relief of po&erty< assistance for the ad&ancement of education< health and reli!ion< etc> 0ublic confidence in charities influences charitable !i&in! and &olunteerin!< and charity employee recruitment< and encoura!es charities to dedicate resources to"ards their !oals and pro!rammes> 1>2We note that in #on! $on!< despite recent initiati&es< public concern is !ro"in! o&er ho" charities are re!ulated< and there are calls from many @uarters for ti!hter controls and increased transparency to be implemented> 1>21 #a&in! re!ard to the circumstances of #on! $on! and ta:in! account of o&erseas de&elopments< the Sub-committee has determined that its ob6ecti&es in this current re&ie" should be to: 
1)

modernise charity la"H

1*

See 81 0aper 4o> 1FA2B%%C-)--*A-2B< at para 1)< a&ailable at: http:CC""">le!co>!o&>h:Cyr-)--*Cen!lishCpanelsCseCpapersCse1-21cb2-%%-2-e>pdf> http:CC""">icac>or!>h:CenCne"s=and=e&entsCpr2Cinde;=uid=)+%>html>

*

  

pro&ide !reater clarity in charity la"H de&elop !reater accountability and transparency to enhance public trust and confidenceH and ensure effecti&e< fair and proportionate re!ulation of charities "hile maintainin! the sector's independence and autonomy> reater clarity

Eodernisin charity law and providin

1>22 2s "ill be discussed in more detail in the subse@uent chapters of this paper< the current la" on charitable status is outdated and unclear> The la" on charitable purposes re@uires updatin! and may need to be codified to pro&ide clarity and certainty> There is also a need for clearer focus in the la" on the issue of public benefit> =evelopin reater accountability and transparency in order to build public trust and confidence 1>23 We note that in some cases< accountability re@uirements to beneficiaries and donors of charities are not sufficiently clear> It is important that the charitable sector should produce sufficiently accessible and rele&ant information about its acti&ities< in order to meet the needs of the public and to a&ert unnecessary public concern> 1>2+ Fundraisin! acti&ities form a ma6or source of the income of some charities> There should be clear re@uirements or !uidelines on fundraisin! acti&ities as these can stron!ly influence public attitudes> 2s discussed in more detail later in this paper< "e consider that a simplified licensin! system for public collections should be introduced> 2lthou!h "e do not underestimate the stren!th of self-re!ulatory initiati&es< "e consider that charities should be o&erseen by an independent body and that !ood practice in fundraisin! should be "idely promoted> 5nsurin effective, fair and proportionate re ulation of charities while maintainin the sector9s independence and autonomy 1>25 2s "ill be discussed in more detail later in this paper< effecti&e and fair re!ulation of charities is needed> Such re!ulation also has to be proportionate and should no more than is necessary to impro&e the system in order that the sector's independence and autonomy be maintained> 1>2% It is our &ie" that the re!ulation of charities should aim to achie&e the follo"in!:    ensure compliance "ith charity la"H enhance accountability to beneficiaries and donorsH impro&e public trust and confidenceH and 1-



encoura!e charities to ma;imise their social and economic potential>

11

C(a.#er 2 O+er+'e, $f #(e &rre"# -e*a.$)'#'$" '" H$"* K$"*
=====================================

I"#r$%& #'$"
2>1 In this chapter< "e briefly e;amine the le!al definition of <charity<< the ad&anta!es "hich flo" from bein! a charitable or!anisation< the le!al structures "hich are a&ailable for their formation and the e;tent to "hich charities and charitable acti&ities are re!ulated in #on! $on!> 3ach of these areas "ill be co&ered in more detail in the later chapters of this paper>

T(e -e*a- %ef'"'#'$" $f "charit!"
2>2 7enerally spea:in!< the meanin! of the term <charity< under #on! $on! la" follo"s the common la"< and is concerned "ith "hether the particular purposes of the or!anisation or acti&ity are <charitable< in the le!al sense> 2s obser&ed in a standard le!al reference "or: the terms <charity<< <charitable<< <charitable ob;ects< and <charitable purposes< ha&e technical meanin!s in la" "hich may differ in some respects from the popular &ie" of these e;pressions>1 <The word 9charitable9, when used in its le al sense, covers many ob;ects which a layman mi ht not consider to be included under that word, but it e4cludes some benevolent or philanthropic activities which a layman mi ht consider charitable.<# 2>3 In order to be considered a charity< an or!anisation must be established for purposes "hich are e;clusi&ely charitable accordin! to la"> 3 The leadin! common la" authority on the definition of charity< "hich is e;pressly applied by both the courts in #on! $on! + and the Inland 9e&enue .epartment<5 is the famous dictum of 8ord Macna!hten in the 1)*1 case of Income Ta4 Special Purposes Commissioners v Pemsel. % In that case< 8ord Macna!hten listed <four principal divisions< of charitable purposes:
1 2 3 +

(alsbury9s Laws of 5n land< Mol 5A2B A2--1 9eissueB< at para 2> Same as abo&e>
Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 12-13>

5

%

See< for e;ample: C Chi-fon v (ui (o Pui-fun I1*)(J #$89 +%2H Re Tsin Shan Eonastery I2--3J 1 #$89. 23(< at 2+2H and Cheun Ean Ku v Lau Kuen Chin L :rs I2--(J + #$1 31+ A12B< at para 25> See Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B< at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> I1)*1J 21 531 A#8B>

12

A1B A2B A3B A+B

trusts for the relief of po&ertyH trusts for the ad&ancement of educationH trusts for the ad&ancement of reli!ionH and trusts for other purposes beneficial to the community not fallin! under any of the precedin! heads>(

2>+ This list "as itself based on 3n!lish le!islation datin! bac: to 1%-1< namely the preamble to the 1haritable Kses 2ct 1%-1 in 3n!land< also :no"n as the Statute of 1haritable Kses or the Statute of 3liNabeth I> ) 2>5 Specific heads of <charitable purpose< "hich ha&e de&eloped o&er time under the common la" include the follo"in!:  the relief of po&ertyH  the ad&ancement of educationH  the ad&ancement of reli!ionH  the establishment of reli!ious institutions of a public characterH  the promotion of healthH  the relief of &ictims of a disasterH  the relief of disabled personsH  the protection of animalsH and  the preser&ation of the en&ironment> 2>% 3;amples of purposes "hich ha&e been identified in the courts as not bein! <charitable< in the le!al sense include those "hich are political in nature<* those "hich promote the benefits of the founders or subscribers of the or!anisation< those "hich encoura!e a particular sport Aas opposed to sports !enerallyB and those for the pro&ision of a playin! field< recreation !round or scholarship fund for employees of a particular company or industry> 12>( The scope of the definition of charity< both at common la" and under statute< is discussed in more detail in 1hapter 5 of this paper>
( ) *

1%(>
1-

I1)*1J 21 531< at 5)3 A#8B> (alsbury9s Laws of 5n land< Mol 5A2B A2--1 9eissueB< at para 2> #ubert 0icarda< The Law and Practice Relatin to Charities AFutter"orths< 1***B< at

See discussion in Inland 9e&enue .epartment< =epartmental Interpretation and Practice Cotes, Co )3 .Revised1 Concessionary =eductions& Section #"C& %pproved Charitable =onations ASep 2--%B< at para *< a&ailable at: http:CC""">ird>!o&>h:Cen!CpdfCe=dipn3(>pdf>

13

T(e .r'+'-e*e) a))$ 'a#e% ,'#( (ar'#a:-e )#a#&)
2>) In terms of le!al and economic implications< there are a number of ad&anta!es associated "ith bein! identified as <charitable< under #on! $on! la"> Ta( privilege 2>* 2 :ey benefit of bein! reco!nised as a charitable institution or trust of a public character is that under the pro&isions of the Inland 9e&enue ,rdinance A1ap 112B< the charitable or!anisation itself is not !enerally liable to ta;< and donations to such an or!anisation can be ta; deductible> These ad&anta!es are discussed briefly belo"> AFor a more detailed discussion of the position on charities and ta; in #on! $on!< see 1hapter 1- of this paper>B % charity9s ta4 e4empt status 2>1The Inland 9e&enue .epartment in #on! $on! maintains a list of or!anisations "hich ha&e successfully applied for ta; e;emption throu!h bein! reco!nised by the .epartment as a <charitable institution or trust of a public character<, "ithin the scope of section )) of the Inland 9e&enue ,rdinance A1ap112B>11 4ot"ithstandin! the !eneral ta; e;emption contained in section )) of the ,rdinance< "here a trade or business is carried on by a charity< the profits so deri&ed are e;empt from ta; only if:   the profits from the trade or business carried on by the charity are to be applied solely for charitable purposesH and the profits are not to be e;pended substantially outside #on! $on!H

and either:   the trade or business of the charity is e;ercised in the course of the carryin! out of the e;pressed ob6ects of the charityH or the "or: in connection "ith the trade or business of the charity is mainly carried on by persons for "hose benefit the charity is established>12

2>11 2 further @ualification is that only charities under the 6urisdiction of the #on! $on! courts @ualify for e;emption< that is< those that ha&e been established in #on! $on!< or the <(on -on establishment of overseas charities such as those deemed to be established in (on -on under

11

12

The online &ersion of this http:CC""">ird>!o&>h:Cen!Cta;Cach=inde;>htm> Section ))< Inland 9e&enue ,rdinance A1ap 112B>

list

is

a&ailable

at:

1+

section 2 of the Societies :rdinance or re istered under Part MI of the Companies :rdinance.<13 Ta4 deductions for charitable donations 2>12 The Inland 9e&enue .epartment has noted: <In its ordinary sense, the word 9donation9 means a ift. % 9 ift9 is the transfer of property in a thin without any valuable consideration. To constitute a ift, the property transferred must be transferred voluntarily and not as a result of a contractual obli ation to transfer it. 'urther, the transferor cannot receive any benefit or advanta e of a material character by way of return.<!2 2>13 Knder section 2%1 of the Inland 9e&enue ,rdinance A1ap 112B< a ta;payer may deduct any <approved charitable donations< made by him Ain the a!!re!ate sum of not less than #$?1--B from his assessable profits or char!eable income durin! a year of assessment> The term <approved charitable donation< is defined under section 2A1B of the ,rdinance as <a donation of money to any charitable institution or trust of a public character which is e4empt from ta4 under section // or to the +overnment, for charitable purposes.< Section 1%. of the ,rdinance also allo"s deductions for appro&ed charitable donations to be made by a ta;payer "ho is sub6ect to profits ta;> .eductions under both sections are sub6ect to a current ceilin! of 35L of the assessable income or profits> 15 2>1+ It should be emphasised that the !ift in this conte;t must be a donation of money> 2 !ift of land< or a "or: of art A"hich is classified as <movable property<B< "ould not be deductible for income ta; purposes Athou!h it may be e;empt from stamp duty< as noted belo"B>1% 2>15 2lthou!h for charitable donations the ta; e;emption benefit is conferred directly upon the donor rather than on the charity< these pro&isions clearly brin! an indirect benefit for charity< as they ha&e the economic effect of ma:in! a donation to a charity more 'efficient'< and thus ma:in! such a donation more attracti&e from the donor's point of &ie" than a donation to a non-charitable body>
13

1+

15

1%

Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> Inland 9e&enue .epartment< =epartmental Interpretation and Practice Cotes, Co )3 .Revised1 Concessionary =eductions& Section #"C& %pproved Charitable =onations ASep 2--%B< at para 3< a&ailable at: http:CC""">ird>!o&>h:Cen!CpdfCe=dipn3(>pdf> The authority cited for this statement is Sanford Oun!-tao Oun! & 1I9 I1*(*J 1 #$T1 1-)1> Section 1%.A2BAbB or 2%1A22BAcB< Inland 9e&enue ,rdinance A1ap 112B> This ceilin! fi!ure may &ary from year to year> For e;ample< section 2%1A22B states that: <The percenta es specified N shall be - .a1 for any year of assessment up to and includin the year of assessment commencin on ! %pril #$$#, !$OP .b1 for the year of assessment commencin on ! %pril #$$) or any subse8uent year of assessment up to and includin the year of assessment commencin on ! %pril #$$3, #0OP .c1 for any year of assessment commencin on or after ! %pril #$$/, )0O.< Susan 1ollins< /The 9ise of 1haritable 7i&in!/< (on -on Lawyer A2pr 2--1B )+< at )5>

15

54emption from stamp duty 2>1% The ma:in! of a !ift to charity "hich is not in the form of money< such as a !ift of land or a "or: of art< "ould be e;empt from stamp duty> 1( Other advantage of charita&le tatu 54emption from some statutory re istration re8uirements 2>1( 1harities may be e;empt from certain statutory re!istration re@uirements< such as re!istration as a society under the Societies ,rdinance A1ap 151B1) and re!istration under the Fusiness 9e!istration ,rdinance A1ap 31-B>1* 54emption from the rule a ainst perpetuities 2>1) The common la" rule a!ainst perpetuities pro&ides that !enerally< a !ift or trust must <vest< in the intended beneficiary before the end of a certain period< other"ise the !ift or trust "ill be &oid <as tendin to a perpetuity<>2- #o"e&er< !ifts to charity en6oy a pri&ile!ed position in this re!ard> The courts are prepared to see property tied up for as lon! as the purposes for "hich the !ift is !i&en are charitable> 2>1* In the #on! $on! case of (on -on L Shan hai Ban6 (on -on .Trustee1 Ltd v The Incorporated Trustee of the Islamic Community 'und of (on -on L :thers, 9hind D< in decidin! "hether the !ift in @uestion "as a charitable !ift< stated that: <It is only if the whole of the ift is for e4clusively charitable purposes that the ift will be upheld as a valid charitable be8uest. In the event of any part of the ift N bein for a noncharitable purpose, the whole of the ift will fail on the basis that it offends the rule a ainst perpetuities.< #! Court9s broad discretion to uphold charitable ift 2>2The courts are also more lenient in upholdin! the &alidity of a charitable !ift e&en thou!h the instrument creatin! it is badly e;pressed> The court is often prepared to find a &alid or '!ood' trust e&en if the testamentary disposition to charity is in imprecise terms Ain "hich case precise terms "ould be laid do"n by the courtB> 2s lon! as a !ift to charity manifested a < eneral charitable intention<22 that is sufficient to ma:e it !ood> The precise terms that
1( 1) 1* 2-

21 22

Section ++< Stamp .uty ,rdinance A1ap 11(B> See Susan 1ollins< abo&e< at )5> Section 52A2B< Societies ,rdinance A1ap 151B> Section 1%AaB< Fusiness 9e!istration ,rdinance A1ap 31-B> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 1+*> See also the 0erpetuities and 2ccumulations ,rdinance A1ap 25(B "hich is applicable to testamentary dispositions ta:in! effect after 13 March 1*(-> I1*)+J 1 #$1 152< at 155> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at +52-+53>

1%

are considered essential to ma:e !ood other dispositions are not re@uired to ma:e !ood a !ift to charity>23 Substitution of charitable purposes 2>21 If the purposes of a charity "ere initially< or ha&e become< incapable of e;ecution< the courts are able to pro&ide ne" purposes as near as possible Ain 4orman French< <cy-pr?s<B to the ori!inal charitable purposes> 2ssociated "ith this po"er is a specific pro&ision in the 0robate and 2dministration ,rdinance A1ap 1-B concernin! !eneral charitable testamentary !ifts< "hich empo"ers the court< on the application of the Secretary for Dustice< to appro&e a scheme for the disposal of the !ift for such charitable purposes as it thin:s fit> 2+ AThe scope and application of the cy-pr?s doctrine in #on! $on! is discussed in 1hapter 11 of this paper>B

F$r1a#'$" $f a (ar'#0C #(e -e*a- )#r& #&re) a+a'-a:-e
2>22 2s a matter of practice< it is essential that a charity is established by a "ritten !o&ernin! instrument> 25 The type of instrument adopted "ould depend on the circumstances of the charity proposed< and the preferences of the promoters or founders of the or!anisation> 1haritable or!anisations in #on! $on! are most commonly created in the form of either:  a company incorporated under the 1ompanies ,rdinance A1ap 32B< "hich may be a company limited by shares or by !uarantee< or a company incorporated o&erseas and re!istered under 0art GI of the 1ompanies ,rdinanceH an unincorporated association< "hich may or may not be re@uired to be re!istered under the Societies ,rdinance A1ap151BH a trustH or a statutory body established by statute< such as the Tun! Wah 7roup #ospitals Aestablished under 1ap 1-51B and 0o 8eun! $u: Aestablished under 1ap 1-+-B>



 

2>23 The different types of le!al structure for charities in #on! $on! are e;amined in detail in 1hapter % of this paper>

23

2+ 25

There are other special rules such as that charities trustees can act by a ma6ority instead of unanimously "hich is the position for pri&ate trusts unless the trust deed other"ise pro&ides: Re ,hiteley I1*1-J 1 1h %--< at %-)< and that the %-year limitation period applies to an action by a beneficiary under a trust but not to an action by the 2ttorney 7eneral Ain #on! $on! the Secretary for DusticeB as protector of charities: %+ v Coc6e I1*))J 2 2ll 39 3*1> See section 3A+B< 0robate and 2dministration ,rdinance A1ap 1-B> Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B< at para (< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm>

1(

O+er)'*(# $f (ar'#a:-e $r*a"')a#'$")
2>2+ .ependin! on the type of charity< 7o&ernment monitorin! in #on! $on! ran!es from <strin ent statutory overall control< to limited scrutiny of specified acti&ities only>2% These areas of o&ersi!ht are set out briefly belo"> A2 fuller discussion of the rele&ant issues is presented in 1hapters ) and * of this paper>B Charitie e ta&li hed &! tatute 2>25 The controls imposed on charities established by statute and !o&erned by their o"n le!islation are <clear and comprehensive<2( and are lar!ely set out in the rele&ant establishin! ,rdinances> 2) These statutory or!anisations are re@uired to account for the use of all their proceeds< to prepare and :eep proper audited accounts of all transactions< and to be open at all reasonable times for inspection by any director of the or!anisation and any person appointed for the purpose by the 1hief 3;ecuti&e> 2* Charitie receiving )overnment u&vention 2>2% 1haritable or!anisations "hich are sub&ented by the 7o&ernment Asuch as some non-!o&ernmental or!anisations pro&idin! ser&ices related to "elfare< education< medical ser&ices and the artsB are re!ulated by the 7o&ernment to the e;tent that the rele&ant bureau or department to "hich they report monitors the use of their 7o&ernment sub&ention>3Other charitie 2>2( Sub6ect to the o&ersi!ht mechanisms discussed belo"< other types of charities are !enerally allo"ed to operate autonomously under their o"n !o&ernin! bodies and accordin! to their o"n rules and re!ulations> 31 These or!anisations include pri&ate charities and non-!o&ernmental charitable or!anisations "hich are neither statutory nor sub&ented< and o&erseas charities established in #on! $on!> Over ight &! the *nland +evenue ,epartment 2>2) 2s noted earlier< the Inland 9e&enue .epartment is only responsible for the ta; e;emption aspects of charitable or!anisations> The .epartment is not responsible for re!isterin! charities< nor for monitorin! their
2%

2( 2)

2*

331

,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 5>3> Same as abo&e< at para 5>+> See< for e;ample< the lon! list of matters set out in the Schedule to the Tun! Wah 7roup pf #ospitals ,rdinance A1ap 1-51B> ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 2>+> Same as abo&e< at paras 5>+ and 2>5> Same as abo&e< at para 2>%>

1)

conduct> There is also no statutory re@uirement in #on! $on! for charitable or!anisations to submit annual reports or accounts to report on their finances> Instead< the Inland 9e&enue .epartment "ill only call for accounts< annual reports or other documents for the purpose of conductin! a periodic re&ie" of the e;emption status of a particular or!anisation so as to ensure that the or!anisation is still charitable and its acti&ities are compatible "ith its ob6ects> 32 The Inland 9e&enue .epartment has noted< ho"e&er< that this inspection of accounts of charitable or!anisation is not mandatory under the e;istin! la"> 33 2>2* 2 charity "hich e;ists in the form of an incorporated company "ould need to submit audited accounts to the Inland 9e&enue .epartment< usually once e&ery four years< as part of the .epartment's periodic re&ie" of charities noted abo&e> In contrast< charities e;istin! in the form of societies or unincorporated associations are only re@uired to submit copies of self-certified accounts> Over ight &! the Companie +egi tr! 2>3The 1ompanies 9e!istry does not o&ersee charities in its o"n ri!ht> The 9e!istrar of 1ompanies re@uires companies incorporated under the 1ompanies ,rdinance A1ap 32B to file "ith the 1ompanies 9e!istry e&ery year an annual return containin! specified particulars> 3+ ,nly those charitable or!anisations "hich are formed as a company incorporated under the 1ompanies ,rdinance are re@uired to file annual returns> Over ight &! the Secretar! for -u tice a "protector of charitie " .paren patriae/ 2>31 The Secretary for Dustice in #on! $on! has assumed the duties of the former 2ttorney 7eneral as the protector of charities> In this role< the Secretary for Dustice is necessarily a party to charity proceedin!s and represents the beneficial interest< or ob6ects< of the charity> 35 <By protectin the interests of charity enerally, the Secretary for >ustice contributes to a framewor6 of supervision and control over charities.< 3% 2>32 2lthou!h the Secretary for Dustice is not a <re ulator< of charities as such< section 5(2 of the Trustee ,rdinance A1ap 2*B empo"ers the Secretary for Dustice to act if there is a case of a breach of a charitable trust or the need for better administration of a charitable trust> Section 5(2 states that the court may pro&ide relief< ma:e an order or !i&e directions as it thin:s

32 33

3+ 35

3%

Section 51A1B< Inland 9e&enue ,rdinance A1ap 112B> Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B< at para 1(< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> Section 1-(< 1ompanies ,rdinance A1ap 32B> #on Won! Oan 8un!< /The Secretary for Dustice 2s the 0rotector of the 0ublic Interest: 1ontinuity and .e&elopment/ A2--(B 3( #$8D 31*< at 333> See also (alsbury9s Laws of 5n land< Mol 5A1B A2--+ 9eissueB< at para 51%> #on Won! Oan 8un!< /The Secretary for Dustice 2s the 0rotector of the 0ublic Interest: 1ontinuity and .e&elopment/ A2--(B 3( #$8D 31*< at 333>

1*

6ust relatin! to a charitable trust upon an application made to it: AaB by: AiB AiiB AiiiB t"o or more persons "ho ha&e the consent in "ritin! of the Secretary for Dustice to ma:e the applicationH the Secretary for DusticeH or all or any or more of the trustees or persons administerin! the trust< or persons claimin! to administer the trust< or persons other"ise interested in the trustH and

AbB

either: AiB AiiB complainin! of a breach of the trust or supposed breach of the trustH or for the purposes of the better administration of the trust>

2>33 Since 1**(< the Secretary for Dustice has played a role in a number of charity cases>3( Over ight &! other )overnment department 2>3+ 2s "ell as the 7o&ernment departments listed abo&e< certain other departments e;ercise some o&ersi!ht functions in relation to charities fallin! "ithin their pur&ie"> These include: the #ome 2ffairs Fureau< in relation to its role of co-ordinatin! policy on recreation and sport and the facilities for these acti&itiesH the 3ducation Fureau< "ith re!ard to its monitorin! of the pro&ision of education ser&icesH and the .epartment of #ealth< "hich has responsibility for ensurin! that healthcare institutions are fit for the ser&ices they pro&ide>

O+er)'*(# $f f&"%ra')'"* a #'+'#'e)
E(i ting over ight &! the Social 0elfare ,epartment1 TE23 and other authoritie 2>35 If a charity "ishes to raise funds throu!h an acti&ity held in a

3(

C Chi-fon and :thers v (ui (o Pui-fun and ,thers I1*)(J + #$89 +%2H Ip Cheun 6wo6 v Sin (ua Ban6 Trustee Ltd and :thers I1**-J 2 #$89 +**H (SBC Trustee .(on -on 1 Limited v ,ilhelmina ,u and :thers A1**(B #1M0 1)%1C1**(H (SBC Trustee .(on -on 1 Limited in their capacity as trustees of the Sir Robert (o Tun Charitable 'und v Secretary for >ustice and :thers A1***B #1M0 1*(5C1**(H (on -on (ousin Services for Refu ees Ltd v Secretary for >ustice A1***B #1M0 %--(C1***H To -an Chi L :thers v Pui Ean Kau L :thers A1**)B #1M0 2-)+C1**+H To -an Chi L :thers v Pui Ean Kau and :thers A2---B 121M 32C1***H Secretary for >ustice v To -an Chi and :thers I2---J 3 #$1F29 +)1H 'ui;ino ,on %nnie Eei Eei L :thers v Lauren 5i6o Lai Kin 'u;ino L :thers A2--+B #1M0 51(*C2--1 Athe 1hi 8in 4unnery caseB>

2-

public place< such as a fla! day< it must first obtain a public subscription permit from the Social Welfare .epartment under section +A1(BAiB of the Summary ,ffences ,rdinance A1ap 22)B> This section ma:es it an offence for any person to or!anise or participate in <any collection of money or sale or e4chan e for donations of bad es, to6ens or similar articles in a public place< < e;cept in accordance "ith a permit issued by the .irector of Social Welfare for a collection< sale or e;chan!e for charitable purposes> The aim of this control is to limit public nuisance and to maintain order> 3) 2>3% 1haritable fundraisin! acti&ities "hich in&ol&e on-street sellin! may be sub6ect to the #a":er 9e!ulation A1ap 1322IB< and "ould re@uire ad&ance application to the Food and 3n&ironmental #y!iene .epartment for a temporary ha":er licence for on-street sellin! acti&ities> 2>3( Similarly< if a charity "ishes to raise funds throu!h a lottery< a licence is re@uired from the 1ommissioner for Tele&ision and 3ntertainment 8icensin! AT382B under section 22A1BAaBAiB of the 7amblin! ,rdinance A1ap 1+)B> This is aimed at restrictin! !amblin! acti&ities> 3* It is an offence under the 7amblin! ,rdinance for licence holders to &iolate the conditions imposed by the T382 in !rantin! lottery licences> ,ffenders are liable on con&iction to a fine of ?5-<--- and to imprisonment for t"o years> +- T382 may also re&o:e the lottery licences issued< and may re6ect future applications submitted by the same or!anisation> 2>3) In order to < uard a ainst unscrupulous use of the proceeds raised throu h these fund-raisin activities< < both T382 and the Social Welfare .epartment re@uire applicants for permits and licences to pro&ide audited accounts of the specified fundraisin! e&ent as a condition of appro&al>+1 For charitable or!anisations "hich are issued "ith a public subscription permit by the Social Welfare .epartment for charitable fundraisin! acti&ities in public places< they are re@uired to submit audited financial statements for the fundraisin! acti&ities to the Social Welfare .epartment "ithin *- days after the fundraisin! e&ents> For fla! days as "ell as other charitable public fundraisin! acti&ities "here monies donated are to be spent outside #on! $on!< the audited account to!ether "ith the auditor's opinion should be published in at least one local 1hinese 8an!ua!e ne"spaper and one local 3n!lish ne"spaper "ithin *- days of the last day specified in the permit< and copies of the ne"spaper cuttin!s should be for"arded to the .irector of Social Welfare at the same time> T!pe of fundrai ing activit! not u&'ect to )overnment monitoring 2>3* 1haritable or!anisations in #on! $on! may en!a!e in a &ariety of fundraisin! acti&ities "hich fall outside any scheme of monitorin! by 7o&ernment authorities< such as those imposed by the Social Welfare .epartment or T382 described abo&e> Types of fundraisin! acti&ity not
3) 3* ++1

See discussion in ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 3>5> Same as abo&e< at paras 3>2-3>5> 0ursuant to section 22A(B< 7amblin! ,rdinance A1ap 1+)B> See ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 3>%>

21

sub6ect to monitorin! include charity auctions< charity balls< concerts< dinners< "al:s< film premiers< sho"s in the mass media< re@uests for charity donations by mail and ad&ertisements or charity phone-in arran!ements "hich in&ol&e appeals to the public>+2

D'))$-&#'$" $f (ar'#'e) a"% #(e %$ #r'"e $f "c!"pr# "
2>+The Inland 9e&enue .epartment has sou!ht to ma:e administrati&e pro&ision re!ardin! the transfer or donation of the assets of charities in the e&ent of their dissolution> In its !uide to charitable or!anisations "ishin! to see: ta; e;emption under section )) of the Inland 9e&enue ,rdinance A1ap 112B< the department states that one of the clauses "hich the !o&ernin! instrument of such an or!anisation should contain is a clause <specifyin how the assets should be dealt with upon its dissolution .The remainin assets should normally be donated to other charities1< >+3 2ccordin!ly< or!anisations see:in! ta; e;emption under section )) should pro&ide a clause to this effect in the or!anisation's !o&ernin! instrument for the department's consideration> 2>+1 In the case of !eneral charitable !ifts< the court is empo"ered to pro&ide ne" purposes as near as possible Ain 4orman French< <cy-pr?s<B to the ori!inal if they are initially< or ha&e become< incapable of e;ecution> 2ssociated "ith this po"er is a specific pro&ision in the 0robate and 2dministration ,rdinance A1ap 1-B concernin! charitable testamentary !ifts< "hich empo"ers the court< on the application of the Secretary for Dustice< to appro&e a scheme for the disposal of the !ift for such charitable purposes as it thin:s fit>++ Further discussion of these issues appears in 1hapter 11 of this paper>

+2 +3

++

Same as abo&e< at para 3>1> See Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sep 2-1-B< at para *AeB< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> See section 3A+B of the 0robate and 2dministration ,rdinance A1ap 1-B< "hich pro&ides: <,here a testator ives, devises or be8ueaths any part of his estate for unspecified charitable purposes, otherwise than on trust, the court shall have ;urisdiction, on the application of the Secretary for >ustice, to approve a scheme for the disposal of the ift, devise or be8uest for such charitable purposes as it thin6s fit.<

22

C(a.#er / Per e'+e% %ef' 'e" 'e) '" #(e re*&-a#$r0 fra1e,$r2 f$r )&.er+')'$" $f (ar'#'e) '" H$"* K$"*
===================================================

I"#r$%& #'$"
3>1 In the pre&ious chapter "e set out a brief analysis of the e;istin! statutory and procedural re@uirements relatin! to charities in #on! $on!> In this chapter< "e hi!hli!ht ho" this system of o&ersi!ht is percei&ed to be deficient< both in the monitorin! of charitable or!anisations and their fundraisin! acti&ities< and in supportin! the efficient operation of charities> 3ach of the issues raised here "ill be discussed in more detail in later chapters of this paper>

Pr$:-e1) '" #(e $+er)'*(# $f (ar'#a:-e $r*a"')a#'$") '" H$"* K$"*
3>2 We sa" earlier in this paper that the number of ta;-e;empt charitable or!anisations has been dramatically on the rise in #on! $on! in recent years> 2s a result of this< it has become increasin!ly apparent that there are serious limitations in our current system of monitorin! charities> 2 report issued by the ,mbudsman in 2--3 1 described the 7o&ernmentPs monitorin! of charities as Qpartial and patchy, fra mented and ineffective.R 2 It "as obser&ed that there "as insufficient transparency and accountability in the operations of charities< and that the o&ersi!ht measures "hich do e;ist do not co&er all charitable bodies or all charitable fundraisin! acti&ities> 3 3>3 From the point of &ie" of the charities operatin! in #on! $on!< the fact that the current o&ersi!ht measures are &ested in a &ariety of 7o&ernment authorities< each imposin! their o"n re@uirements and standards in differin! circumstances< must create some de!ree of confusion and does not support the efficient operation of charities> 3>+ These and other percei&ed limitations in the current system of o&ersi!ht of charities are discussed belo"> Out"dated definition of charit!

1

2 3

,ffice of the ,mbudsman< Investi ation Report& Eonitorin Raisin %ctivities AFeb 2--3B> Same as abo&e< at para %>1AcB> Same as abo&e< at 1hapter 5 and para %>1>

of Charitable 'und

23

3>5 2s "e sa" in the pre&ious chapter< the definition of <charity< in #on! $on! is not based upon a clear statutory definition< but upon the common la" interpretation of 3n!lish le!islation datin! bac: hundreds of years< namely to the preamble to the 1%-1 Statute of 3liNabeth I> The terminolo!y used in the preamble A"hich is set out in full and discussed in 1hapter 5B is archaic and not suited to modern conditions> 3>% The leadin! case authority on the definition of charity is ac:no"led!ed to be the 1)*1 decision of the #ouse of 8ords in Pemsel.+ 8ord Macna!hten's famous dictum in that case< "hich sou!ht to enunciate the four principal di&isions of charitable purpose Aie< the relief of po&erty< the ad&ancement of education< the ad&ancement of reli!ion and any other purpose not fallin! under these three headsB< is still applied today< althou!h it too may be seen as bein! out of touch "ith modern sensibilities> In particular< the fact that many of the more recently de&eloped charitable purposes necessarily fall "ithin the &a!ue 'any other purpose' classification< has resulted in e&ol&in! case la" on charitable purposes "hich is confusin! and unclear>5 3>( These and other issues related to the definition of charity are considered in more detail in 1hapter 5 of this paper> 2ack of a coherent ! tem for the regi tration of charitie 3>) 2s noted in 1hapter 2< the Inland 9e&enue .epartment is not responsible for re!isterin! or monitorin! charities< and the .epartment's list of or!anisations that ha&e been !ranted ta; e;emption status under section )) of the Inland 9e&enue ,rdinance A1ap 112B does not constitute a formal Qre!isterP of charitable or!anisations as such> There may be a dan!er< ho"e&er< that the public Aand hence potential charity donorsB may percei&e that the !rant of ta; e;emption status and inclusion on this list confers on those charities <a cloa6 of respectability and the semblance of official sanction not intended by the Inland Revenue :rdinance.<% 3>* We e;amine in 1hapter ( the need for a proper system of re!istration of charities in #on! $on!< both to facilitate the monitorin! of charities and to ensure that potential donors may be properly informed about the status of indi&idual charities> *ncon i tent tandard or re4uirement on governance1 accounting and reporting &! charitie 3>12s discussed else"here in this paper<( charitable or!anisations may be established under a number of different le!al structures in #on! $on!< includin! statutory bodies< incorporated companies< charitable trusts
+ 5

%

(

Income Ta4 Special Purposes Commissioners v Pemsel I1)*1J 21 531< at 5)3 A#8B> 2s obser&ed as early as 1*22 in In re Tetley I1*22 T +%)JH I1*23J 1 1h 25)< at 2%% A12B< per 8ord Sterndale< M9> 2s obser&ed in ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 5>12> See 1hapter 2 and 1hapter % of this paper>

2+

and societies> While "e ha&e obser&ed no particular problem "ith the ran!e of le!al forms that charities may ta:e Aas "e discuss further in 1hapter %B< "e note that each of these types of or!anisation structure can in&ol&e differin! le!islati&e re@uirements at the time of the or!anisationPs formation and throu!hout the duration of its operations> Knder the current system of o&ersi!ht< statutory charities established under a specific ,rdinance can be sub6ect to strin!ent statutory control< ) "hile other types of charities may be sub6ect to limited scrutiny of specified acti&ities only< or e&en< in some cases< to a total lac: of scrutiny>* 3>11 For e;ample< statutory charities are re@uired to account for the use of all their proceeds< to prepare and :eep proper audited accounts of all transactions< and to be open at all reasonable times for inspection by any director of the or!anisation and any person appointed by the 1hief 3;ecuti&e>11haritable or!anisations "hich are sub&ented by the 7o&ernment Asuch as some non-!o&ernmental or!anisations pro&idin! ser&ices related to "elfare< education< medical ser&ices and the artsB are re!ulated by the 7o&ernment to the e;tent that the rele&ant bureau or department to "hich they report monitors the use of their 7o&ernment sub&ention>11 1haritable or!anisations established under the 1ompanies ,rdinance A1ap 32B are re@uired to prepare audited accounts in order to fulfil re@uirements under that ,rdinance> This is not the case for charitable or!anisations established as societies re!istered under the Societies ,rdinance A1ap 151B< ho"e&er> Further< charities "hich are neither statutory nor sub&ented may be allo"ed to operate autonomously under their o"n !o&ernin! bodies and accordin! to their o"n rules and re!ulations> 12 3>12 In 1hapter )< "e consider and propose an impro&ed frame"or: for !o&ernance< accountin! and reportin! re@uirements for charities in #on! $on!>

)

*

111 12

See< for e;ample< the lon! list of matters set out in the Schedule to the Tun! Wah 7roup of #ospitals ,rdinance A1ap 1-51B> Such as non-statutory and non-sub&ented charities that do not raise funds in public places or or!anise lotteries to raise funds> These charities are not sub6ect to any 7o&ernment control o&er the amount of charitable donations recei&ed or the disposal of such funds> See ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 5>3> Same as abo&e< at para 2>+> Same as abo&e< at paras 5>+ and 2>5> Same as abo&e< at para 2>%>

25

2imited control of charita&le fundrai ing 3>13 2s e;plained in 1hapter 2< 7o&ernment o&ersi!ht of the fundraisin! acti&ities of charities is confined specifically to those acti&ities re@uirin! the permission of the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment or the Tele&ision and 3ntertainment 8icensin! 2uthority< such as fla! days< on-street sellin! and lotteries> It has been obser&ed that "hile these authorities display a commendable sense of duty in e;ercisin! control o&er the use of proceeds from fundraisin! acti&ities< insofar as their respecti&e le!islation permits< such scrutiny can be only partial and limited>13 For other forms of fundraisin! acti&ity such as charity auctions< balls< concerts< dinners< or re@uests for donations by mail or throu!h ad&ertisements< no !o&ernment o&ersi!ht applies< as these charitable appeals do not re@uire either a permit or a licence>1+ 3>1+ 2s "e "ill e;plore further in 1hapter *< a number of limitations ha&e been identified in the e;istin! re!ulatory measures on fundraisin!> • From the perspecti&e of charities< those "ishin! to conduct certain fundraisin! acti&ities ha&e to apply to one or more of a ran!e of !o&ernment departments< each "ith &aryin! procedures and re@uirements< in order to be !ranted appro&al> From the public's point of &ie"< there is a lac: of access to information on fundraisin! acti&ities and there is no centralised information point or hotline "here the public can ma:e en@uiries about fundraisin! acti&ities> There are no statutory pro&isions settin! out the detailed re@uirements for fundraisin! by charitable or!anisations< co&erin! such issues as internal controls< accountability and transparency> While some broad !uidelines and best practice manuals on fundraisin! e;ist< these are all &oluntary !uidelines that ha&e been de&eloped o&er time by different departments or authorities> 2s there may be certain areas of o&erlap as "ell as some !aps amon!st these< they do not pro&ide a coherent system of !uidance to charities>

•

•

3>15 We are also concerned about the current difficulties in &erifyin! donations made to other parts of the "orld or to the remote areas of Mainland 1hina Afor e;ample< for the relief of the earth@ua:e disaster in SichuanB> We feel that not only is !reater 7o&ernment monitorin! re@uired in this area< but also more emphasis should be placed on the "or: of auditors of charitable or!anisations in carryin! out audits on donations recei&ed> 3>1% It has been su!!ested else"here that some de!ree of donor transparency could be built into the system< to pro&ide information on "ho donates to charity< in "hat amounts< for "hat purposes and "ith "hat
13 1+

Same as abo&e< at para 5>(> Same as abo&e< at para 3>1>

2%

e;pectations>15 #a&in! considered this< "e do not thin: that donor transparency is an issue> Instead< "e tend to ta:e the &ie" that it is important to protect donorsP personal information and pri&acy< as some donors "ould prefer to remain anonymous in their charitable !i&in!>

C$" -&)'$")
3>1( 1ompared to a number of o&erseas 6urisdictions "ith comprehensi&e charities le!islation< "hich "ill be discussed later in this paper< it is e&ident that #on! $on! lac:s a coherent le!islati&e frame"or: for the establishment and re!ulation of charities and their fundraisin! acti&ities> 2s "e ha&e seen< dependin! on the type of charity< 7o&ernment monitorin! in #on! $on! ran!es from strict statutory control to limited scrutiny only of specific acti&ities>1% Further< the super&isory functions "hich do e;ist are incon&eniently spread across a &ariety of authorities< each "ith their o"n set of re@uirements> 3>1) In particular< there is little information a&ailable to enable donors to &erify that the or!anisations they may "ish to ma:e donations to are in fact &alid charities not bo!us operations< or to ensure that the money they "ish to donate "ill be "ell spent> 3>1* It is "ith the aim of addressin! and remedyin! these percei&ed deficiencies that "e ha&e put for"ard the proposals "hich are presented later in this paper>

15

1%

The 2sia Foundation< Report to the (on -on Leadership Council of the %sia 'oundation& Eore 5ffective Philanthropy in (on -on - 'indin s and Recommendations A9e&ised 4o& 13< 2--%B< at paras 1 to 2> ,ffice of the ,mbudsman< Investi ation Report& Eonitorin of Charitable 'und Raisin %ctivities AFeb 2--3B< at para 5>%>

2(

C(a.#er 3 O+er+'e, $f #(e -a, $f (ar'#'e) '" $#(er 4&r')%' #'$")
========================================

I"#r$%& #'$"
+>1 In this chapter< "e briefly o&er&ie" the la" relatin! to charities in se&eral other 6urisdictions< most of "hich ha&e introduced le!islation in this field> 1ertain aspects of these le!al models "ill also be more fully e;plored at appropriate 6unctures in the comin! chapters> 2lthou!h the bac:!round and circumstances of these 6urisdictions may differ in some respects from those in #on! $on!< the problems and issues "hich arise in relation to charities are broadly the same>

A&)#ra-'a
+>2 2lthou!h there has been a si!nificant effort to reform charity la" in 2ustralia<1 this has not yet materialised into ma6or reform 2 apart from the 3;tension of 1haritable 0urpose 2ct 2--+ A1ommon"ealthB< "hich mainly concerns the definition of charity> There ha&e< ho"e&er< been piecemeal reforms to le!islation dealin! "ith incorporated associations< fundraisin! and charitable !amin! in &arious states and territories< as "ell as an incremental de&elopment of ta;ation compliance measures for e;empt and deductible entities> +>3 Foth the state and federal charity la"s in 2ustralia closely follo" the 3n!lish definition of charity based on the 0reamble to the 3liNabethan Statute of 1haritable Kses in 1%-1> In addition< 3n!lish case authority is consistently used as the basis for 2ustralian la" in both federal and state
1

2

See for e;ample< Industry 1ommission A1anberraB< Charitable :r anisations in %ustralia< 9eport 4o +5< 270S A1**5BH In8uiry into the =efinition of Charities and Related :r anisations < at http:CC""">cdi>!o&>auH Foard of Ta;ation< Consultation on the =efinition of a Charity A % report to the Treasurer A2--3B< at http:CC""">ta;board>!o&>auH Senate 5conomics Committee Report A2--)B< at http:CC""">aph>!o&>auCsenateCcommitteeCeconomics=ctteCcharities=-)Cinde;>htm> ,ne commentator has noted: <Iarious %ustralian in8uires and reports have produced !#,*#$ pa es of public submissions, 0" days of hearin s, 20 site visits, !)22 pa es of official reports N .< : M Mc7re!or-8o"ndes< /2ustralia: critical dri&ers< barriers< outcomes and unresol&ed issues and future challen!es/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at 2> 0rofessor Mc7re!or-8o"ndes< cited abo&e< continues< at 3< <The Industry Commission which e4amined charitable or anisations in a lon and wide-ran in report in !**0 made a number of findin s and recommendations about the inconsistent and poor state of F%ustralian Ta4ation :fficeG re ulation and uncertainty of the law of charity. Its recommendations have never been s8uarely addressed by the federal overnment, partly as a conse8uence of the report bein released at a time of a chan e of overnment. Some basic issues such as accountin standards, national le al form and fundin arran ements identified for reform are still awaitin attention.<

2)

courts> 0rofessor Myles Mc7re!or-8o"ndes has summariesd the common la" position in 2ustralia in the follo"in! terms: <State courts mainly refer to the definition of charity in respect of the supervision of charitable trusts, dispositions in wills, fundraisin re ulation and in connection with various statutes overnin local ta4 e4emptions. The federal courts have been dominated by cases stemmin from the federal income ta4 le islation9s e4emption of 9charitable institutions9. 'or thirty years the only si nificant charity case pursued to the ultimate appeal court was Commissioner of Land Ta4 .CS,1 v. >oyce which was essentially concerned with whether charitable trustees could be an 9institution9 for the purposes of ta4ation e4emption. ,ithout a vibrant case flow the common law be an to show si ns of ossification and there was no 8uasi-;udicial body such as a Charity Commission to promote new understandin s of charity relevant to the current environment.< ) +>+ Theoretically< state 2ttorneys 7eneral are responsible for super&isin! charitable trusts< but in practice the 2ustralian Ta;ation ,ffice ser&es as the closest body to a national re!ulator> There is< ho"e&er< no re@uirement on annual reportin!< financial or other"ise< from its endorsed charitable or!anisations> 2 re!ister of charitable or!anisations "ith ta;ation e;emption status has only been compiled by the 2ustralian Ta;ation ,ffice since the year 2--->

Ca"a%a
+>5 The pro&inces in 1anada ha&e the po"er to super&ise charities under the 1anadian constitution> In practice< ho"e&er< the de facto primary re!ulator of charities is the 1anada 9e&enue 2!ency Athe /192/B< the federal ta;in! authority> This is because e;emption from the payment of ta; on income and the ability to offer ta; credits to donors Athe main benefits to charitiesB< are pro&ided in the federal Income Ta; 2ct> ,r!anisations may apply to the 192 for re!istration as charities "hich are then sub6ect to audit and enforcement acti&ities by the 1harities .irectorate under the 192> +>% In 1anada< only ,ntario has a formal mechanism for super&ision of charities> The ,ffice of the 0ublic 7uardian and Trustee e;ercises some super&isory authority o&er charities< mainly in relation to fiduciary responsibilities of trustees> Some pro&inces ha&e statutory pro&isions primarily on control o&er the fundraisin! acti&ities of non-profit or!anisations> + +>(
3 +

There are fe" court cases establishin! "hat is charitable in
M Mc7re!or-8o"ndes< same as abo&e< at 2 to 3> Some pro&inces can< under federal le!islation< issue licences to or!anisations underta:in! charitable acti&ities allo"in! them to use lotteries or participate in casinos to raise funds> Knder such licensin! re!imes< pro&inces ha&e established different eli!ibility rules and created different rules as to "hat is charitable in each pro&ince: see F Wyatt< /,&er&ie" from 1anada/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at +>

2*

1anada> In the past fe" decades< the Supreme 1ourt of 1anada has heard only three charity la" cases> There are also barriers to de&elopin! charity la" throu!h the courts in 1anada>5 +>) 1anada has also considered a ne" type of re!ulator< similar in nature and desi!n to the 1harity 1ommission of 3n!land and Wales> 2 fundamental problem "hich has been identified< ho"e&er< is that such a model is not compatible "ith 1anada's constitutional structure> %

E"*-a"% a"% Wa-e)
+>* The 1harities 2ct 2--% A/the 3n!lish 2--% 2ct/B defines "hat constitutes a charity and charitable purposes and establishes a re!ulatory frame"or: for charities> This represents a ma6or o&erhaul of charity le!islation> The 3;planatory 4otes to the 3n!lish 2--% 2ct record that its ori!ins lie in a re&ie" of the la" and re!ulation of charities and other not-forprofit or!anisations commissioned by the 0rime Minister in 2--1< leadin! on from the .ea:in 1ommission's report< ( "hich called for< amon!st other thin!s< reform of charity la">) +>15

The 3n!lish 2--% 2ct is to come into force in sta!es>

The

%

(

)

/%ppeals from the re ulator9s decisions to deny charitable re istration or to remove re istration do not proceed to a trial court for hearin s, but rather are conducted, based on the record, by the 'ederal Court of %ppeal. ,hereas ta4payers may proceed throu h informal internal appeal mechanisms within CR% and then o to the Ta4 Court of Canada, the same does not hold true for or ani@ations that are denied charitable re istration or wish to protest the revocation of their charitable status. The cost and formality of a hearin before Canada9s second-hi hest federal court is a prohibitive e4ercise for all but the most wealthy. :ther decisions made by the re ulator are, in most cases, sub;ect to ;udicial review by the 'ederal Court Trial =ivision. Co such cases have been brou ht, lar ely because those other types of decisions are of little conse8uence to most charities./ See F Wyatt< same as abo&e< at 5> /%s noted earlier, the primary responsibility for the supervision of charities constitutionally belon s to the provinces. The federal overnment9s authority over charities comes only from the fact that there are benefits iven to charities under the Income Ta4 %ct, a federal statute. In essence, therefore, the Charities =irectorate9s role is limited to ensurin that an or ani@ation 8ualifies .and maintains 8ualification for1 those benefits. (owever, iven that those benefits are the sole reason most or ani@ations see6 charitable status, the federal role becomes paramount in fact, if not in law. By contrast, a si nificant role of the Charity Commission of 5n land and ,ales is to ensure that trustees of charities e4ercise their fiduciary responsibility over that property which is impressed with a charitable trust. This is a role that, under Canada9s constitution, would be within the e4clusive ;urisdiction of the provinces. N +iven Canada9s political ma6e-up, such a model is unli6ely./ See F Wyatt< same as abo&e< at *> 1ommission on the Future of the Moluntary Sector< Eeetin the Challen e of Chan e& Ioluntary %ction into the #!st Century A1**%B - also :no"n as the <=ea6in Report<> 0ro&ided by the 4ational 2rchi&es at: http:CC""">le!islation>!o&>u:Cu:p!aC2--%C5-Ccontents Strate!y Knit 0ress 9elease< /0rime Minister 2nnounces Moluntary Sector 9e&ie"/< 3 Duly 2--1< 12F 12)C-1> The 3n!lish 2--% 2ct implements a ma6ority of the accepted recommendations of the Strate!y Knit< "ith the remainder ha&in! been implemented either throu!h other le!islation or by administrati&e action> It should be noted that more recently< a ne" 1harities Fill to consolidate pre&ious charities le!islation "as placed before the K$ 0arliament in March 2-11> 2s part of this consolidation< the Fill includes pro&isions from the 9ecreational 1harities 2ct 1*5)< the 1harities 2ct 1**3 and the 1harities 2ct 2--%< leadin! to the repeal of the former t"o 2cts and some sections Aincludin! sections 1 to * and 11 to ++B and some Schedules of the 1harities 2ct 2--%> It is e;pected that the substanti&e pro&isions comprised in 0art 3 of the 1harities 2ct 2--% Arelatin! to fundin! for charitable< bene&olent or philanthropic institutionsB "ill remain unaffected< ho"e&er>

3-

re!ulatory frame"or: in the 2ct is as follo"s> AaB AbB 0art 1 defines the meanin! of / charity/ and /charitable purposes/> 1hapter 1 of 0art 2 re!ulates charities< creatin! a ne" 1harity 1ommission as a corporate body< settin! out its ob6ecti&es< functions and duties< abolishin! the e;istin! 1harity 1ommissioner and transferrin! its functions< ri!hts and liabilities to the ne" 1harity 1ommission * Athe trend is to shift the re!ulatory responsibilities Aincludin! the responsibility to determine "hether an applicant is charitable in natureB from the ta; a!ency to a more independent bodyB>11hapter 2 of 0art 2 establishes a ne" 1harity Tribunal "hich hears appeals a!ainst decisions of the ne" 1harity 1ommission Aso as to pro&ide an alternati&e to the courts system for the re&ie" of re!ulatory decisionsB< and also hears referrals from the 1harity 1ommission or the 2ttorney 7eneralH a party may< ho"e&er< appeal to the #i!h 1ourt a!ainst the Tribunal's decision Asection )B> 1hapter 3 of 0art 2 pro&ides for re!istration of charities A"hich is considered to be a &ital basis for an efficient re!ulatory system< and !rantin! public access to the re!ister is intended to enhance transparencyB> 1hapter ) of 0art 2 introduces the ne" concept of the /Charitable Incorporated :r anisation/ "hich can be established "ith limited or unlimited liability< but only for charitable purposes> It is anticipated by the Knited $in!dom 7o&ernment that this ne" type of le!al structure "ill be better suited to !i&e effect to charitable purposes and to streamline !o&ernance< as "ell as reduce the personal liability of trustees and simplify the re!ulatory burden> In terms of re!ulatin! for !ood !o&ernance< pro&isions on remo&al< suspension< remuneration and dis@ualification of

AcB

AdB

AeB

AfB

*

1-

/'or most purposes, the Commission now has a ;urisdiction and e4ercises powers concurrent with those of the (i h Court and Commissioners are vested with the same powers as the %ttorney +eneral as re ards ta6in proceedin s in relation to charities >/ See $ ,'#alloran< /9e!ulatory 9eforms: 3n!land E Wales< Ireland< 4orthern Ireland and Scotland/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at 2> $ ,'#alloran< same as abo&e< at %< has obser&ed that< / The issue as to which a ency in the re ulatory framewor6 bears responsibility for applyin the public benefit test is of crucial importance to charities and for the development of the charitable sector. ,here, in 6eepin with the traditional policin role, that responsibility rested with the ta4 collectin a ency then, to some de ree, the test had to operate in an e4clusionary manner as that a ency9s raison d9etre re8uired it to protect and ma4imi@e the nation9s ta4 revenue base. This has been reco ni@ed in the S- ;urisdictions and in Ireland where one outcome of their charity law reform processes has been to remove this responsibility from the ta4 a ency and assi n it instead to a more independent overnment body. In 5n land L ,ales and Corthern Ireland, but not in Scotland and Ireland, the le islature has vested that body with (i h Court powers./

31

charity trustees< etc< are included Ain sections 1* to 21< 1hapter * of 0art 2 B> The le!islation also pro&ides for assistance and super&ision of charities by the courts and the 1ommission< and includes< for e;ample< a po"er to enter premises and seiNe documents in section 2%> A!B 0art 3 of the 2--% 2ct pro&ides< inter alia< an inte!rated approach to /public charitable collections/ and< more !enerally< re!ulates fundraisin!>11

+>11 It is "orth mentionin! that the traditional common la" po"ers of the #i!h 1ourt and the 2ttorney 7eneral 12 to protect< super&ise and amend charitable trusts ha&e been lar!ely statutorily transferred to or assumed by the 1harity 1ommission since the 1harities 2ct 1**3> 13 This diminishin! role of the #i!h 1ourt and the 2ttorney 7eneral Aor 8ord 2d&ocate in ScotlandB is also e&idenced in Ireland and Scotland>

Ire-a"%
+>12 For a lon! time< charities in Ireland "ere !o&erned mainly by the 1harities 2cts of 1*%1 and 1*(3< as amended by the Social Welfare AMiscellaneous 0ro&isionsB 2ct 2--2> This "as a conser&ati&e re!ime modelled on the 1harities 2ct 1*%- in 3n!land> The lead re!ulatory a!ency "as the 9e&enue 1ommission< "ith the 1ommissioners of 1haritable .onations and Fe@uests in a monitorin! and support role> +>13 The enactment of the 1harities 2ct 2--* A/the Irish 2--* 2ct/B in March 2--* follo"ed studies of the charities sector and calls for reform from the 8a" Society of Ireland< the .epartment of 1ommunity< 9ural and 7aeltacht 2ffairs and the Irish 8a" 9eform 1ommission> 1+ In publishin! the 1harities Fill in 2pril 2--(< the .epartment of 1ommunity< 9ural and 7aeltacht 2ffairs identified the follo"in! as bein! the :ey policy reform issues:

11

12

13 1+

Most of the pro&isions in this 0art are to implement the #ome ,ffice's proposals to introduce a unified system to re!ulate public charitable collections throu!hout 3n!land and Wales: see #ome ,ffice< Public Collections for Charitable, Philanthropic and Benevolent Purposes A2--3B> $ ,'#alloran has also commented< /The present overnment policy in all ;urisdictions is to brin the law relatin to fundraisin into the main body of charity law, ive the lead re ulatory body oversi ht of fundraisin practice but also to await and review the outcome of the charity sector9s efforts to develop an effective policy of self-re ulation of fundraisin practices before decidin whether to ma6e use of its reserved power to introduce mandatory re ulations >/ See $ ,'#alloran< abo&e< at 13> /The ancient parens patriae ;urisdiction of the Crown in relation to charities, and the ri ht to brin proceedin s in respect of them, devolved from the Lord Chancellor to become vested in the %ttorney +eneral. These powers have been described as 9theoretically limitless9 because they 9sprin from the direct responsibility of the Crown for those who cannot loo6 after themselves9. (owever, the traditional role of the %ttorney +eneral, e4ercisin the parens patriae powers to protect and supervise, is no lon er fully operational in any of the S- or Irish ;urisdictions>/ See $ ,'#alloran< same as abo&e< at 15> $ ,'#alloran< same as abo&e< at 1+> 8a" Society of Ireland< Charity Law& The Case for Reform A2--2BH .epartment of 1ommunity< 9ural and 7aeltacht 2ffairs< 5stablishin a Eodern Statutory 'ramewor6 for Charities A2--3BH Irish 8a" 9eform 1ommission< Le al Structures for Charities A2--%B.

32

 

<The charities sector in Ireland is unre ulated. This effectively means that there is no body which has&
 

the specific aim of supervisin the sector the statutory powers to either maintain a re ister of charities or to sub;ect the sector to re ulatory scrutiny.

  

There is therefore no such thin as a re istered charity in Ireland at present. There is no statutory definition of what a 9charity9 is. There is no reliable information on
  

the number of active charities what their financial worth is how they spend their funds.<15

+>1+ AaB AbB

The re!ulatory frame"or: in the Irish 2--* 2ct is set out belo": 1% 0art 1 defines the meanin! of <charitable purpose<> 0art 2 establishes a ne" 1haritable 9e!ulatory 2uthority Athe /2uthority/B: shiftin! the re!ulatory responsibilities Aincludin! the responsibility to determine "hether an applicant is charitable in natureB from the ta; a!ency to a more independent body< and transferrin! all functions relatin! to charitable or!anisations or charitable trusts &ested in the 2ttorney 7eneral to the 2uthority Asection 3)B>1( 0art 3 re!ulates charitable or!anisations by "ay of:    establishin! a re!ister of charitable or!anisations in "hich all charities must re!isterH1) ma:in! it an offence for an unre!istered charitable or!anisation to carry on acti&ities in IrelandH1* empo"erin! the 2uthority to refuse re!istration to a charitable or!anisation "hose name is li:ely to mislead

AcB

15

1%

1( 1) 1*

The 7o&ernment of Ireland< Revised 5uropean Social Charter "th Cational Report on the implementation of the 5uropean Social Charter .revised1< 25 September 2--*> 2&ailable at: http:CC""">coe>intCtCd!hlCmonitorin!CsocialcharterCreportin!CstatereportsCIreland%=en>pdf The Irish 2--* 2ct< to!ether "ith the 1harities 2cts 1*%1 and 1*(3< and the Street and #ouse to #ouse 1ollections 2ct 1*%2< no" pro&ide a composite re!ulatory frame"or: for charities> See $ ,'#alloran< abo&e< at %> Section 3*< Irish 2--* 2ct> Section +1< Irish 2--* 2ct>

33

the public as to its purposes or acti&itiesH2 imposin! a duty to :eep proper accounts a&ailable for inspection and to prepare an annual statement of accountsH21 re@uirin! charitable or!anisations to submit to the 2uthority annual acti&ity reports "hich are to be made publicly a&ailableH22 and re!ulatin! for !ood !o&ernance: dis@ualification of charity trustees< etc>23 pro&isions on



 AdB

0art + of the Irish 2--* 2ct pro&ides for protection of charitable or!anisations by "ay of:  in&esti!atin! affairs of charitable or!anisationsH 2+  enterin! and searchin! premisesH25 and  empo"erin! the #i!h 1ourt to ma:e orders to protect charitable or!anisations>2%

AeB

0art 5 establishes the 1harity 2ppeals Tribunal to hear appeals from decisions of the 2uthority< a cheaper and @uic:er means of re&ie"in! re!ulatory decisionsH2( and 0art % pro&ides for< inter alia< the dissolution of 1ommissioners of 1haritable .onations and Fe@uests for Ireland< and transferrin! functions< land and other property from the 1ommissioners to the 2uthority>

AfB

+>15 It is note"orthy that the Irish 2--* 2ct has not introduced the concept of the 1haritable Incorporated ,r!anisation as in some 6urisdictions< and has not reformed the la" on fundraisin! acti&ities "hich has al"ays been !o&erned by le!islati&e pro&isions that are @uite detached from charity la" and ha&e no specific application to charities> 2) Knli:e its counterparts in 3n!land and Scotland< the Irish 2--* 2ct has built-in pro&isions for continuous

221 22 23 2+ 25 2%

2(

2)

Section +2< Irish 2--* 2ct> Sections +( and +)< Irish 2--* 2ct> Sections 52 and 5+< Irish 2--* 2ct> Sections 55< *- and *1< Irish 2--* 2ct> Section %+< Irish 2--* 2ct> Section %*< Irish 2--* 2ct> Section (+< Irish 2--* 2ct> #o"e&er< $ ,'#alloran states: <In the virtual absence of any provisions addressin the powers of the (i h Court, it is to be assumed that the traditional and increasin ly mar inal role of this body in the affairs of charities will continue relatively unchan ed.< See $ ,'#alloran< abo&e< at 15> There is< ho"e&er< a ri!ht of appeal to the #i!h 1ourt on points of la" Asection )-< Irish 2--* 2ctB> $ ,'#alloran< abo&e< at 12 to 13< see footnote 55: <The only reference to fundraisin in the #$$* %ct is the s. *3.!1 provision which reserves a power to ma6e re ulations in relation to charitable fundraisin .<

3+

contribution from the sector throu!h representati&e panels> 2*

Ne, Eea-a"%
+>1% Fefore the ad&ent of the 1harities 2ct 2--5 A/the 4e" 5ealand 2--5 2ct/B "hich establishes the 1harities 1ommission Athe /1ommission/B< the Inland 9e&enue .epartment operated a system "hereby or!anisations could as: for "ritten confirmation that they @ualified as ta; e;empt on charitable !rounds> #o"e&er< there "as no le!al re@uirement for doin! so and many entities claimed themsel&es as charities> 3- The 4e" 5ealand 2--5 2ct "as assented to in 2pril 2--5< and the intent behind the 2ct is to re!ulate and to monitor the charity sector in 4e" 5ealand> +>1( The 4e" 5ealand 2--5 2ct establishes the 1ommission "hich is to assess an entity's application for charitable status> 2n entity< "ith a charitable status< "ill benefit from t"o fiscal ad&anta!es> The direct ad&anta!e is the e;emption of the charitable trust from income ta;< "hile the indirect one is that donors to re!istered charitable trusts may @ualify for ta; credits>31 The re!ulatory frame"or: in the 4e" 5ealand 2--5 2ct is as follo"s: AaB AbB AcB 0art 1 establishes the 1ommission< and sets out its functions< po"ers and obli!ationsH sections + and 5 in 0art 1 define / charitable entity/ and /charitable purpose/H Subpart 1 of 0art 2 pro&ides for< inter alia, re!istration and de-re!istration of societies< institutions< and trustees of trusts as charitable entitiesH and Subpart 2 of 0art 2 pro&ides for< inter alia, the re!ulatory role of the 1ommission< includin!< AiB re@uirin! charitable entities and certain other persons to comply "ith certain obli!ations< for e;ample< charitable entities' duties to prepare annual returns Asection +1BH empo"erin! the 1ommission to e;amine and in@uire into

AdB

AiiB
2*

3-

31

Section 3% pro&ides that: <the terms of reference of a panel may include the ma6in of observations or proposals on the followin & performance of the new re ulatory bodyP any developments within the 5uropean Snion or internationally that have implications for that bodyP initiatives which that body could usefully ta6e with related costin sP any policy, document, uidelines or code of conduct, issued or proposed to be issued by that bodyP the performance of the charities sector in any particular area or respectP and an assessment of the effectiveness of the re ulation of the administration and operation of charitable fundraisin throu h codes of conduct.< T 7arrett< /3stablishin! a 1harities 1ommission in 4e" 5ealand/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at 1> Fiscal ad&anta!es of charitable status are !o&erned by the Income Ta; 2ct 2--(< not the 1harities 2ct 2--5> See M 7ousmett< /2n ,&er&ie" of the Main 0olicies used to 3ncoura!e 0hilanthropy in 4e" 5ealand/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at +>

35

any charitable entity or any rele&ant person and ma:in! it an offence for non-compliance "ith a notice issued by the 1ommission Asections 5- and 52BH AiiiB Ai&B A&B A&iB empo"erin! the 1ommission to issue a "arnin! notice to a charitable entity Asection 5+BH empo"erin! the 1ommission to impose an administrati&e penalty Asection 5)BH pro&idin! for a ri!ht of appeal to the #i!h 1ourt a!ainst the 1ommission's decision Asection 5*BH and empo"erin! the #i!h 1ourt to ma:e an interim order pendin! determination of an appeal Asection %-B>

S $#-a"%
+>1) The statutory re!ulation of charities is of relati&ely recent ori!in in Scotland> The first such le!islation "as 0art I of the 8a" 9eform AMiscellaneous 0ro&isionsB AScotlandB 2ct 1**- "hich came into force in 1**2> The main re!ulatory body "as the 9e&enue 1ommission< responsible for determinin! both charitable status and eli!ibility for ta; e;emption> 32 In Scotland< the traditional parens patriae role of the 2ttorney 7eneral in relation to charities is un:no"n< but the office of 8ord 2d&ocate is &ested "ith some similar responsibilities>33 +>1* #o"e&er< follo"in! a Scottish re&ie" of charity la"< 3+ there is a ne" re!ulatory frame"or: as enshrined in the 1harities and Trustee In&estment AScotlandB 2ct 2--5 A/the Scottish 2--5 2ct/B: AaB establishin! the ,ffice of the Scottish 1harity 9e!ulator< a ne" independent lead re!ulatory body: shiftin! the re!ulatory responsibilities Aincludin! the responsibility to determine "hether an applicant is charitable in natureB from the ta; a!ency to a more independent body A1hapter 1 of 0art 1BH settin! out the test for /charitable purposes/ Ain section (BH settin! up the Scottish 1harity 9e!ister A1hapter 2 of 0art 1BH pro&idin! for access to information and information disclosure A1hapter 3 of 0art 1BH pro&idin! for< inter alia< the super&isory role of the ,ffice of the Scottish 1harity 9e!ulator A1hapter + of 0art 1BH
$ ,'#alloran< abo&e< at 1>

AbB AcB AdB AeB

32 33 3+

$ ,'#alloran< abo&e< at 1% Afootnote (5B> Scottish 1harity 8a" 9e&ie" 1ommission< Charity Scotland& The Report of the Scottish Charity Law Review Commission A2--1B>

3%

AfB

empo"erin! the 1ourt of Session to re!ulate charities "hen there is misconduct< maladministration or misrepresentation Asection 3+BH imposin! a duty to :eep accounts and report matters A1hapter % of 0art 1BH introducin! the Scottish 1haritable Incorporated ,r!anisation< similar to its 3n!lish counterpart< "hich is intended to streamline !o&ernance< reduce the personal liability of trustees and simplify the re!ulatory burden A1hapter ( of 0art 1BH re!ulatin! for !ood !o&ernance: pro&isions on duties< remuneration and dis@ualification of charity trustees A1hapter * of 0art 1BH establishin! the Scottish 1harity 2ppeals 0anel< a cheaper and @uic:er means of re&ie"in! re!ulatory decisions A1hapter 1- of 0art 1BH35 and modifyin! the re!ulatory re!ime for fundraisin! A0art 2B> 3%

A!B AhB

AiB

A6B

A:B

S'"*a.$re
+>2There "as a ma6or re&ie" in Sin!apore of the charity re!ulatory frame"or: by the Inter-Ministry 1ommittee AIM1B on 9e!ulation of 1harities and Institutions of a 0ublic 1haracter in 2--%> 3( The Sin!apore !o&ernment fully accepted the IM1's recommendations in the same year> 3) +>21 The e;istin! la" on charities in Sin!apore is contained in the 1harities 2ct A1ap 3(B< as si!nificantly amended by the 1harities A2mendmentB 2ct 2--( upon implementation of the IM1's recommendations>3* The Sin!apore 1harities 2ct pro&ides for the re!istration of charities< the administration of charities and their affairs< the re!ulation of charities and institutions of a public character< the re!ulation of fundraisin! acti&ities carried on in connection "ith charities and other institutions and the conduct of fundraisin! appeals> +>22 The re!ulatory frame"or: in the 2ct is set out belo":

35

()B>
3%

There is a ri!ht of appeal to the 1ourt of Session a!ainst a 0anel decision Asection

3(

3)

3*

0ublic charitable collections ha&e been re!ulated under section 11* of the 1i&ic 7o&ernment AScotlandB 2ct 1*)2< and application for street and door-to-door collections is made to local authorities or in certain circumstances to the Secretary of State for Scotland> See: http:CCapp1>mcys>!o&>s!C0ress9oomCTheInterMinistry1ommittee,nThe9e!ulation,f>asp; M1OS Media release 4o: -2C2--%> See: http:CCapp1>mcys>!o&>s!C0ortalsC-CSummaryCpressroomC*-2--%>pdf> M1OS Media release 4o: -*C2--%> M1OS Media release 4o: -*C2--%< at para 5: some of the recommendations do not re@uire le!islati&e amendments>

3(

AaB AbB

section 2 in 0art I defines< inter alia< <charity< and <charitable purposes<H 0art II pro&ides for the appointment of the 1ommissioner of 1harities Athe 1ommissionerB and sets out the 1ommissioner's ob6ecti&es and !eneral functionsH 0art II2 establishes a 1harity 1ouncil so as to promote !ood !o&ernance and self-re!ulation in the charity sectorH 0art III pro&ides for re!istration of charities and in@uiries into charitiesH 0art IM re@uires< inter alia< charities to :eep accountin! records< prepare annual statements of accounts and annual reports< and pro&ides for public inspection of annual reports< etcH 0art MI pro&ides for the application of property< cy-prRs and assistance and super&ision of charities by the court and the 1ommissioner< includin! suspension< remo&al and dis@ualification of trusteesH 0art MII controls fundraisin! for charitable institutionsH 0art MIII prohibits ma:in! a fundraisin! appeal to any member of the public "ithout a permitH and 0art MIII2 pro&ides for the appointment of Sector 2dministrators "ho< in assistin! the 1ommissioner< are in char!e of o&erseein! both the charities and institutions of a public character in their respecti&e sectors as desi!nated by the rele&ant Minister in the 7aNette>

AcB AdB AeB

AfB

A!B AhB AiB

+>23 The main re!ulator is the 1ommissioner "ho is under the pur&ie" of the Ministry of 1ommunity .e&elopment< Oouth and Sports> The 1ommissioner is assisted by Sector 2dministrators> 3ach Sector 2dministrator is responsible for a specific charity sector: social ser&ices< healthcare< education< arts E herita!e< community and sports> +- In parallel< there is the people-sector led 1harity 1ouncil to promote !ood !o&ernance and self-re!ulation as "ell as to ad&ise the 1ommissioner on ma6or charity issues>

S$&#( Afr' a
+>2+ South 2frica's le!al system is a mi;ed system< combinin! elements of 9oman .utch la" and 3n!lish common la"> South 2frica has therefore de&eloped a la" of charitable trusts "hich< "hile sharin! elements
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1ommissioner of 1harities< Commissioner of Charities %nnual Report for the Kear 5ndin )! =ecember #$$"< at para 3> See also 8o" 0u: Oeon!< /Sin!apore 1harity 9e!ulatory Frame"or:/< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at (>

3)

"ith 3n!lish common la" 6urisdictions< is @uite distincti&e> +>25 In 1**+< 0resident 4elson Mandela appointed the 1ommission of 3n@uiry To In&esti!ate the Ta; Structure of South 2frica> This 1ommission's 4inth Interim 9eport dealt e;clusi&ely "ith the fiscal issues affectin! non-profit or!anisations>+1 2s a result< the income ta; and related fiscal le!islation on charitable or!anisations has under!one si!nificant chan!es>+2 +>2% In South 2frica< charitable or!anisations are re!ulated by both the South 2frican 9e&enue Ser&ice's Ta; 3;emption Knit A/T3K/B and the 4ational .epartment of Social .e&elopment's .irectorate of 4on-0rofit ,r!anisations A/40, .irectorate/B> +>2( With the purpose of ensurin! specialised and uniform treatment and pre&entin! abuse< the T3K "as specifically established to determine applications for e;emption and annually assess ta;-e;empt or!anisations under the Income Ta; 2ct< 5) of 1*%2 A/the South 2frica 1*%2 2ct/B> The T3K is thus entrusted "ith the tas: of re!ulatin! charitable or!anisations under the South 2frica 1*%2 2ct and of re!isterin! and re&o:in! charitable ta;-e;empt status> +>2) The 40, .irectorate re!isters or!anisations under the 4on 0rofit ,r!anisations 2ct< (1 of 1**( A/the South 2frica 1**( 2ct/B "hich "as enacted to encoura!e and support or!anisations by creatin! an enablin! en&ironment for or!anisations to flourish< and settin! and maintainin! ade@uate standards of !o&ernance< accountability and transparency> 1hapter 2 of the South 2frica 1**( 2ct pro&ides for some measures for creatin! an enablin! en&ironment for such or!anisations> +3 +>2* tiers in There are three le!al forms of non-profit or!anisations and four the re!ulatory frame"or: for not-for-profit or!anisations>

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+2

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M 0ar:er and M $atN< /9eformin! the 9e!ulation of 1haritable ,r!anisations: the South 2frican 0erspecti&e/ presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*< at paras 2>1 to 2>+> The amended section 3- in the South 2frica 1*%2 2ct has introduced the concepts of the <public benefit or anisation< and <public benefit activity<> These measures include establishment of the .irectorate for 4onprofit ,r!anisations< issuance of model documents and codes of !ood practice by the .irectorate< the Minister's report on the acti&ities of the .irectorate< maintainin! a panel of 2rbitrators and the 2rbitration Tribunal< and establishment of 2d&isory or Technical 1ommittees>

3*

1onse@uently< an or!anisation may ha&e to comply "ith &arious re@uirements and re!ulations at different tiers>++ +>3Within the first tier< such an or!anisation can be in one of the follo"in! le!al forms: AaB AbB AcB a &oluntary association under common la" Ausually small community based or!anisationsBH a trust under the Trust 0roperty 1ontrol 2ct 1*)) and common la"H and a company limited by !uarantee under section 21 of the 1ompanies 2ct 1*(3 A/associations incorporated not for ain/B>

+>31 Within the second tier< an or!anisation of any of the abo&e forms may< by fulfillin! certain re@uirements< apply for the status of a re!istered nonprofit or!anisation under the South 2frica 1**( 2ct> This is percei&ed to be the entry point in the re!ulatory frame"or: for or!anisations to deri&e benefits from the enablin! en&ironment< as it pro&ides a re!istration facility for all public non-profit entities> 4.32 2t the third tier< a non-profit or!anisation may< by fulfillin! the re@uirements< apply for the status of <public benefit or anisation< under section 3- of the South 2frica 1*%2 2ct> +>33 Within the fourth tier< <public benefit or anisations< may ha&e t"o ma6or benefits under section 3- of the South 2frica 1*%2 2ct< namely: ta; e;emption< and donor deductibility for contributions to those <public benefit or anisations< that carry out certain specified <public benefit activities< .<public benefit or anisations with donor-deductible status<B>

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The .epartment of Social .e&elopment< 9epublic of South 2frica has stated< <:ne of these challen es is the fra mented re ulatory framewor6 as it re8uires too many re istration processes to comply with. 5ven for a sophisticated and well-resourced or anisation, the numerous re istration processes and compliance procedures are frustratin . 'or e4ample, a section #! company may often have to re ister three times .Re istrar of Companies, CP: =irectorate and Ta4 54emption Snit of S%RS1 and comply with three different re ulatory bodies that re8uire different 6inds of information. :r anisations then have to amend their foundin documents and reportin re8uirements. In effect, the current environment may lead to inevitable variances in the perceived status of CP:s, and over time, undermines the status accorded to these le al entities. In addition, the lac6 of inte ration between the re ulatory a encies reinforces unnecessary duplication of resources. N :ne of the 6ey recommendations of the Impact %ssessment of the CP: %ct is that the Einister of Social =evelopment should facilitate a process to review and ali n le islation to allow for an inte rated re ulatory framewor6 that allows for consistency within the le al framewor6 for re isterin CP:s. This will re8uire a hi h level political facilitation between Einistries of Trade and Industry, >ustice and Constitutional =evelopment, and 'inance. The purpose of such an interaction should be to redefine the CP: %ct and other relevant le islation so as to ultimately establish a sin le le islation mechanism for re isterin CP:s.< See .epartment of Social .e&elopment< 9epublic of South 2frica< .irectorate: 4on-profit ,r!anisations Fusiness 0lan of the MT3F 039I,. 2--(--)C2--)--* A2--(B< at para 3>3< a&ailable at http:CC""">dsd>!o&>NaCnpoCinde;>php optionScom=docmanEtas:Scat=&ie"E!idS3-EItemidS11%

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+>3+ The le!islati&e pro&isions in South 2frica relatin! to non-profit or!anisations also include the follo"in! re@uirements and re!ulations: +5 AaB AbB re!istration under the South 2frica 1**( 2ct and its cancellation on non-complianceH !o&ernance re@uirements< such as foundin! documents A"ritten constitution for a &oluntary association< trust deed for a trust< memorandum and articles of association for a company limited by !uarantee under section 21 of the 2ctBH responsibilities and liabilities of !o&ernin! bodies of such or!anisationsH report re@uirements to &arious !o&ernment a!enciesH public access to informationH accountin! and auditin! re@uirementsH and re!ulations on fundraisin! acti&ities>

AcB AdB AeB AfB A!B

+5

See T Fre"is< /Summary of 9e!ulatory System for 47,s in South 2frica/ at http:CC""">n!ore!net>or!C8ibraryCSummaryL2-ofL2-theL2-SouthL2-2fricanL2-re!ulatory L2-systemL2-TF>doc

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C(a.#er 5 C$" -&)'$") a"% .r$.$)a-) $" #(e %ef'"'#'$" $f (ar'#0
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5>1 In this chapter< "e e;amine in detail ho" the concept of <charity< is defined in la"> We set out the problems "ith the current la" and present ar!uments for and a!ainst ha&in! a statutory definition of <charitable purposes<< before concludin! that such a definition is desirable> We then consider the essential elements of such a definition after re&ie"in! the rele&ant le!islation in other 6urisdictions>

C&rre"# )'#&a#'$" '" H$"* K$"*
The legal definition of "charit!" 5>2 <% trust, in order to be charitable must have ob;ects which are e4clusively charitable.<1 2s "e sa" in 1hapter 2< the meanin! of the term <charity< under #on! $on! la" follo"s the common la"< and is concerned "ith "hether the particular purposes of the or!anisation or acti&ity are <charitable< in the le!al sense> $i torical development of the common law po ition on charitie 5>3 8ord Macna!hten's dictum in the 1)*1 case of Income Ta4 Special Purposes Commissioners v Pemsel is the leadin! common la" authority on the definition of charity> #is 8ordship stated in that case: <9Charity9 in its le al sense comprises four principal divisions& trusts for the relief of povertyP trusts for the advancement of educationP trusts for the advancement of reli ionP and trusts for other purposes beneficial to the community, not fallin under any of the precedin heads.<# 5>+ 8ord Macna!hten's list of <four principal divisions< of charitable purposes "as itself deri&ed from the preamble to the 1haritable Kses 2ct 1%-1 in 3n!land< also :no"n as the Statute of 1haritable Kses or the Statute of 3liNabeth I>3 The charitable purposes set out in the preamble Ae;pressed in modernised 3n!lishB included:

1 2 3

Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 12-13> I1)*1J 21 531 A#8B< at 5)3> (alsbury9s Laws of 5n land< Mol 5A2B A2--1 9eissueB< at para 2>

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<The relief of a ed, impotent and poor peopleP the maintenance of sic6 and maimed soldiers and mariners, schools of learnin , free schools and scholars in universitiesP the repair of brid es, ports, havens, causeways, churches, sea-ban6s and hi hwaysP the education and preferment of orphansP the relief, stoc6 or maintenance of houses of correctionP the marria es of poor maids, the supportation, aid and help of youn tradesmen, handicraftsmen, and persons decayedP the relief or redemption of prisoners or captivesP and the aid or ease of any poor inhabitants concernin payment of fifteens, settin out of soldiers and other ta4es.<2 5>5 In commentin! on the statute and its preamble in his 6ud!ment in Pemsel< 8ord Macna!hten stated: <The ob;ect of that statute Fof 5li@abeth IG was merely to provide new machinery for the reformation of abuses in re ard to charities. But by a sin ular construction it was held to authori@e certain ifts to charity which otherwise would have been void. %nd it contained in the preamble a list of charities so varied and comprehensive that it became the practice of the court to refer to it as a sort of inde4 or chart. %t the same time it has never been for otten that the 9ob;ects there enumerated9 N are not to be ta6en as the only ob;ects of charity, but are iven as instances.<0 5>% The 1haritable Kses 2ct 1%-1 "as repealed by the Mortmain and 1haritable Kses 2ct 1)))< "ith the e;ception of the 2ct's preamble< "hich "as set out in full in section 13 of the 1))) 2ct> This 2ct itself "as subse@uently repealed in 3n!land by the 1harities 2ct 1*%-> 2s to the effect of this repeal on the status of the preamble< it has been commented: <,ith the repeal of the !/// %ct by the Charities %ct !*"$, the preamble is no lon er on the statute boo6, but the preamble never had any statutory operation, and its final repeal does not affect the authority of the cases decided on it nor the principles on which future cases are to be decided.< " 5>( The current common la" position on "hat may constitute a <charitable purpose< is that the purpose must fall either "ithin the list of purposes set out in the preamble to the statute of 3liNabeth I< or "ithin one of the four cate!ories of charitable purposes laid do"n by 8ord Macna!hten "hich are deri&ed from the preamble> ( The purpose must be also <for the public benefit<> 2t common la"< this is presumed until the contrary is pro&en for 8ord Macna!hten's first three heads of charitable purpose: the pre&ention
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5 % (

2s set out in (on -on L Shan hai Ban6 (on -on .Trustee1 Ltd v The Incorporated Trustee of the Islamic Community 'und of (on -on L :thers I1*)+J 1 #$1 152< at 15% A#1tB< per 9hind D< referrin! to 0icarda< The Law and Practice Relatin to Charities AFutter"orths< 1***B< at )> Income Ta4 Special Purposes Commissioners v Pemsel I1)*1J 21 531< at 5)1 A#8B> (alsbury9s Laws of 5n land< Mol 5A2B A2--1 9eissueB< at para 2< note (> Same as abo&e< at para 2>

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of po&erty< the ad&ancement of education and the ad&ancement of reli!ion> AIt should be noted< ho"e&er< that this common la" presumption "as remo&ed by statute in 3n!land in 2--%>)B 5>) For purposes fallin! "ithin 8ord Macna!hten's fourth head Aie< trusts for other purposes beneficial to the community not fallin! under any of the precedin! headsB< it has been stated that such a purpose< <must be within the spirit and intendment of the ancient statute Fof 5li@abethG, either directly or by analo y with decided cases on the same point, or it must have been declared to be charitable by some other statute.< * In order to satisfy the <public benefit< test< a charitable purpose under this head <must be both beneficial and available to a sufficient section of the community.< 1The pecific head of "charita&le purpo e" at common law Relief of poverty 5>* The preamble to the 3n!lish 1haritable Kses 2ct 1%-1 lists the relief of a!ed< impotent and poor people< but these "ords are to be construed dis6uncti&ely<11 so that the relief of poor persons is charitable per se and there is no need for them to be also <a ed< or <impotent< at the same time in order to satisfy the ob6ect of charity> The "ord <poverty< is a relati&e term and has not been defined by the courts or statute> It is a @uestion of de!ree dependin! on the circumstances>12 It is clear from some cases that there is no need for a person to be destitute in order to satisfy the meanin! of po&erty> 13 5>1said: In Trustees of the Eary Clar6 (ome v %ndersons < 1hannell D <That seems to lead to the conclusion that the e4pression 9poor person9 in a trust for the benefit of poor persons does not mean the very poorest, the absolutely destituteP the word 9poor9 is more or less relative. The difficulty in such a case as the present is to determine from which point of view the 8uestion is to be loo6ed at, for obviously very different views may be held as to what is poverty and what is riches.<!2

) * 111

With the enactment of the 1harities 2ct 2--%> See section 3A2B of the 2ct> #alsbury< same as abo&e> 3mphasis added> #alsbury< same as abo&e> 3mphasis added> >oseph Rowntree Eemorial Trust (ousin %ssoc Ltd v %-+ I1*)3J 1h 15*< at 1(1 to 1(+> 4uNhat Mali:< /.efinin! '1harity' and '1haritable 0urposes' in the Knited $in!dom/< The International >ournal of Cot-for-Profit Law< Mol 11< 4o 1 A4o& 2--)B: http:CC""">icnl>or!C:no"led!eCi6nlC&ol11iss1Cspecial=2>htm> Re Coulthurst I1*51J 1h %%1 at %%5< %%%> A1*-+B 2 $F %+5< at %55>

12

13 1+

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The advancement of education 5>11 <%spects of the advancement of education are specifically mentioned in the Preamble, namely, 9schools of learnin , free schools and scholars in universities9 and also 9the education and preferment of orphans9. N F'Gee-payin schools .provided they do not distribute profits other than for charitable purposes1 can be charitable.< 15 5>12 1harity la" !i&es a "ide meanin! to <education< and does not limit it to education by a teacher in a classroom< play!round or sports field> 1% In order to be charitable for the ad&ancement of education< the or!anisation must be for an educational purpose "hich the la" re!ards as charitable and fall "ithin the spirit and intendment of the preamble to the Statute of 3liNabeth I> Further< the education for "hich the donor intends to pro&ide must be of educational &alue to the community and the benefits must be a&ailable to the public or to a sufficiently important section of the community> 1( 5>13 In C Chi-fon v (ui (o Pui-fun,1) 9hind D held that <the development of culture< !enerally is a charitable purpose "ithin the educational ad&ancement head of charity< and that in a 1hinese community li:e #on! $on! <the development of Chinese culture< is charitable> The advancement of reli ion 5>1+ It has been obser&ed that the purpose of the preamble to the Statute of 3liNabeth I "as to illustrate charitable purposes and "as not meant to dra" up an e;hausti&e definition of charity> 1* ,n this basis< <advancement of reli ion<< thou!h not specifically referred to in the preamble Athe nearest e;ample listed bein! the / the repair of churches/B< has been held to be a head of charitable purpose>25>15 2 !ift for reli!ious purposes has to satisfy t"o conditions in order to come "ithin the meanin! of 8ord Macna!hten's third head of charity> First< the !ift must contribute to the ad&ancement of reli!ion as that "ord is interpreted by the courts> Secondly< the !ift must promote the reli!ious instruction or education of the public>21 5>1% 2s noted abo&e< the preamble to the Statute of 3liNabeth I specifically pro&ides that the repair of churches is a reli!ious purpose> 7ifts "hich are considered as charitable for reli!ious purposes include buildin!< endo"in!< maintainin! or repairin! places of "orship< pro&idin! suitable furniture or ornaments< facilitatin! the conduct of reli!ious ser&ices< and
15 1%

1( 1) 1*

221

0eter 8u;ton< The Law of Charities A,;ford Kni&ersity 0ress< 2--1B< at 11)> See: 1harity 1ommission of 3n!land and Wales 7uidance< The %dvancement of 5ducation for the Public Benefit, A.ec 2--)B< a&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceC1harity=essentialsC 0ublic=benefitCpbdduc>asp; Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at +(> I1*)(J #$89 +%2> #ubert 0icarda< The Law and Practice Relatin to Charities AFutter"orths< 1***B< at (2> See same as abo&e> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at (3>

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promotin! the strictly reli!ious "or: carried on in connection "ith the place of "orship>22 5>1( The 1harity 1ommissioners of 3n!land and Wales Athe predecessor of the 1harity 1ommissionB re@uired e&idence that an abbey< monastery< or con&ent promoted reli!ion in a "ay "hich conferred a sufficient de!ree of public benefit before re!isterin! it as a charity> 23 It has been considered that the presumption of charity "ill be rebutted< and public benefit "ill ha&e to be sho"n positi&ely< <if there is evidence that the purpose is subversive of all morality, or it is a new belief system, or if there has been public concern e4pressed about the or anisation carryin out the particular purpose, or if it is focused too narrowly on its adherents.< 2+ Promotion of health 5>1) The protection of human life is a "ell established charitable purpose "ithin the preamble to the Statute of 3liNabeth I> 2 trust for the promotion of health is charitable> This includes the pre&ention< cure or treatment of diseases for the promotion of health> 2 number of purposes connected "ith health beyond simply the relief of the sic: ha&e been re!arded as charitable>25 2 trust "hich is to establish or maintain a hospital< a "ard or a bed in a hospital is charitable under this head> 2 trust for the study of the causes< cure or treatment of diseases< or to maintain conditions conduci&e to health< is also re!arded as charitable>2% Relief of victims of a disaster 5>1* Some disaster funds are re!arded as charitable if the purpose is to relie&e the needs of those "ho ha&e suffered< "hether directly as &ictims or indirectly as members of the &ictims' families> This purpose falls "ithin the head of the <relief of distress< in the preamble to the Statute of 3liNabeth I> 2( Relief of disabled persons 5>2The preamble to the Statute of 3liNabeth I refers to <the relief of impotent people<> 2 dictionary definition of <impotent< is <powerless, helpless, ineffectiveP physically wea6, decrepit< >2) In modern lan!ua!e< this refers to persons under a physical or mental disability> 2* It is sufficiently "ide to co&er not only those sufferin! from permanent disability< "hether of body or mind< but those temporarily incapacitated by in6ury or illness< or in need of rest< and youn! children incapable of protectin! themsel&es from the conse@uences of cruelty or ne!lect>3- 2s the preamble is to be construed dis6uncti&ely in respect of <the relief of the a ed, impotent and poor people< < there is no need for an impotent person to be also poor or a!ed in order to be the ob6ect of
22 23 2+ 25 2% 2( 2) 2* 3-

Same as abo&e< at )3> 0eter 8u;ton< The Law of Charities A,;ford Kni&ersity 0ress< 2--1B< at 132-133> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at ()> Same as abo&e< at 1-(> 2merican 8a" Institute< Restatement of the Law< Trusts 2d< Mol 2< para 3(2> 0eter 8u;ton< The Law of Charities A,;ford Kni&ersity 0ress< 2--1B< at 1+1> 8esley Fro"n< The Cew Shorter :4ford 5n lish =ictionary< A1larendon 0ress< 1**3B> 0eter 8u;ton< The Law of Charities A,;ford Kni&ersity 0ress< 2--1B< at 13*> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 35>

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charity> Protection of animals 5>21 2 trust for the protection or "elfare of animals< irrespecti&e of "hether or not they are useful to man< is prima facie charitable "ithin the fourth head of the Pemsel case>31 2 trust< the purpose of "hich is to loo: after animals !enerally or a particular species of animal< may be re!arded as a !ood charitable trust>32 5>22 In Re ,ed wood< S"infen 3ady 8-D stated: <% ift for the benefit and protection of animals tends to promote and encoura e 6indness towards them, to discoura e cruelty, and to ameliorate the condition of the brute creation, and thus to stimulate humane and enerous sentiments in man towards the lower animals, and by these means promote feelin s of humanity and morality enerally, repress brutality, and thus elevate the human race. That such purposes are eminently charitable, in the accepted le al sense of that term, is amply established by the cases to which the Easter of the Rolls has referred.<)) Preservation of the environment 5>23 The preser&ation of the en&ironment< includin! its flora and fauna< is a reco!nised charitable purpose> ,ther !eneral e;amples under this head include: research into "aste recyclin! processesH promotion of the protection of endan!ered flora and faunaH education of the public on the ecolo!ical importance of trees and their plantin!< care and protectionH ad&ancement of education and research in the field of ener!y and ener!y related sub6ects< such as forms of rene"able ener!yH and education of the public in the &alue of clean air and methods and conse@uences of air pollution>3+ Purpo e held not to &e charita&le 5>2+ 1on&ersely< a trust for political purposes is not charitable> This rule< "hich is sometimes called <the rule a ainst politics,< is easy to state but not to apply< and the cases disclose inconsistencies> It has been obser&ed that the <FS-G Charity Commissioners have been at pains to clarify what they conceive to be ob;ectionable in the field and over the years have issued uidelines settin out their views on the laws.< 35 5>25 The term <political< as used in the la" of charities to describe ob6ects or acti&ities is< as e;plained by 0icarda< not confined to the party
31 32 33 3+

35

Same as abo&e< at 12)> 0eter 8u;ton< The Law of Charities A,;ford Kni&ersity 0ress< 2--1B< at 15(> I1*15J 1 1h 113< at 122> #ubert 0icarda< The Law and Practice Relatin to Charities AFutter"orths< 1***B< at 1%+ to 1%5> Same as abo&e< at 1%(>

+(

political> The follo"in! ha&e been held political: < N furtherin the interests of any political partyP advocatin or opposin any chan e in the law, policy or administrative practice of this countryP see6in to brin about chan es in the law of another countryP see6in to brin about a reversal of overnment policy or of particular decisions of overnmental authorities in a forei n countryP the promotion of peace, international understandin or friendship between roups .e4cept in the interests of racial harmony within the nation1P the elimination of war or the cessation of a particular warP efforts or attempts to sway public opinion on controversial social issues.< )" 5>2% ,ther purposes of or!anisations "hich ha&e been identified as not bein! <charitable< in the le!al sense include: those "hich promote the benefits of the founders or subscribers of the or!anisationH those "hich encoura!e a particular sport such as football or cyclin! Aas opposed to sports !enerallyBH and those set up to pro&ide a playin! field< recreation !round or scholarship fund for employees of a particular company or industry> 3( The e(tent to which "charit!" i defined under $ong %ong legi lation Inland Revenue :rdinance .Cap !!#1 5>2( 2s "e ha&e seen earlier< the Inland 9e&enue .epartment in #on! $on! maintains a list of or!anisations "hich ha&e successfully applied for ta; e;emption throu!h reco!nition as a <charitable institution or trust of a public character<, "ithin the scope of section )) of the Inland 9e&enue ,rdinance A1ap112B>3) Section )) of the Inland 9e&enue ,rdinance A1ap112B states: <Cotwithstandin anythin to the contrary in this :rdinance contained there shall be e4empt and there shall be deemed always to have been e4empt from ta4 any charitable institution or trust of a public character& Provided that where a trade or business is carried on by any such institution or trust the profits derived from such trade or business shall be e4empt and shall be deemed to have been e4empt from ta4 only if such profits are applied solely for charitable purposes and are not e4pended substantially outside (on -on and either .a1 the trade or business is e4ercised in the course of the actual carryin out of the e4pressed ob;ects of such institution or trustP or

3% 3(

3)

Same as abo&e< at 1%(> See discussion in Inland 9e&enue .epartment< .epartmental Interpretation and 0ractice 4otes< 4o 3( A9e&isedB Concessionary =eductions& Section #"C& %pproved Charitable =onations ASep 2--%B< at para *< a&ailable at: http:CC""">ird>!o&>h:Cen!CpdfCe=dipn3(>pdf> The online &ersion of this list is a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach>htm>

+)

.b1

the wor6 in connection with the trade or business is mainly carried on by persons for whose benefit such institution or trust is established.<

5>2) While the terms <charitable institution or trust of a public character< and <charitable purposes< are not defined in the ,rdinance< the term <approved charitable donation< is defined< as meanin! <a donation of money to any charitable institution or trust of a public character which is e4empt from ta4 under section // or to the +overnment, for charitable purposes.<3* 2s noted earlier< in practice the Inland 9e&enue .epartment loo:s to the common la" to determine "hether an or!anisation can be said to ha&e been established for charitable purposes< +- in particular to 8ord Macna!hten's four principal di&isions of charitable purpose in Income Ta4 Special Purposes Commissioners v Pemsel. +1 In order to be considered a charity< the or!anisation must be established for purposes "hich are e;clusi&ely charitable accordin! to la"> The .epartment states: <It is not permissible for a body to have mi4ed ob;ectives, some of which are charitable and others which are non-charitable.< +2 5>2* The Inland 9e&enue .epartment has made a&ailable to the public the set of interpretation and practice notes +3 that it applies in determinin! "hether particular donations are considered ta; deductible as <approved charitable donations<> These ha&e no bindin! force< ho"e&er< and do not affect a ta;payer's ri!ht of ob6ection or appeal <to the Commissioner Fof Inland RevenueG, the Board of Review or the Court.< ++ 5>30ara!raph * of these interpretation and practice notes states: <% purpose is not charitable unless it is directed to the public or a sufficient cross section of the public. In eneral, an or anisation cannot be classified as charitable if, in principle, it is established for the benefit of specific individuals. It is not possible to lay down a precise rule as to what constitutes a sufficient cross section of the public. :ver the years, the courts have considered various situations where charitable status was claimed. In summary, the courts9 decisions have been A

3* +-

+1 +2

+3 ++

Section 2A1B< Inland 9e&enue ,rdinance A1ap 112B> Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed< Sept 2-1-B< a&ailable at http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> I1)*1J 21 531 A#8B> Inland 9e&enue .epartment< .epartmental Interpretation and 0ractice 4otes< 4o 3( A9e&isedB Concessionary =eductions& Section #"C& %pproved Charitable =onations ASep 2--%B< a&ailable at: http:CC""">ird>!o&>h:Cen!CpdfCe=dipn3(>pdf> Same as abo&e> Same as abo&e< front co&er>

+*

F Purposes held to be charitable purposes
Relief of poor people Relief of victims of a particular disaster Relief of sic6ness Relief of physically and mentally disabled 5stablishment or maintenance of non-profit-ma6in schools Provision of scholarships =iffusion of 6nowled e of particular academic sub;ects 5stablishment or maintenance of a church 5stablishment of reli ious institutions of a public character Prevention of cruelty to animals Protection and countryside safe uardin of the environment or

F Purposes held not to be charitable purposes
%ttainment of a political ob;ect Promotion of the benefits of the founders or subscribers 5ncoura ement of a particular sport such as football or cyclin Provision of a playin field, recreation round or scholarship fund for employees of a particular company or industry.<

Re istered Trustees Incorporation :rdinance .Cap )$"1 5>31 The 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B !o&erns the incorporation of trustees appointed by certain bodies< associations and communities of persons< and the incorporation of trustees of charitable trusts>+5 For the purposes of the ,rdinance< the term <charity< is defined in section 2A1B as meanin!< <any trust or or ani@ation established by deed or otherwise for a charitable purpose.< 5>32 Section 2A1B of the 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B defines the term <charitable purpose< as includin!: <.a1 .b1 the relief of povertyP the advancement of art, education, learnin , literature, science or researchP

+5

See 8on! Title to the 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B>

5-

.c1

the ma6in of provision for.i1 the cure, alleviation or prevention ofP or

.ii1 the care of persons sufferin from or sub;ected to, any disease, infirmity or disability affectin human bein s .includin the care of women before, durin and after child birth1P .d1 .e1 .f1 . 1 the advancement of reli ionP any ecclesiastical purposeP the promotion of the moral, social and physical well-bein of the communityP and any other purpose beneficial to the community not specified in para raphs .a1 to .f1.<2"

Pr$:-e1) ,'#( #(e &rre"# -a, a"% #(e "ee% f$r ref$r1
5>33 2s "e ha&e seen< in order for a body to be considered a charity under #on! $on! la"< it must be established <for purposes which are e4clusively charitable accordin to law<. +( ,ur definition of <charitable purpose<< e&en to this day< is based on 8ord Macna!hten's 1)*1 statement of the four cate!ories of charitable purposes +) "hich "as itself based on the preamble to the 1haritable Kses 2ct 1%-1 in 3n!land> +* 5>3+ 1learly< there are difficulties in attemptin! to determine the scope of "hat should constitute a charity in t"enty-first century #on! $on! by reference to a statute from Tudor 3n!land< and from case la" founded in the Mictorian era> We outline some of these difficulties belo">

+%

+(

+)

+*

Section 2A1B< 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B> Section 2A2B of the ,rdinance adds that: <,here the ob;ects of any body of persons or charity involve the ac8uisition of ain by such body of persons or charity or any of its individual members or trustees, as the case may be, such body of persons or charity shall not be a body of persons or charity for the purposes of this :rdinance.< This is further 8ualified by section #.)1, which states& <'or the purposes of subsection .#1, the receipt by an individual member or trustee of any body of persons or charity of remuneration in respect of any professional services rendered to such body of persons or charity where the will, deed, rules, re ulations or other instrument creatin , constitutin or re ulatin the same so permits shall not be an ac8uisition of ain.< Inland 9e&enue .epartment< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sept 2-1-B at Thttp:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htmU Special Commissioners of Income Ta4 v Pemsel I1)*1J Mol 3 Ta; 1ases 53< at *%< per 8ord Macna!hten> 2lso :no"n as the Statute of 1haritable Kses or the Statute of 3liNabeth I> The preamble sets out a lon! and &aried list of e;amples of purposes "hich "ere charitable: see (alsbury9s Laws of 5n land< Mol 5A2B A2--1 9eissueB< at para 2>

51

Outdated definition 5>35 The lan!ua!e of the preamble to the 1%-1 2ct is archaic and unsuited to modern conditions> Many of the e;amples to "hich it refers bear little rele&ance to the current "orld> The emphasis of 8ord Macna!hten's four cate!ories of charitable purpose appears e@ually out of touch "ith modern sensibilities> While there may be little dispute about identifyin! the <relief of poverty< and the <advancement of education< as appropriate charitable purposes< some mi!ht ar!ue that the <advancement of reli ion< does not deser&e to be sin!led out for special prominence "hen all other purposes Asuch as care for the sic: and a!ed< pre&ention of cruelty< en&ironmental protection< encoura!ement of sport< etcB are lumped to!ether "ithin an o&erall fourth cate!ory of <other purposes beneficial to the community.< 5>3% The determination of "hat amounts to a charitable purpose relies on case la" emanatin! from the nineteenth century and the archaic lan!ua!e of a se&enteenth century statute> 4either is readily accessible to the layman< and the !uidance they "ould offer him in any e&ent is limited> There is a stron! case for ar!uin! that it is in the interests of both the !eneral public and charitable or!anisations themsel&es that the le!al definition of "hat amounts to a charitable purpose should be clear< accessible and in tune "ith current &alues> The law i confu ing and unclear 5>3( 2s "e sa" in 1hapter 3< there is no !eneral statutory scheme for the re!istration or re!ulation of charities in #on! $on!> Knder the pro&isions of the Inland 9e&enue ,rdinance A1ap 112B< an or!anisation accepted as a charity by the Inland 9e&enue .epartment is not !enerally liable to ta; and donations to such or!anisations are ta; deductible> There is< ho"e&er< no statutory definition in the Inland 9e&enue ,rdinance of "hat amounts to a charity< and the Inland 9e&enue .epartment is therefore obli!ed to loo: to the common la" in determinin! "hether an or!anisation can be said to ha&e been established for <charitable purposes<> That case la" is less than clear> 5>3) The fourth head of 8ord Macna!hten's lan!ua!e in Pemsel9s case< namely <trusts for other purposes beneficial to the community, not fallin under any of the precedin heads< < offers little !uidance as to "hat is< and "hat is not< a charitable purpose> It lea&es "ide scope for doubt and ambi!uity< "hich can be resol&ed only by e;pensi&e liti!ation> It is hardly surprisin! that 8ord Sterndale< M9< once said & <I am unable to find any principle which will uide one easily, and safely, throu h the tan le of the cases as to what is and what is not a charitable ift<. 5-

5-

In re Tetley I1*22 T +%)JH I1*23J 1 1h 25)< at 2%% A12B>

52

Pr$) a"% $") $f (a+'"* a )#a#&#$r0 %ef'"'#'$"
5>3* that: AaB AbB The principal ar!uments in fa&our of a statutory definition are it "ould pro&ide !reater accessibility and clarity of the la"< assistin! both donors and charitable or!anisations themsel&esH it could reflect rele&ant current &alues and the "ide ran!e of acti&ities no" underta:en by charitable or!anisations< in a "ay "hich the old case la" cannotH it is undesirable that the !rantin! of ta; concessions to an or!anisation and its donors under the Inland 9e&enue ,rdinance should be determined by the application of administrati&e !uidelines Ae&en those based on the common la"B< rather than a clear statutory definitionH a clear statutory definition of the or!anisations "hich are to be re!ulated is essential if a statutory scheme for the re!ulation of charitable or!anisations is to be establishedH and the creation of a statutory definition of "hat amounts to a charity "ould be in line "ith the !eneral trend of le!al de&elopment in the common la" "orld>

AcB

AdB

AeB

5>+The principal ar!uments a!ainst the introduction of a statutory definition are that: AaB no statutory definition can hope to foresee e&ery future de&elopment in charitable !i&in! and it "ould lose the fle;ibility inherent in case la" "hich allo"s !radual chan!e o&er time to meet chan!in! social circumstancesH and a statutory definition "ould not a&oid the need for liti!ation in difficult cases< but it "ould lose the benefit of case la" established o&er many years>

AbB

5>+1 In elaboration of the first ar!ument a!ainst a statutory definition< as late as 1*)*< a White 0aper in the Knited $in!dom concluded that: <an attempt to define charity by any of these means Fi.e. listin the purposes which are deemed to be charitable, enactin a definition of charity based on Lord Eacna hten9s classification, or definin 9charitable purposes9 as 9purposes beneficial to the community9G would be frau ht with difficulty, and mi ht put at ris6 the fle4ibility of the present law which is both its stren th and its most valuable feature. In particular, Fthe +overnmentG consider

53

that there would be reat dan ers in attemptin to specify in statute those ob;ects which are to be re arded as charitable<. 0! That &ie" "as< of course< subse@uently re6ected by the 7o&ernment in puttin! for"ard the definition of <charitable purpose< contained in the 3n!lish 1harities 2ct 2--% A/the 3n!lish 2--% 2ct/B> 5>+2 In our &ie"< ho"e&er< the case for a statutory definition is o&er"helmin!> It cannot be a sound basis for ob6ection that a statutory definition "ould remo&e the benefit of e;istin! case la"< "hen that case la" has been found to be ambi!uous and uncertain> 4o statutory definition can hope to foresee e&ery e&entuality< but a definition "hich pro&ides a broad ran!e of cate!ories< "hile retainin! some measure of fle;ibility to reco!nise purposes not fallin! "ithin a specific cate!ory< "ould constitute an impro&ement on 8ord Macna!hten's four cate!ories of charitable purposes> We therefore recommend that there should be a clear statutory definition of "hat constitutes a charitable purpose> The later part of this chapter "ill consider the essential elements of such a definition< after re&ie"in! the rele&ant le!islation in other 6urisdictions>

Re $11e"%a#'$" 1 We re $11e"% #(a# #(ere )($&-% :e a -ear )#a#&#$r0 %ef'"'#'$" $f ,(a# $")#'#&#e) a (ar'#a:-e .&r.$)e!

I))&e) #$ :e $")'%ere% '" %ef'"'"* (ar'#a:-e )#a#&)
5>+3 #a&in! concluded that there should be a clear statutory statement of "hat constitutes a charitable purpose< there are a number of issues rele&ant to decidin! how charitable status should be defined> E(clu ivel! charita&le purpo e 5>++ The current la" re@uires that< to be reco!nised as charitable< an or!anisation must ha&e purposes that are e4clusively charitable> 2n alternati&e "ould be to allo" charitable status to or!anisations "hose purposes are mi;ed but this "ould be at odds "ith the approach adopted in other 6urisdictions> "Pu&lic &enefit" ver u "private &enefit" 5>+5 The definition of <charitable purpose< adopted in other common la" 6urisdictions focuses on <public benefit<< as distinct from <private benefit<>

51

K$ #ome ,ffice< Charities& % 'ramewor6 for the 'uture A1*)*B 1m %*+< at para 2>11>

5+

Some 6urisdictions re@uire specific steps to be ta:en to satisfy a test of <public benefit<> 5>+% In re&ie"in! the position of charities there< a K$ Strate!y Knit report on charities and the not-for-profit sector discussed self-help or!anisations and dre" a distinction bet"een pri&ate and public benefit in these or!anisations: <Self-help or anisations are important in that they empower beneficiaries to help both themselves and others. :ur consultation revealed that there is confusion over whether selfhelp or anisations can obtain charitable status. %t present, selfhelp or anisations which have open membership may be charitable, but or anisations run by a small number of people for their own benefit cannot. This distinction helpfully draws a line between private and public benefit.< 0# 5>+( The K$ Strate!y Knit report also sets out a list of characteristics "hich are indicati&e of <public benefit<: /        The or anisation benefits the public as a whole or a sufficient section of it. The beneficiaries are not defined in terms of a personal or contractual relationship. The beneficiaries should not be defined by an inappropriate or capricious lin6. Eembership and benefits should be available to all those who fall within the class of beneficiaries. %ny private benefit arises directly out of the pursuit of the charity9s ob;ects or is le itimately incidental to them. The amount of private benefit should be reasonable. Char es should be reasonable and should not e4clude a substantial proportion of the beneficiary class. The service provided should not cater only for the financially well off. It should in principle be open to all potential beneficiaries.<0)

52

53

K$ Strate!y Knit 9eport< Private %ction, Public Benefit& % Review of Charities and the ,ider Cot-'or-Profit Sector ASep 2--2B< at +1> Same as abo&e< at 3(>

55

"Pu&lic &enefit" rather than "altrui m" 5>+) It has al"ays been emphasised in case la" that <public benefit< is central to charity< but this is different from <altruism<> The si!nificance of the public benefit re@uirement rather than <altruism< is hi!hli!hted in the K$ Strate!y Knit's report: <The +overnment considers that public benefit should continue to be one of the essential re8uirements of charitable status. Both the recent report by the Cational Council for Ioluntary :r anisations on the definition of charity, 02 and the Scottish Ec'adden report,00 reiterate the central importance of public benefit to the concept of charity. % recent opinion poll conducted by CCI: confirmed that //O of those as6ed a reed that a re istered charity should be able to demonstrate that its activities provide a benefit to society. The response was particularly stron amon st !/-#2 year olds, where *0O a reed. %lthou h the acceptable level of public benefit can be difficult to ;ud e, this does not diminish its relevance. Removin this concept from the definition of what is charitable and replacin it or combinin it with another, untested concept - such as altruism as has been su ested in %ustralia 0" - would create unacceptable uncertainty in law, and would have few advanta es.<03 "Charita&le purpo e " rather than "charita&le activitie " 5>+* It has also been obser&ed that <charitable purposes< should be emphasised< rather than <charitable activities<> The K$ Strate!y Knit report discussed this issue: <Some have ar ued that the best way to emphasise public benefit would be to base charitable status on activities, rather than purposes. (owever, the main advanta e of focusin on stated purposes is that it allows for fle4ibility in how the or anisation chooses to achieve these purposes. This ives or anisations the independence to underta6e the activities they deem most effective in achievin their purposes, as well as the fle4ibility to respond to problems in new and innovative ways. It is not widely appreciated, however, that the ta4 reliefs associated with charitable status already depend on funds bein applied to charitable purposes. % stricter activities test would
5+

55

5%

5(

4ational 1ouncil of Moluntary ,r!anisations< 'or the Public BenefitT % Consultation =ocument on Charity Law Reform A2--1B> Scottish 3;ecuti&e< The Report of the Scottish Charity Law Review Commission A2--1B A:no"n as <The Ec'adden report< after the 1hair< Dean McFaddenB> 1ommittee of In@uiry< Report of the In8uiry into the =efinition of Charities and Related :r anisations ADun 2--1B> K$ Strate!y Knit 9eport< Private %ction, Public Benefit& % Review of Charities and the ,ider Cot-'or-Profit Sector ASep 2--2B< at 3*>

5%

also imply a de ree of state oversi ht and control of voluntary or anisations that would be onerous and stiflin of initiative and innovation.<0/ Other con ideration 5nsure all currently charitable purposes included 5>5We ha&e discerned no reason for e;cludin! any e;istin! charitable purposes from the statutory definition> Thus in dra"in! up a statutory definition of charitable purposes for #on! $on!< care should be ta:en to ensure that the definition does not e;clude any purposes "hich are currently charitable> 2t the same time< any e;pansion of the definition to include purposes "hich are not currently charitable should proceed cautiously< "ith due consideration bein! !i&en to possible implications for !o&ernment resources in terms both of sub&entions and loss of ta; re&enue> 5>51 2 report by the K$ #ome ,ffice in 2--3 considered that <the specific purposes contained in the list Fof charitable purposesG should reflect ma;or areas of charitable endeavour which have, or should have, stron public reco nition.<5* 2doptin! that reasonin!< it could be ar!ued that the purposes to be specifically listed in a statutory definition for #on! $on! should reflect ma6or areas of charitable endea&our here "hich ha&e< or should ha&e< stron! public reco!nition> 54istin case law 5>52 2s noted by the K$ Strate!y Knit in its report< althou!h the e;istin! la" may be anomalous< there is also a body of helpful case la" that has considered specific @uestions< such as the scope and meanin! of <education< in the conte;t of charity la"> 2s the Strate!y Knit's report points out: <Removin all reference to e4istin case law would create si nificant uncertainty for e4istin charities, and would mean that many of the same points would have to be unnecessarily e4plored a ain by the courts.<"$ 5>53 It is not our intention that e;istin! case la" should be done a"ay "ith< other than "here it is clearly at odds "ith the meanin! of the ne" statutory definition "e propose>

5) 5*

%-

Same as abo&e< at 3)> K$ #ome ,ffice< Charities and Cot-for-Profits& % Eodern Le al 'ramewor6, The +overnment9s response to <Private %ction, Public Benefit< ADuly 2--3B< at *> K$ Strate!y Knit 9eport< Private %ction, Public Benefit& % Review of Charities and the ,ider Cot-'or-Profit Sector ASep 2--2B< at +1>

5(

P$))':-e ref$r1 1$%e-)C %ef'"'#'$") '" $#(er 4&r')%' #'$")
5>5+ The Sub-committee has studied &arious o&erseas models on the definition of charitable purposes> In doin! so< "e note our preference for the approaches adopted in 3n!land and Wales< and in Scotland> 2 summary of these approaches is set out belo"> .etails of models adopted in other 6urisdictions are discussed in 2nne; 1 of this paper> England and 0ale 5>55 <.!1 Section 1 of the 3n!lish 2--% 2ct defines a charity to mean: N an institution which A .a1 .b1 is established for charitable purposes only, and falls to be sub;ect to the control of the (i h Court in the e4ercise of its ;urisdiction with respect to charities.

.#1

The definition of 9charity9 in subsection .!1 does not apply for the purposes of an enactment if a different definition of that term applies for those purposes by virtue of that or any other enactment. % reference in any enactment or document to a charity within the meanin of the Charitable Sses %ct !"$! .c 21 or the preamble to it is to be construed as a reference to a charity as defined by subsection .!1.<

.)1

5>5% Section 2A1B of the 3n!lish 2--% 2ct defines a charitable purpose as one "hich falls "ithin the purposes listed in section 2A2B of the 2ct< and is for the public benefit> The listed purposes are: <.a1 .b1 .c1 .d1 .e1 .f1 . 1 the prevention or relief of povertyP the advancement of educationP the advancement of reli ionP the advancement of health or the savin of livesP the advancement developmentP of citi@enship or community

the advancement of the arts, culture, herita e or scienceP the advancement of amateur sportP

5)

.h1

the advancement of human ri hts, conflict resolution or reconciliation or the promotion of reli ious or racial harmony or e8uality and diversityP the advancement improvementP of environmental protection or

.i1 .;1

the relief of those in need by reason of youth, a e, illhealth, disability, financial hardship or other disadvanta eP the advancement of animal welfareP the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance servicesP any other purposes within subsection .21.<

.61 .l1

.m1

5>5( Section 2A3B offers further e;planation of some of these purposes in section 2A2B as follo"s: <.a1 in para raph .c1 9reli ion9 includes U .i1 .ii1 .b1 a reli ion which involves belief in more than one od, and a reli ion which does not involve belief in a odP

in para raph .d1 9the advancement of health9 includes the prevention or relief of sic6ness, disease or human sufferin P para raph .e1 includes U .i1 .ii1 rural or urban re eneration, and the promotion of civic responsibility, volunteerin , the voluntary sector or the effectiveness or efficiency of charitiesP

.c1

.d1

in para raph . 1 9sport9 means sports or ames which promote health by involvin physical or mental s6ill or e4ertionP para raph .;1 includes relief iven by the provision of accommodation or care to the persons mentioned in that para raphP and

.e1

5*

.f1

in para raph .l1 9fire and rescue services9 means services provided by fire and rescue authorities under Part # of the 'ire and Rescue Services %ct #$$2 .c #!1.<

5>5) Section 2A+B e;plains that <any other purposes< in section 2A2B AmB abo&e co&ers: <.a1 any purposes not within para raphs .a1 to .l1 of subsection .#1 but reco nised as charitable purposes under e4istin charity law or by virtue of section ! of the Recreational Charities %ct !*0/ .c !31P any purposes that may reasonably be re arded as analo ous to, or within the spirit of, any purposes fallin within any of those para raphs or para raph .a1 aboveP and any purposes that may reasonably be re arded as analo ous to, or within the spirit of, any purposes which have been reco nised under charity law as fallin within para raph .b1 above or this para raph.<

.b1

.c1

5>5* In effect< this means that anythin! currently re!arded as charitable "ill continue to be so> It is si!nificant< ho"e&er< that both limbs of the charity test must be satisfied< ie< the charity's purpose must fall "ithin one of the listed cate!ories and it must be <for the public benefit<> Section 3A2B !oes on to state that there is to be no presumption that a particular purpose is for the public benefit> This effecti&ely remo&es the pre&ious common la" presumption that charities for the pre&ention or relief of po&erty< the ad&ancement of education or the ad&ancement of reli!ion "ere for the public benefit> 5>%There is no definition of "hat amounts to <public benefit< beyond section 3A3B's statement 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 relatin to charities in 5n land and ,ales.< 5>%1 The 1harity 1ommission is re@uired by section + of the 2ct to issue !uidance on the operation of the public benefit re@uirement< and must carry out public consultation before it does so> Scotland 5>%2 In order to be re!istered as a charity under the 1harities and Trustee In&estment AScotlandB 2ct 2--5 A/the Scottish 2--5 2ct/B< a body must satisfy the <charity test< set out in section (> 2 body meets this test if: <.a1 its purposes consist only of one or more of the charitable purposes, and

%-

.b1

it provides .or, in the case of an applicant, provides or intends to provide1 public benefit in Scotland or elsewhere.<

5>%3 Section (A2B of the Scottish 2--5 2ct defines <charitable purposes< as: <.a1 .b1 .c1 .d1 .e1 .f1 . 1 .h1 .i1 the prevention or relief of poverty, the advancement of education, the advancement of reli ion, the advancement of health, the savin of lives, the advancement development, of citi@enship or community

the advancement of the arts, herita e, culture or science, the advancement of public participation in sport, the provision of recreational facilities, or the or anisation of recreational activities, with the ob;ect of improvin the conditions of life for the persons for whom the facilities or activities are primarily intended, the advancement of human ri hts, conflict resolution or reconciliation, the promotion of reli ious or racial harmony, the promotion of e8uality and diversity, the advancement improvement, of environmental protection or

.;1 .61 .l1 .m1 .n1 .o1 .p1

the relief of those in need by reason of a e, ill-health, disability, financial hardship or other disadvanta e, the advancement of animal welfare, any other purpose that may reasonably be re arded as analo ous to any of the precedin purposes.<

5>%+ Section (A3B of the 2ct pro&ides further e;planation in respect of some of these charitable purposes in section (A2B:

%1

<.a1

in para raph .d1, 9the advancement of health9 includes the prevention or relief of sic6ness, disease or human sufferin , para raph .f1 includes U .i1 .ii1 rural or urban re eneration, and the promotion of civic responsibility, volunteerin , the voluntary sector or the effectiveness or efficiency of charities,

.b1

.c1 .d1

in para raph .h1, 9sport9 means sport which involves physical s6ill and e4ertion, para raph .i1 applies only in relation to recreational facilities or activities which are A .i1 primarily intended for persons who have need of them by reason of their a e, ill-health, disability, financial hardship or other disadvanta e, or available to members of the public at lar e or to male or female members of the public at lar e, iven by the provision of

.ii1 .e1 .f1

para raph .n1 includes relief accommodation or care, and

for the purposes of para raph .p1, the advancement of any philosophical belief .whether or not involvin belief in a od1 is analo ous to the purpose set out in para raph .c1.<

5>%5 Section )A1B of the 2ct pro&ides that< for the purposes of decidin! "hether section (A1B's <charity test< has been met< no purpose can be presumed to be <for the public benefit< > Section )A2B lists the follo"in! factors "hich must be considered in decidin! "hether a body pro&ides <public benefit<: <.a1 how any A .i1 benefit ained or li6ely to be ained by members of the body or any other persons .other than as members of the public1, and

.ii1

disbenefit incurred or li6ely to be incurred by the public, in conse8uence of the body e4ercisin its functions compares with the benefit ained or li6ely to be ained by the public in that conse8uence, and

%2

.b1

where benefit is, or is li6ely to be, provided to a section of the public only, whether any condition on obtainin that benefit .includin any char e or fee1 is unduly restrictive.<

Ca#e*$r'e) $f (ar'#a:-e .&r.$)e - $&r .r$.$)a-)
5>%% We concluded and recommended in the earlier part of this chapter that there should be a clear statutory statement of "hat constitutes a charitable purpose> We noted &arious issues that "ere rele&ant to ho" this definition should be arri&ed at and then re&ie"ed possible reform models in other 6urisdictions> 5>%( 2s noted earlier< in de&isin! a definition suitable for #on! $on!< "e belie&e that the le!islation in 3n!land and Scotland in particular pro&ides a useful startin! point< ta:in! account of our shared le!al herita!e> In the para!raphs "hich follo"< "e therefore consider the &arious cate!ories included in the statutory definition of charitable purposes in these t"o 6urisdictions< and set out our &ie" as to "hether or not each of these cate!ories should be included in #on! $on!'s statutory definition> A3;cept "here noted< the headin! for each part of the discussion belo" reflects the "ordin! in the Scottish 2--5 2ct< "hile aspects of the 3n!lish 2--% 2ct "hich di&er!e from this are referred to in the discussion under each head>B "The prevention or relief of povert!" 5>%) Knder the charities le!islation in both 3n!land and Scotland< the first charitable purpose listed is <the prevention or relief of poverty<%1> 5>%* In our &ie"< there can be no doubt that the pre&ention of po&erty should be one of the heads of charitable purpose< reflectin! the e;istin! common la"> #o"e&er< the @uestion arises as to "hether <relief of poverty< could be interpreted as <promotion of wealth<, rather than <prevention of poverty.< The ar!ument is in our &ie" academic> In 3n!land< <prevention of poverty< is understood to include <preventin those who are poor from becomin poorer and preventin persons who are not poor from becomin poor<>%2 The ma6ority of the Sub-committee are of the opinion that <prevention of poverty< should be included in the ne" statutory definition> We recommend that <the prevention or relief of poverty,< should be one of the heads of charitable purposes< "ith the @ualification that the <prevention of poverty< means to <help those who mi ht fall below the poverty line unless help were iven<> "The advancement of education"
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2ct>
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See section 2A2BAaB of the 3n!lish 2--% 2ct and section (A2BAaB of the Scottish 2--5

1harity 1ommission for 3n!land and Wales< Commentary on the =escriptions of Charitable Purposes in the Charities %ct #$$" A2--*B< at: http:CC""">charity-commission>!o&>u:C 1harity=re@uirements=!uidanceC1harity=essentialsC 0ublic=benefitCcorcom1>asp

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5>(The ad&ancement of education is listed as the second head of charitable purpose under both the Scottish 2--5 2ct and the 3n!lish 2--% 2ct>%3 5>(1 2s "e sa" earlier< in 3n!land and Wales prior to the 3n!lish 2--% 2ct< purposes for the ad&ancement of education Aor the relief of po&erty or the ad&ancement of reli!ionB "ere presumed to be for the public benefit unless the presumption "as rebutted by e&idence to the contrary> In other cases< public benefit had to be sho"n> 0art 1 of the 3n!lish 2--% 2ct< ho"e&er< has remo&ed this presumption of public benefit in respect of education Aas "ell as in respect of the relief of po&erty and the ad&ancement of reli!ionB> 2s a conse@uence< <independent schools< or <private schools< in 3n!land and Wales are no" sub6ect to the <public benefit< test imposed by the 3n!lish 2--% 2ct< and must ac@uire charitable status in order to ta:e ad&anta!e of the ta; benefit of that status> In this re!ard< "e note the K$ Strate!y Knit's obser&ations: <Some charities char e fees for the provision of services. Char in fees that are affordable to lar e sections of the population will not affect the public character of the charity. (owever, those charities that char e have to ensure that they have a public character, that is, that they provide access for those who would be e4cluded because of the fees. 'or e4ample, to maintain their charitable status, independent schools which char e hi h fees have to ma6e si nificant provision for those who cannot pay full fees and the ma;ority probably do so already.<"2 5>(2 In order to satisfy the public benefit test< independent schools in 3n!land ha&e had to do more to share their facilities and e;pertise "ith a "ider ran!e of children>%5 This has included the settin! up of scholarships and bursaries to pro&ide financial assistance to students "ho "ould other"ise not be able to afford the rele&ant school fees> 5>(3 We recommend that the ad&ancement of education should be one of the heads of charitable purpose< reflectin! the e;istin! position under common la"> Similar to the situation in 3n!land and Wales< ho"e&er< "e consider that< in determinin! "hether pri&ate schools in #on! $on! are able to ac@uire charitable status< their purpose for the ad&ancement of education should also satisfy the re@uirement for public benefit> %% "The advancement of religion"
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See section 2A2BAbB of the 3n!lish 2--% 2ct and section (A2BAbB of the Scottish 2--5 2ct> K$ Strate!y Knit 9eport< Private %ction, Public Benefit, % Review of Charities and the ,ider Cot-'or-Profit Sector ASep 2--2B< at +1> FF1 ,ne-minute World 4e"s< Mi:e Fa:er< /School charity test or class "ar / A1( Duly 2--*B< at: http:CCne"s>bbc>co>u:C2ChiCu:=ne"sCeducationC)15%(5(>stm The Sub-committee notes that it has recently been reported that a famous o&erseas pri&ate school plans to set up a pri&ate school in #on! $on!> 2t the date of publication of this paper< it is un:no"n as to "hether this school "ill< in due course< apply for charitable status>

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5>(+ Knder both section (A2BAcB of the Scottish 2--5 2ct and section 2A2BAcB of the 3n!lish 2--% 2ct< "the advancement of religion" ') )#a#e% a) $"e $f #(e (ar'#a:-e .&r.$)e)! Se #'$" 2G/H $f #(e E"*-')( 2006 A # f&r#(er e<.-a'") #(a# "9reli ion9 includes U .i1 .ii1 a reli ion which involves belief in more than one od, and a reli ion which does not involve belief in a od.<

This implies that <reli ion< f$r #(e .&r.$)e) $f #(e E"*-')( -e*')-a#'$" 1a0 '"+$-+e :e-'ef e'#(er '" "$ *$%9 $"e *$%9 $r 1$re #(a" $"e *$%! 5!75 T(e f&r#(er -ar'f' a#'$" .r$+'%e% &"%er #(e S $##')( 2005 A # ') e<.re))e% %'ffere"#-0! Se #'$" 7G/HGfH )#a#e) #(a#9 "5 the advancement of an! philo ophical &elief .whether or not involving &elief in a god/ i analogou to the purpo e et out in paragraph .c/ 6the advancement of religion7." 5>(% While "e obser&e that the ad&ancement of reli!ion is included as a charitable purpose in e;istin! common la" and most statutory definitions< "e note that a number of 6urisdictions ha&e included additional clarification of "hat amounts to <reli ion<> We fa&our the inclusion of the ad&ancement of reli!ion as a charitable purpose> We also note that the <advancement< of reli!ion could be said to imply some element of proselytisin!< rather than the mere maintenance of belief or the enhancement of reli!ious :no"led!e> It may be that some other form of "ords should encapsulate this particular purpose> We are of the &ie" that< as "ith the ad&ancement of education< purposes for the ad&ancement of reli!ion should also satisfy the public benefit test> "The advancement of health" 5>(( In the Scottish 2--5 2ct< <the advancement of health< appears in section (A2BAdB as one head of charitable purpose< "hile section (A2BAeB lists <the savin of lives< a) a"$#(er! I" $"#ra)#9 section 2A2BAdB of the 3n!lish 2--% 2ct combines <the advancement of health or the savin of lives< as one head of charitable purpose> We note also that both the Scottish and 3n!lish le!islation defines <the advancement of health< to include <the prevention or relief of sic6ness, disease or human sufferin < >%( 5>() In 3n!land and Wales< the 3n!lish 1harity 1ommission has also issued !uidance on the meanin! of the charitable purpose <the advancement of health and the savin of lives< in section 2A2BAdB of the 3n!lish 2--% 2ct> In relation to the first part of this head< <the advancement of health<, the 1ommission's !uidance states that: <!. The advancement of health includes the prevention or relief
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2ct>

See section 2A3BAbB of the 3n!lish 2--% 2ct and section (A3BAaB of the Scottish 2--%

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of sic6ness, disease or human sufferin , as well as the promotion of health. It includes conventional methods as well as complementary, alternative or holistic methods which are concerned with healin mind, body and spirit in the alleviation of symptoms and the cure of illness. To be charitable there needs to be sufficient evidence of the efficacy of the method to be used. %ssessin the efficacy of different therapies will depend upon what benefits are claimed for it .i.e. whether it is dia nostic, curative, therapeutic andJor palliative1 and whether it is offered as a complement to conventional medicine or as an alternative. 5ach case is considered on its merits but the (ouse of Lords Report on complementary and alternative medicine I"/J provides a useful uide. #. The relief of sic6ness e4tends beyond the treatment or provision of care, such as a hospital, to the provision of items, services and facilities to ease the sufferin or assist the recovery of people who are sic6, convalescent, disabled or infirm or to provide comforts for patients.< "* 5>(* In line "ith the Scottish approach< "e recommend that <the advancement of health<, as a separate head< s($&-% :e $"e $f #(e a#e*$r'e) $f charitable purposes> We also consider that an e;press e;plication that this head includes <the prevention or relief of sic6ness, disease or human sufferin < should be included in #on! $on!'s definition> "The aving of live " 5>)Knder section (A2BAeB of the Scottish 2--5 2ct< <the savin of lives< is set out as a separate head of charitable purpose> The Scottish 1harity 9e!ulator has stated that it considers that this: <N includes a ran e of activity directed towards savin people whose lives are in dan er and protectin life. %ctivities in pursuit of this purpose mi ht include the provision of rescue services or trainin in first aid or other life-savin techni8ues.< (5>)1 2s noted earlier< section 2A2BAdB of the 3n!lish 2--% 2ct sets out the combined head of <the advancement of health or the savin of lives< as one of the charitable purposes> The 3n!lish 1harity 1ommission's !uidance on the meanin! of <the advancement of health and the savin of lives< states that:

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#ouse of 8ords< Science and Technolo y& Si4th Report& Complementary and %lternative Eedicine A21 4o& 2---B< a&ailable at: http:CC""">publications>parliament>u:CpaCld1***--CldselectCldsctechC123C123-2>htmVa1 See 1harity 1ommission "ebsite at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity=essentialsCpublic=benefitC2d&ance ment=of=health>asp; ,ffice of the Scottish 1harity 9e!ulator< Eeetin the Charity Test, =raft +uidance for Consultation, Dan 2--)>

%%

<The savin of lives includes a ran e of charitable activity directed towards savin people whose lives are in dan er and protectin life and property. 54amples of the sorts of charities and charitable purposes fallin within this description include& charities that provide .conventional andJor complementary, alternative or holistic1 medical treatment, care and healin , such as hospitals and healin centres, and charities supportin their wor6 or associated with them, e. . (ospital Lea ues of 'riendsP charities that provide comforts, items, services and facilities for people who are sic6, convalescent, disabled or infirm, e. . (ospital RadioP medical research charitiesP charities that provide services and facilities for medical practitioners, such as homes for nursesP charities that ensure the proper standards of medical practice, e. . the +eneral Eedical CouncilP charities that promote activities that have a proven beneficial effect on healthP charities that provide rescue services, such as lifeboats, mountain rescue, fire, ambulance, air ambulance and first aid services, or which assist the wor6 of the police and rescue services for e4ample by providin emer ency radio communication at national and local disastersP charities set up to assist the victims of natural disasters or warP the provision of life savin or self defence classesP the provision of blood transfusion services>/(1 5>)2 In line "ith the approach under the Scottish le!islation< "e recommend that <the savin of lives<< as a separate head< should be one of the cate!ories of charitable purposes>

"The advancement of citi8en hip or communit! development" 5>)3 Knder section (A2BAfB of the Scottish 2--5 2ct< <the advancement of citi@enship or community development< is one of the charitable purposes> Section (A3BAbB further e;plains that this head includes: <.i1 .ii1
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rural or urban re eneration, and the promotion of civic responsibility, volunteerin , the voluntary sector or the effectiveness or efficiency of

1harity 1ommission for 3n!land and Wales< +uidance on the %dvancement of health or the savin of lives< a&ailable at: http:CC""">charity-commission>!o&>u:Ccharity=re@uirements=!uidanceC1harity=essentialsC public=benefitC2d&ancement=of=health>asp;>

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charities.< 5>)+ Identical pro&isions appear in the 3n!lish 2--% 2ct> (2 2s has been obser&ed by the 3n!lish 1harity 1ommission< the ad&ancement of citiNenship or community de&elopment co&ers a broad !roup of charitable purposes directed to"ards support for social and community infrastructure "hich is focused on the community rather than the indi&idual> (3 3;amples of the types of charities and charitable purposes belon!in! to this cate!ory include the promotion of ci&ic responsibility and !ood citiNenship Asuch as !ood citiNenship a"ard schemes< Scout and 7uide !roupsB< the promotion of urban and rural re!eneration<(+ the promotion of &olunteerin! and the promotion of the &oluntary sector (5 and the promotion of the efficiency and effecti&eness of charities and the effecti&e use of charitable resources> (% 5>)5 We a!ree and recommend that this should be one of the heads of charitable purposes included in the definition>

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See sections 2A2BAeB and 2A3BAcB of the 3n!lish 2--% 2ct> 1harity 1ommission for 3n!land and Wales< +uidance on Charitable Purposes< a&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity=essentialsCpublic =benefitC2d&ancin!=community=de&elopment>asp; The 1harity 1ommission issued a !uidance note A99 2B to e;plain the e;tent to "hich the promotion of urban and rural re!eneration is charitable for the public benefit> / Charitable re eneration or anisations can achieve this by the maintenance or improvement of the physical, social and economic infrastructure and by assistin people who are at a disadvanta e because of their social and economic circumstances. Re eneration or anisations mi ht do some, or all, of the followin & ․ provide financial or other assistance to people who are poorP ․ provide housin for those in need and help to improve housin standards enerally in those parts of an area of deprivation where poor housin is a problemP ․ help unemployed people find employmentP ․ provide education, trainin and re-trainin opportunities and wor6 e4perience, especially for unemployed peopleP ․ provide financial or technical assistance or advice to new business or e4istin business where it would lead to trainin and employment opportunities for unemployed peopleP ․ provide land and buildin s on favourable terms to business in order to create trainin and employment opportunities for unemployed peopleP ․ provide, maintain and improve roads and accessibility to main transport routesP ․ provide, maintain and improve recreational facilitiesP ․ preserve buildin s in the area which are of historic or architectural importanceP ․ provide public amenities.< 2&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity =essentialsCpublic=benefitC2d&ancin!=community=de&elopment>asp; The 1harity 1ommission issued a !uidance note A99 13B to e;plain the e;tent to "hich the promotion of the &oluntary sector for the public benefit is charitable< a&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity=essentialsCpublic =benefitC2d&ancin!=community=de&elopment>asp; The 1harity 1ommission issued a !uidance note A99 1+B to pro&ide criteria for determinin! "hen or!anisations concerned "ith promotin! the efficiency and effecti&eness of charities and the effecti&e use of charitable resources for the benefit of the public can themsel&es be re!arded as charitable> This !uidance is concerned "ith or!anisations that offer ser&ices or support to charities or "hose acti&ities "ill assist non-charitable< as "ell as charitable< or!anisations to employ their resources more effecti&ely to achie&e e;clusi&ely charitable purposes> 2&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity =essentialsCpublic=benefitC2d&ancin!=community=de&elopment>asp;

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"The advancement of the art 1 heritage1 culture or cience" 5>)% Knder section (A2BA!B of the Scottish 2--5 2ct< <the advancement of the arts, herita e, culture or science< is one of the heads of charitable purpose> 2n almost identical head appears in section 2A2BAfB of the 3n!lish 2--% 2ct< e;cept that the "ords <herita e< and <culture< ha&e been transposed> 5>)( The ad&ancement of the arts co&ers a "ide ran!e of charitable acti&ities< includin! promotin! &arious forms of art at a national< professional and local and amateur le&el< the pro&ision of arts facilities and encoura!in! hi!h standards of art> <Culture< is a broad term often used in the conte;t of ad&ancin! art or herita!e> <(erita e< mi!ht be re!arded as part of a country's local or national history and traditions "hich are passed do"n throu!h successi&e !enerations> 2d&ancin! herita!e includes charities for the preser&ation of historic land and buildin!s> The ad&ancement of science includes scientific research and charities connected "ith &arious learned societies and institutions> 3;amples of the sorts of charities and charitable purposes fallin! "ithin this head include art !alleries< arts festi&als and arts councils< charities that promote or encoura!e hi!h standards of< the arts of drama< ballet< music< sin!in! and so on< the promotion of crafts and craftsmanship and scientific research pro6ects> (( 5>)) We a!ree that this should be one of the heads of charitable purposes and so recommend> "The advancement of pu&lic participation in port" 5>)* 2t common la"< the promotion of sport per se< irrespecti&e of "hether or not it relates to one< or more than one< :ind of sport< is not charitable> For e;ample< in In re Cotta e() it "as held that a !ift for the encoura!ement of a mere sport< thou!h it mi!ht be beneficial to the public< could not be upheld as charitable> Foth the 3n!lish and Scottish le!islation< ho"e&er< no" includes a specific charitable head relatin! to sports< each 2ct adoptin! a sli!htly different form of "ords> 5>*Section (A2BAhB of the Scottish 2--5 2ct cites <the advancement of public participation in sport< < "hile in 3n!land< section 2A2BA!B of the 3n!lish 2--% 2ct refers to <the advancement of amateur sport< > In the case of the 3n!lish head< section 2A3BAdB e;plains that <sport< means <sports or ames

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The 1harity 1ommission of 3n!land and Wales< +uidance on the advancement of the arts< culture, herita e or science< a&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity=essentialsCpublicbenefitC2d&ancem ent=of=the=arts>asp; I1)*5J 2 1h %+*>

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which promote health by involvin physical or mental s6ill or e4ertion< >(* In relation to the Scottish head< section (A3BAcB of the Scottish 2--5 2ct states that <sport< in section (A2BAhB means <sport which involves physical s6ill and e4ertion<> 5>*1 We ha&e considered "hether a head alon! the lines of one or other of the K$'s statutory formulations should be included "ithin #on! $on!'s ne" definition of charitable purposes and ha&e concluded that it should not for t"o reasons> First< a number of charities that could fall "ithin such a head "ould be co&ered already by other heads of charitable purpose> For e;ample< "hilst bodies "hose sole ob6ect is the promotion of sport are not re!arded as charitable for ta; e;emption purposes by the #on! $on! Inland 9e&enue .epartment< the .epartment considers or!anisations established for the purpose of <the promotion of public participation in recreationJsport to promote health< to be charitable< as their purpose "ould be for <the advancement of health< "hich falls "ithin the fourth head of the Pemsel case Anamely< <other purposes beneficial to the community not fallin under any of the precedin heads<B. We ha&e already recommended Aat para!raph 5>(* abo&eB that the ne" le!islati&e definition of charitable purposes should include a specific head for /the advancement of health/< confirmin! and continuin! e;istin! practice> 5>*2 Secondly< "e are concerned that if <the advancement of public participation in sport< "ere to be added as a head of charitable purpose< some or!anisations not pre&iously considered as charities may become eli!ible to be so desi!nated< "ith conse@uential ta; implications> The Sub-committee accordin!ly considers that a separate head relatin! to sports alon! the lines of the Scottish or 3n!lish pro&isions should not be included in the ne" statutory definition> "The provi ion of recreational facilitie 1 or the organi ation of recreational activitie 1 with the o&'ect of improving the condition of life for the per on for whom the facilitie or activitie are primaril! intended" 5>*3 Section 1A1B of the 9ecreational 1harities 2ct 1*5) )- in the K$ pro&ides that it shall be deemed to be charitable:

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2ccordin! to the +uidance on The advancement of amateur sport issued by the 1harity 1ommission< e;amples of the sorts of charities and charitable purposes fallin! "ithin this description include charities ad&ancin! sport at a local club< e!< local football< ru!by< tennis clubs etc< multisports centres and other or!anisations concerned "ith the promotion of a particular amateur sport or !ame< a&ailable at: http:CC""">charitycommission>!o&>u:C1harity=re@uirements=!uidanceCcharity=essentialsCpublic=benefitC2d&ancin !=amateur=sport>asp;> It should be noted that this 1*5) 2ct is li:ely to be repealed as part of a consolidation of charities le!islation no" comprised in a ne" 1harities Fill put before the K$ 0arliament in March 2-11> The Fill includes the pro&isions discussed abo&e and others from the 9ecreational 1harities 2ct 1*5)< the 1harities 2ct 1**3 and the 1harities 2ct 2--%< leadin! to the repeal of the former t"o 2cts and some sections Asections 1 to * and 11 to ++B and some Schedules of the 1harities 2ct 2--%>B

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/to provide, or assist in the provision of, facilities for recreation or other leisure-time occupation, if the facilities are provided in the interests of social welfare./ Section 1A2B pro&ides that facilities "ill not be considered to ha&e been pro&ided in the interests of social "elfare unless they are / provided with the ob;ect of improvin the conditions of life for the persons for whom the facilities are primarily intended/ and either: /.i1 those persons have need of such facilities as aforesaid by reason of their youth, a e, infirmity or disablement, poverty or social and economic circumstancesP or .ii1 the facilities are to be available to the members or female members of the public at lar e./ 5>*+ The Scottish 2--5 2ct re-stated this charitable purpose in sli!htly different Aand !ender-neutralB form but the effect remains broadly the same> Section (A2BAiB of the 2--5 2ct includes in the list of charitable purposes: <the provision of recreational facilities, or the or anisation of recreational activities, with the ob;ect of improvin the conditions of life for the persons for whom the facilities or activities are primarily intended<. Section (A3BAdB further pro&ides that recreational facilities or acti&ities "ill only be considered charitable if they are: <.i1 primarily intended for persons who have need of them by reason of their a e, ill-health, disability, financial hardship or other disadvanta e, or .ii1 available to members of the public at lar e or to male or female members of the public at lar e.< 5>*5 The inclusion of this charitable purpose in the Scottish le!islation ensures continuity "ith the 9ecreational 1harities 2ct 1*5) and so ensures that purposes that "ere re!arded by #M 9e&enue and 1ustoms as charitable under the 1*5) 2ct in Scotland "ill continue to be charitable> )1 5>*% Where a body only pro&ides facilities or acti&ities to a limited section of the public and not to the Amale or femaleB public as a "hole< that section of the public must be defined in terms of need as set out in section (A3BAdBAiB of the 2ct if the body's purposes are to @ualify as charitable< and the body must then demonstrate that the benefit is bein! pro&ided primarily to that section of the public> 2n e;ample "ould be a club pro&idin! recreational or sportin! facilities for teena!ers "ith learnin! difficulties> )2
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,ffice of the Scottish 1harity 9e!ulator< Eeetin the Charity Test, =raft +uidance for Consultation< Dan 2--)> ,ffice of the Scottish 1harity 9e!ulator< Eeetin the Charity Test, =raft +uidance for Consultation< Dan 2--)>

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5>*( The 3n!lish le!islation ta:es a some"hat different approach to that of the Scottish 2--5 2ct but its effect is also to ensure that purposes deemed charitable under the 1*5) 2ct remain so> Instead of incorporatin! a pro&ision in similar terms to section 1 of the 9ecreational 1harities 2ct 1*5)< the 3n!lish 2--% 2ct pro&ided by section 2A+B that any purposes reco!nised as charitable by &irtue of section 1 of the 1*5) 2ct continue to be so treated> 5>*) #on! $on! has no le!islation e@ui&alent to the 9ecreational 1harities 2ct 1*5) to determine "hether or not the pro&ision of particular recreational facilities amounts to a charitable purpose or not and must instead rely on the common la"> The 9ecreational 1harities 2ct 1*5) "as passed to confirm the charitable status of a "ide ran!e of recreational or!anisations< pre&iously treated as charitable< "hose position "as in doubt follo"in! the decision of the #ouse of 8ords in Commissioner of Inland Revenue v Baddeley.)3 The purpose of the 2ct "as essentially correcti&e: it "as not intended to e;tend charitable status to a "ider ran!e of recreational or!anisations< but to restore the position "hich e;isted before the #ouse of 8ords' decision> 5>** 2t common la"< it may be that the pro&ision of recreational facilities "ould be re!arded in certain circumstances as charitable< as bein! conduci&e to <the advancement of health<< "hich falls "ithin the fourth head of the Pemsel case> Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies pro&idin! purely recreational facilities for sports< such as tennis< ru!by< and so on< are not treated as charitable> 5>1-There are practical problems in includin! in the ne" statutory list of charitable purposes a head "hich could "iden the scope of charity beyond the bounds set by current practice> In the absence of a definition of "hat constitutes <recreational facilities< for charitable purposes it is possible that< for instance< commercial &entures or facilities of doubtful public benefit mi!ht fall "ithin the ne" head> 9ecreational purposes or facilities that may be re!arded as deser&in! of charitable status are li:ely to be co&ered by the other proposed heads such as ad&ancement of health or ad&ancement of community de&elopment> ,n balance< therefore< the Sub-committee is of the &ie" that this should not be one of the heads of charitable purposes under the ne" statutory definition> "The advancement of human right 1 conflict re olution or reconciliation" 5>1-1 Section 2A2BAhB of the 3n!lish 2--% 2ct includes "ithin the list of charitable purposes /the advancement of human ri hts, conflict resolution or reconciliation or the promotion of reli ious or racial harmony or e8uality and diversity>/ Section (A2B of the Scottish le!islation splits this omnibus head into three separate parts: <.;1 the advancement of human ri hts, conflict resolution or

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.61 .l1

reconciliation, the promotion of reli ious or racial harmony, the promotion of e8uality and diversity<.

We prefer the Scottish approach and ha&e separated our consideration of these issues accordin!ly> 5>1-2 <The advancement of human ri hts, conflict resolution or reconciliation" are all areas of increasin! importance and public concern> In the charitable conte;t< ho"e&er< a distinction must be dra"n bet"een acti&ities in these areas "hich are for political purposes and those "hich are not> The former "ill not be considered charitable> Knfortunately< althou!h the la" is clear that charities must not ha&e political ob6ects< there is little direct !uidance from the courts on ho" the line is to be dra"n bet"een acti&ities by charities in a political conte;t in pursuance of their charitable ob6ects< "hich are permissible< and those "hich ha&e become /too political/ and do not @ualify as charitable>)+ 2n early authority is the #ouse of 8ords decision in Bowman v Secular Society Ltd, "here 8ord 0ar:er of Waddin!ton stated the !eneral principles to be applied as follo"s: <F%G trust for the attainment of political ob;ects has always been held invalid, not because it is ille al, for everyone is at liberty to advocate or promote by any lawful means a chan e in the law, but because the court has no means of ;ud in whether a proposed chan e in the law will or will not be for the public benefit, and therefore cannot say that a ift to secure the chan e is a charitable ift.< /0 5>1-3 In Ec+overn v %tt-+en< Slade D stated that: <FTGhe court will not re ard as charitable a trust of which a main ob;ect is to procure an alteration of the law of the Snited -in dom for one or both of two reasons& first, the court will ordinarily have no sufficient means of ;ud in as a matter of evidence whether the proposed chan e will or will not be for the public benefit. Secondly, even if the evidence suffices to enable it to form a prima facie opinion that a chan e in the law is desirable, it must still decide the case on the principle that the law is ri ht as it stands, since to do otherwise would usurp the functions of the le islature.< /" 5>1-+ Slade D summarised his conclusions in relation to trusts for political purposes in the follo"in! terms: <.!1 5ven if it otherwise appears to fall within the spirit and intendment of the preamble to the Statute of 5li@abeth, a trust for political purposes fallin within the spirit of Lord Par6er9s pronouncement in Bowman9s case can never be re arded as
)+

)5 )%

The 1harity 1ommission for 3n!land and Wales< CC * - Campai nin and Political %ctivities by Charities AMersion March 2--)B> I1*1(J 21 +-%< at ++2> I1*)2J 1h 321< at 33%< 33(>

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bein for public benefit in the manner which the law re ards as charitable. .#1 Trusts for political purposes fallin within the spirit of this pronouncement include, inter alia, trusts of which a direct and principal purpose is either .i1 to further the interests of a particular political partyP or .ii1 to procure chan es in laws of this countryP or .iii1 to procure chan es in the laws of a forei n countryP or .iv1 to procure a reversal of overnment policy or of particular decisions of overnmental authorities in this countryP or .v1 to procure a reversal of overnment policy or of particular decisions of overnmental authorities in a forei n country.< /3 5>1-5 More recently< the 3n!lish 1harity 1ommission has issued a !uideline under CC * - Campai nin and Political %ctivities by Charities .Earch #$$/1)) "hich see:s to pro&ide !uidance to charity trustees on the e;tent to "hich they may properly en!a!e in acti&ities of a political nature> The 1harity 1ommission states that the !uidelines are under constant re&ie" to ensure that they are de&eloped appropriately in the li!ht of its e;perience of their impact upon the acti&ities of charities> )* This !uideline A"hich replaces the earlier &ersion of 11 * A2--+B and the Wuestions and 2ns"ers on 11 * A2--(BB focuses on the freedoms and possibilities for charities to en!a!e in campai!nin! and other types of political acti&ities< and on the restrictions and ris:s that trustees must bear in mind> 5>1-% 2t the heart of the !uideline is the principle that an or!anisation cannot be charitable if the purposes or ob6ects of the or!anisation itself are political> 2 political purpose< accordin! to the !uideline< means any purpose directed at furtherin! the interests of any political party< or securin! or opposin! any chan!e in the la" or in the policy or decisions of central !o&ernment< local authorities or other public bodies< "hether in the Knited $in!dom or abroad> 5>1-( The definitions of <campai nin < and <political activity< for the purpose of the !uideline< and based on charity la"< are pro&ided in Section 1+ of 11 *> The "ord <campai nin < refers to <awareness-raisin and to efforts to educate or involve the public by mobilisin their support on a particular issue, or to influence or chan e public attitudes.< It also refers to <campai nin activity which aims to ensure that e4istin laws are observed.< This is distin!uished from an acti&ity "hich in&ol&es tryin! to secure support for< or oppose< a chan!e in the la" or in the policy or decisions of central !o&ernment< local authorities or other public bodies< "hether in the Knited $in!dom or abroad< and "hich is referred to in the !uideline as <political activity<> 5>1-) The !uideline states that <campai nin < and <political activity< can be le!itimate and &aluable acti&ities for charities to underta:e> #o"e&er<
)( ))

)*

I1*)2J 1h 321 at 3+-> The 1harity 1ommission for 3n!land and Wales< CC * - Campai nin and Political %ctivities by Charities AMarch 2--)B< a&ailable at: http:CC""">charity-commission>!o&>u:C0ublicationsCcc*>asp; The 1harity 1ommission for 3n!land and Wales< CC * - Campai nin and Political %ctivities by Charities AMersion March 2--)B>

(+

the particular political campai!nin! or political acti&ity must be underta:en by a charity only in the conte4t of supportin the delivery of its charitable purposes> 3;amples of campai!nin! "hich are considered charitable acti&ities mi!ht include:
• •

a health charity promotin! the benefits of a balanced diet in reducin! heart problemsH a refu!ee charity< emphasisin! the positi&e contribution that refu!ees ha&e made to society and callin! for 7o&ernment to enforce e;istin! le!islation that supports the ri!hts of refu!eesH a children's charity< dra"in! attention to the dan!ers of domestic &iolence and child abuseH or a human ri!hts charity callin! on a !o&ernment to obser&e certain fundamental human ri!hts< and for the practice of torture to be abolished>

• •

5>1-* 2n acti&ity aimed at ensurin! that an e;istin! la" is obser&ed "ould fall under <campai nin << "hile an acti&ity to preser&e an e;istin! piece of le!islation< "here a charity opposes its bein! repealed or amended< "ould fall under <political activity<> The 1harity 1ommission's !uideline obser&es that there may be situations "here the carryin! out of a political acti&ity is the best "ay for charity trustees to support the charity's purposes< and a charity may choose to focus most or all of its resources on political acti&ity for a period> #o"e&er< the :ey issue for charity trustees is the need to ensure that this acti&ity is not< and does not become< the reason for the charity's e;istence>*5>114ot"ithstandin! this attempt by the 3n!lish 1harity 1ommission to clarify the distinction< it is clear that the line is &ery fine indeed bet"een acti&ities "hich are political< but "hich can be carried out nonetheless by a charity in the conte;t of supportin! the deli&ery of its charitable purposes< and those acti&ities "hich ha&e political ob6ects and cannot be carried out by a charity> The reality is that it "ill often be difficult to distin!uish bet"een the t"o :inds of acti&ities and "e accept that this is an area "hich may !i&e rise to uncertainty and ambi!uity> 5>111 2 recent landmar: appeal case in 2ustralia has sho"n that fundamentally different approaches can be ta:en on this issue in different common la" 6urisdictions> In the 2-1- case of %idJ,atch Incorporated v Commissioner of Ta4ation<*1 the #i!h 1ourt of 2ustralia Afollo"in! a series of

*-

*1

The 1harity 1ommission for 3n!land and Wales< CC * - Campai nin and Political %ctivities by Charities AMarch 2--)B< a&ailable at: http:CC""">charity-commission>!o&>u:C0ublicationsCcc*>asp; I2-1-J #12 +2>

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conflictin! lo"er le&el findin!s on the issue *2B held that it "as possible for an or!anisation to be re!arded as charitable e&en thou!h it had <political ob;ects<, as lon! as it "as re!arded as fulfillin! a purpose beneficial to the community "ithin the fourth head in the Pemsel case> 2idCWatch had the stated ob6ect of promotin! !reater efficiency and effecti&eness of forei!n aid> In the #i!h 1ourt 6ud!ment< the court found that the !eneration of public debate by la"ful means about the efficiency of forei!n aid "hich "as directed to the relief of po&erty "as itself a purpose beneficial to the community "ithin the fourth head in the Pemsel case. The court also decided that in 2ustralia< unli:e 3n!land< there "as no !eneral doctrine "hich e;cluded from charitable purposes <political ob;ects< Aas "as indicated in the 3n!lish decision in Ec+overn v %ttorney-+eneralB> Therefore< an or!anisation's purposes should not be dis@ualified from bein! charitable by the application of a broadly e;pressed <political ob;ects< doctrine> 5>112 The Sub-committee has no difficulty "ith the proposition that the ad&ancement of human ri!hts can "ell be charitable> We note< ho"e&er< the &ie" that there is a need to distin!uish charitable from political purposes and the difficulty of definin! the distinction> We in&ite comments specifically on "hether this particular cate!ory should be included in the statutory definition and ho" it should be defined> "The promotion of religiou or racial harmon!" 5>113 Section (A2BA:B of the Scottish 2--5 2ct includes <the advancement of reli ious or racial harmony< as one of the charitable purposes> 2s noted earlier< section 2A2BAhB of the 3n!lish 2--% 2ct includes this head "ithin the combined head of <the advancement of human ri hts, conflict resolution or reconciliation or the promotion of reli ious or racial harmony or e8uality and diversity<> 5>11+ Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose ob6ect is <the promotion of reli ious or racial harmony< are treated as charitable> We consider that the present practice should continue and recommend that this should be one of the heads of charitable purposes>

*2

From 1+ Duly 2---< 2idCWatch Incorporated "as endorsed as a <charitable institution< and thus an entity e;empt from income ta; liability under the Income Ta; 2ssessment 2ct 1**( A1thB> It "as also endorsed as a <charitable institution< for the purposes of the Frin!e Fenefits Ta; 2ssessment 2ct 1*)% A1thB and the 2 4e" Ta; System A7oods and Ser&ices Ta;B 2ct 1*** A1thB> These endorsements "ere re&o:ed by the the 1ommissioner of Ta;ation "ith effect from 2 ,ctober 2--%> 2idCWatch subse@uently lod!ed an ob6ection to the re&ocations< "hich "as disallo"ed by the 1ommissioner on % March 2--(> ,n 2) Duly 2--)< the 2dministrati&e 2ppeals Tribunal A/the 22T/B set aside the decision of the 1ommissioner and determined that 2idCWatch "as a <charitable institution< "ithin the meanin! of the rele&ant le!islation> Kpon appeal by the 1ommissioner< the Full 1ourt of the Federal 1ourt set aside the decision of the 22T and affirmed the ob6ection decision of the 1ommissioner> 2idCWatch then appealed to the #i!h 1ourt of 2ustralia< "here< in %idJ,atch Incorporated v Commissioner of Ta4ation I2-1-J #12 +2< the appeal "as allo"ed and the decision of the 22T "as restored>

(%

"The promotion of e4ualit! and diver it!" 5>115 2s "ith the pre&ious head< section (A2BAlB of the Scottish 2--5 2ct includes <the promotion of e8uality and diversity< as one of the charitable purposes< "hile this is included in section 2A2BAhB of the 3n!lish 2--% 2ct under the combined head of <the advancement of human ri hts, conflict resolution or reconciliation or the promotion of reli ious or racial harmony or e8uality and diversity<> 5>11% Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose ob6ect is <the promotion of e8uality and diversity< are treated as charitable> We consider that the present practice should continue and recommend that this should be one of the heads of charitable purposes> "The advancement of environmental protection or improvement" 5>11( Section (A2BAmB of the Scottish 2--5 2ct pro&ides that <the advancement of environmental protection or improvement< as one of the charitable purposes> 2n identical purpose is pro&ided under section 2A2BAiB of the 3n!lish 2--% 2ct> 5>11) Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose ob6ect is <the advancement of environmental protection or improvement< are treated as charitable> We consider that the present practice should continue and recommend that this should be one of the heads of charitable purposes> "The relief of tho e in need &! rea on of !outh1 age1 ill"health1 di a&ilit!1 financial hard hip or other di advantage" 5>11* This head of charitable purpose is set out in section (A2BAnB of the Scottish 2--5 2ct> Section (A3BAeB further e;plains that section (A2BAnB includes <relief iven by the provision of accommodation or care< > 2n identical head of charitable purpose is included in section 2A2BA6B of the 3n!lish 2--% 2ct "ith a similar elaboration in section 2A3BAeB of the 2ct> 5>12Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose ob6ect is <the relief of those in need by reason of youth, a e, ill-health, disability financial hardship or other disadvanta e< are treated as charitable> We consider that the present practice should continue and recommend that this should be one of the heads of charitable purposes> "The advancement of animal welfare" 5>121 The charitable purpose of <the advancement of animal welfare< is listed as one of the charitable purposes both in section (A2BAoB of the

((

Scottish 2--5 2ct and section 2A2BA:B of the 3n!lish 2--% 2ct> 2t common la"< the ad&ancement of animal "elfare is re!arded as fallin! "ithin the fourth charitable head of the Pemsel case> 2ccordin!ly< under the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose ob6ect is <the advancement of animal welfare< are charitable> 5>122 We are of the &ie" and recommend that this should remain as a charitable purpose under the ne" statutory definition> "3n! other purpo e that ma! rea ona&l! &e regarded a analogou to an! of the preceding purpo e " 5>123 Section 2A2BAmB of the 3n!lish 2--% 2ct includes as one of the heads of charitable purposes <any other purposes that are reco ni@ed as charitable<> Section 2A+BAaB of the 2ct pro&ides that <any other purposes< co&ers any purposes not "ithin the other charitable heads but "hich are reco!nised as charitable purposes under e;istin! charity la"> Section 2A+BAbB and AcB pro&ides that <any other purposes< are purposes that may reasonably be re!arded as analo!ous to< or "ithin the spirit of< any purposes fallin! "ithin the other defined heads Afor section 2A+BAbBB< or "hich ha&e been reco!nised under charity la" as fallin! "ithin para!raph AbB Afor section 2A+BAcBB> In other "ords9 under section 2A+BAaB of the 3n!lish 2--% 2ct 9 all the charitable purposes pre&iously accepted "ould still be considered as charitable after enactment of the 2ct in 2--%> 5>12+ Section 2A+BAaB of the 3n!lish 2--% 2ct refers to "hat are reco!nised as charitable purposes accordin! to both charity AcommonB la" and section 1 of the 9ecreational 1harities 2ct 1*5)< but not the charitable purposes listed in section 2A2BAaB to AlB> In contrast< section 2A+BAbB and AcB refers to "hat are re!arded as <analo ous to or within the spirit of< any purposes reco!nised as charitable purposes under the heads in section 2A2B AaB to AlB< charity AcommonB la" and the 9ecreational 1harities 2ct 1*5)> The scope of section 2A+B is therefore &ery "ide> 5>125 In Scotland< the &arious charitable purposes are set out at section (A2BAaB to ApB of the Scottish 2--5 2ct> 2 'catch all' pro&ision at section (A2BApB includes <any other purpose that may reasonably be re arded as analo ous to any of the precedin purposes< > It "ould appear that <any analo ous purpose< must be in relation to the heads already pro&ided in section (A2BAaB to AoB< as there is no reference in the le!islation to any other le!islation< or e;istin! charity la" under the common la"> AThe only refinement to this appears to be section (A3BAfB of the Scottish 2--5 2ct< "hich pro&ides that <for the purposes of para raph .p1, the advancement of any philosophical belief .whether or not involvin belief in a od1 is analo ous to the purpose set out in para raph .c1<, ie< <the advancement of reli ion< >B The scope of charitable purposes pro&ided under the Scottish 2ct "ould therefore appear to be much more restricti&e than the 3n!lish pro&ision> 5>12% In Ireland< the rele&ant le!islation in essence used the four cate!ories deri&ed from the Pemsel case> In section 3A1BAdB of the Irish

()

1harities 2ct 2--*< <any other purpose that is of benefit to the community< is one of the four charitable purposes> Section 3A11B offers some !uidance as to "hat amounts to a <purpose that is of benefit to the community< for the purposes of section 3A1BAdB< and considerably e;tends the scope of <charitable purpose< beyond the ad&ancement of education and reli!ion and the pre&ention or relief of po&erty or economic hardship set out in section 3A1B> 5>12( Knder the e;istin! practice adopted by the Inland 9e&enue .epartment in #on! $on!< bodies "hose purposes fall "ithin the fourth head of the Pemsel case Aie< purposes beneficial to the community not fallin! under the heads of relief of po&erty< ad&ancement of education or the ad&ancement of reli!ionB are charitable> 5>12) The Sub-committee discussed at len!th the contrastin! scope of this head under common la" principles and the K$ statutory models> We thin: it important to allo" sufficient fle;ibility to enable the scope of charitable purpose to ad6ust to meet social and economic chan!es< "hile at the same time pro&idin! sufficient clarity to a&oid ambi!uity and uncertainty> 2fter careful consideration< "e ha&e reached the &ie" that a proper balance is struc: by adoptin! the formula <any other purpose that is of benefit to the community<> 7i&en the proposal of a more elaborate list of heads of charitable purposes< "e belie&e that the ob6ect of ma:in! the la" more transparent and accessible is not ad&ersely affected by ha&in! a residual head> We therefore recommend that this should be included in the statutory list as a residual head of charitable purpose> Re $11e"%a#'$" 2 We re $11e"% #(a# #(e )#a#&#$r0 %ef'"'#'$" $f ,(a# $")#'#&#e) a (ar'#a:-e .&r.$)e #(a# ') e< -&)'+e-0 (ar'#a:-e )($&-% '" -&%e #(e f$--$,'"* (ea%)C G1H G2H G/H G3H G5H G6H G7H G8H G;H
*3 *+

T(e .re+e"#'$" $r re-'ef $f .$+er#0I*3 T(e a%+a" e1e"# $f e%& a#'$"I T(e a%+a" e1e"# $f re-'*'$"I *+ T(e a%+a" e1e"# $f (ea-#(I T(e )a+'"* $f -'+e)I T(e a%+a" e1e"# %e+e-$.1e"#I $f '#'Je")('. $r $11&"'#0

T(e a%+a" e1e"# $f ar#)9 ) 'e" eI

&-#&re9 (er'#a*e $r

T(e .r$1$#'$" $f re-'*'$&) $r ra 'a- (ar1$"0I T(e .r$1$#'$" $f e>&a-'#0 a"% %'+er)'#0I
Sub6ect to further refinements su!!ested in para!raph 5>%* abo&e> Sub6ect to further refinements su!!ested in para!raph 5>(% abo&e>

(*

G10H G11H

T(e a%+a" e1e"# $f e"+'r$"1e"#a- .r$#e #'$" $r '1.r$+e1e"#I T(e re-'ef $f #($)e '" "ee% :0 rea)$" $f 0$&#(9 a*e9 '---(ea-#(9 %')a:'-'#09 f'"a" 'a- (ar%)('. $r $#(er %')a%+a"#a*eI T(e a%+a" e1e"# $f a"'1a- ,e-fareI A"0 $#(er .&r.$)e #(a# ') $f :e"ef'# #$ #(e $11&"'#0!

G12H G1/H

We f&r#(er re $11e"% #(a#9 ,(' (e+er (ea% $f (ar'#a:-e .&r.$)e #(e .ar#' &-ar .&r.$)e fa--) &"%er9 '# 1&)# :e a-)$ f$r #(e .&:-' :e"ef'#!*5 I" re-a#'$" #$ "The advancement of human right 1 conflict re olution or reconciliation" 9 ,e ,e- $1e #(e .&:-' B) +'e,) a) #$ ,(e#(er #(e)e .&r.$)e) )($&-% :e '" -&%e% '" #(e -')# $f (ar'#a:-e .&r.$)e)!

*5

We note that this "ould ha&e the effect of remo&in! the present common la" presumption that purposes for the relief of po&erty< the ad&ancement of education and the ad&ancement of reli!ion are prima facie charitable and for the public benefit>

)-

C(a.#er 6 C$" -&)'$") a"% .r$.$)a-) $" #(e -e*a- )#r& #&re) $f (ar'#'e)
========================================

I"#r$%& #'$"
%>1 In this chapter< "e e;amine in more detail the current position re!ardin! the le!al structure of charities< both in #on! $on! and in o&erseas 6urisdictions< and consider possible options for reform>

C&rre"# )'#&a#'$" '" H$"* K$"*
T!pe of charita&le organi ation tructure %>2 2s discussed briefly in 1hapter 2< a charitable or!anisation in #on! $on! can ta:e one of a &ariety of le!al forms< includin!:     an unincorporated association "hich may or may not be re@uired to be re!istered under the Societies ,rdinance A1ap 151BH a trustH a company incorporated under the 1ompanies ,rdinance A1ap 32B< "hich may be a company limited by shares or by !uarantee< or a company incorporated o&erseasH or a statutory body incorporated under a specific ,rdinance>

%>3 2ccordin! to Inland 9e&enue .epartment statistics< in .ecember 2--(< the distribution of charities across these &arious le!al forms "as as follo"s: Form 1orporation Society Trust ,thers1 Total Societies
1

4o> of ,r!anisations 3<%)%2% +-% +11 5<123

2ccordin! to statistics of the Inland 9e&enue .epartment< the forms of charities classified as <:thers< comprise mostly incorporated mana!ement committees AIM1B established under the 3ducation ,rdinance A1ap 2(*B> The rest are statutory bodies< ad hoc special committees and o&erseas companies re!istered under 0art GI of the 1ompanies ,rdinance A1ap 32B>

)1

%>+ 2n unincorporated association is a &oluntary !roup of people AmembersB defined and bound to!ether by a set of rules Aoften referred to as a constitutionB and called by a distincti&e name> 2 3;amples of such associations are unincorporated members' clubs< unincorporated charitable institutions and &oluntary associations for the purpose of carryin! out functions of a social character> 2ssociations of this :ind ha&e no le!al entity and therefore cannot enter into contracts< sue or be sued< in the association's name or on its behalf Ae;cept "here such po"er has been e;pressly conferred by le!islationB> Where "or: has been done for< or !oods supplied to< such an association< the @uestion of liability is !o&erned by the rules "hich apply to contracts made throu!h an a!ent> The only persons "ho can be made liable are those "ho actually !a&e the order for the "or: or the !oods< or "ho either e;pressly or impliedly authorised the !i&in! of the order on their behalf< or "ho ratified the order after it had been !i&en>3 %>5 2n unincorporated association usually continues in e;istence independently of chan!es in the composition of its membership> + In order to @ualify as a charitable unincorporated association< as distinct from other :inds of unincorporated associations< the ob6ects of the association must be restricted to charitable purposes and its rules "ill contain a dissolution clause re@uirin! surplus property to be !i&en to other charitable purposes rather than be distributed amon! its members> The main ad&anta!es of an unincorporated association as a &ehicle to conduct a charity <are that it is fle4ible .in that its constitution can be tailored to fit the individual case1, ine4pensive to run, and free of statutory controls.< 5 In #on! $on!< ho"e&er< such an association may or may not be re!istered under the Societies ,rdinance A1ap 151B> %>% The Societies ,rdinance "as first introduced in 1*+* in order to !o&ern societies formed in #on! $on!> The ,rdinance pro&ided a notification system for the establishment of societies and prohibited the operation of certain societies> Section 5 of the ,rdinance re@uires a local society< "ithin one month of its establishment or deemed establishment< to apply in the specified form to the Societies ,fficer % of the #on! $on! 0olice Force for re!istration or e;emption from re!istration under the ,rdinance> 2 <local society< means any society or!anised and established in #on! $on! or ha&in! its head@uarters or chief place of business in #on! $on!< and includes any society deemed to be established in #on! $on!> ( T"o e;amples of charitable bodies re!istered as societies under the Societies ,rdinance are The Samaritans and the #on! $on! Flind Knion> %>( 2 society is deemed to be established in #on! $on! e&en "here it is or!anised and has its head@uarters or chief place of business outside
2 3 +

5 %

(

Re Eacaulay9s 5state I1*+3J 1h +35< at +3%> (alsbury9s Laws of (on $on! X Commentary A8e;is4e;is 2--*B< at para 115>1+3> 7 .al 0ont< Charity Law in %ustralia and Cew Dealand A,;ford Kni&ersity 0ress 2---B< at 3%5> 7 .al 0ont< abo&e< at 3%%> <Societies :fficer< means the Societies ,fficer and any 2ssistant Societies ,fficer appointed in accordance "ith the pro&isions of section 3 of the Societies ,rdinance A1ap 151B>
Section 2 of the Societies ,rdinance A1ap 151B>

)2

#on! $on!< if any of its office-bearers or members resides in #on! $on!< or if a person in #on! $on! mana!es or assists in the mana!ement of the society< or solicits or collects money or subscriptions in #on! $on! on its behalf> %>) The Societies ,fficer may e;empt a society or a branch of the society from re!istration if he is satisfied that the society or the branch is established solely for reli!ious< charitable< social or recreational purposes< or as a rural committee or a federation or other association of rural committees> The Societies ,fficer e;empts a society by issuin! a certificate of e;emption from re!istration in the specified form> %>* Knder section 52 of the Societies ,rdinance< the Societies ,fficer may< after consultation "ith the Secretary for Security< refuse to re!ister or to e;empt from re!istration a society or a branch of a society: AaB if he reasonably belie&es that the refusal is necessary in the interests of national security or public safety< public order or the protection of the ri!hts and freedoms of othersH or if the society or the branch is a political body that has a connection "ith a forei!n political or!anisation or a political or!anisation of Tai"an>

AbB

%>1Knder section 11 of the Societies ,rdinance< the Societies ,fficer :eeps a list of all societies and branches "hich ha&e been re!istered or e;empted from re!istration< settin! out the names of the societies and the branches< and the respecti&e addresses of the principal places of business of the societies and the branches and the places or premises o"ned or occupied by the societies> The list :ept by the Societies ,fficer is open to inspection by any person free of char!e durin! officer hours at the Societies ,ffice> %>11 Knder section 15 of the Societies ,rdinance< the Societies ,fficer may at any time re@uire the society to furnish him in "ritin! "ith such information as he may reasonably re@uire for the performance of his functions under the ,rdinance> The information re@uired may include the income< the source of the income and the e;penditure of the society or its branch> 2 society or its branch "hich has been re!istered or e;empted from re!istration is also re@uired under section 1- of the ,rdinance to inform the Societies ,fficer in "ritin! "ithin one month if it chan!es its name< ob6ects< officerbearers or principal place of business or closes a branch "hich is re!istered or e;empted from re!istration under the ,rdinance> % trust %>12 2 trust may be defined as <the relationship that arises wherever a person .called the trustee1 holds property for the benefit of some other persons .who are termed beneficiaries1 or for some ob;ects permitted by law, in such a way that the real benefit of the property accrues, not to the trustee,

)3

but to the beneficiaries or ob;ects of the trust.< ) 2 trustee o"es a fiduciary duty to act in the best interests of the beneficiaries of the trust and to ensure that its assets are protected> %>13 2 charitable trust is a trust formed for charitable purposes> It is usually set up by a !roup of persons "ho ma:e a declaration of trust outlinin! the purposes of the trust> It may also be created by a settlor or testator "ho transfers or be@ueaths funds or property to trustees upon trust for "holly and e;clusi&ely charitable purposes>* The !o&ernin! document of a charitable trust is the trust instrument "hich sets out the purposes of the trust and the po"ers of the trustees>1- In addition to the content of the trust deed< the le!al ri!hts< duties< obli!ations and discretionary po"ers of trustees< to!ether "ith limitations on their personal liabilities< may also be prescribed in common la" and le!islation>11 %>1+ To a lar!e e;tent< charitable trusts are !o&erned by the same principles and body of case la" as !eneral trusts> In order to @ualify as a &alid charitable trust< as distin!uished from a &alid non-charitable trust< the trust must be created in lan!ua!e sufficient to sho" the settlor's intention and the sub6ect matter of the !ift must be capable of bein! ascertained> There must also be certainty that all potential ob6ects are charitable> 12 %>15 The trust la" re!ime in #on! $on! is based on 3n!lish common la" and e@uity principles supplemented by &arious ,rdinances> 3ssentially< there are t"o cate!ories of trust la" pro&isions> The first cate!ory comprises <mandatory< rules< meanin! those statutory pro&isions "hich cannot be e;cluded by the terms of the trust instrument> 3;amples are the rules a!ainst perpetuities and e;cessi&e accumulations of income> 13 The second cate!ory is <non-mandatory< or <default< pro&isions "hich apply to the trust if there is no trust instrument or "here the trust instrument is silent on a particular issue>1+ %>1% The Trustee ,rdinance A1ap 2*B< "hich is modelled substantially on the Trustees 2ct 1*25 of the 3n!land and Wales< "as first enacted in 1*3+ to supplement and amend the common la" relatin! to trustees< includin! trustees' po"ers< the appointment and dischar!e of trustees and re!istration of trust companies>15 Most pro&isions in the Trustee ,rdinance belon! to the cate!ory of <non-mandatory< or <default< pro&isions> Trustees of charitable funds may be trust companies re!istered under the Trustee ,rdinance>
)

*

111 12

13

1+ 15

Financial Ser&ices and the Treasury Fureau< Review of the Trustee :rdinance and Related Eatters& Consultation Paper ADun 2--*B< at para 1>1> The Consultation Conclusions to the re&ie" "ere published in February 2-1-< a&ailable at: http:CC""">fstb>!o&>h:CfsbCtopicalCto=re&ie">htm The 8a" 9eform 1ommission of Ireland< Consultation Paper on Charitable Trust Law& +eneral Proposals A2--5< 891 10 3%B< at 1> The 8a" 9eform 1ommission of Ireland< same as abo&e> (alsbury9s Laws of (on -on A Commentary A8e;is4e;is 2--*B< at para 335>+-*> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 13+< 13( and 1+1> See related le!islati&e pro&isions in the 0erpetuities and 2ccumulations ,rdinance A1ap 25(B>
Financial Ser&ices and the Treasury Fureau< abo&e< at para 1>3>

The Trustee ,rdinance A1ap 2*B< "hich has not been substantially amended since its enactment< is currently under re&ie": see Financial Ser&ices and the Treasury Fureau< abo&e>

)+

%>1( 2nother ,rdinance in this area is the 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B> The purpose of this ,rdinance is to <facilitate the incorporation of trustees appointed by certain bodies, associations and communities of persons, and of trustees of charities and to ma6e provision for purposes connected therewith.< 1% %>1) Knder section 3 of the ,rdinance< the duly appointed trustees of any body of persons or charity may apply to the 9e!istrar of 1ompanies for a certificate of incorporation> This certificate< "hich is !ranted by the 1hief 3;ecuti&e< may contain any conditions or directions and may be cancelled or amended by the 1hief 3;ecuti&e at any time> Knder section +A2B of the ,rdinance< the trustees and their successors in office "ill be a body corporate by the name specified in the certificate and it may sue and be sued< and "ill ha&e and use a common seal> The 9e!istrar of 1ompanies maintains a re!ister of all such re!istered trustee corporations "hich is open to public inspection> %>1* 4ot all re!istered trustee corporations are charitable bodies> Knder section 2 of the ,rdinance< <charity< means any trust or or!anisation established by deed or other"ise for a charitable purpose> 1( Section 2 also pro&ides that under the ,rdinance< <body of persons< means AaB any community of persons bound to!ether by custom< reli!ion< :inship< nationality or re!ional or local interests< or AbB any body or association of persons established for any charitable purpose> 1) 2n e;ample of a charitable body incorporated under the 9e!istered Trustees Incorporation ,rdinance is The Society for the 2id and 9ehabilitation of .ru! 2busers> %>2It should be noted that the act of incorporation does not ne!ate the potential liability of incorporated re!istered trustees for breaches of trust> Knder section 11 of the ,rdinance< all trustees constitutin! the re!istered corporation are char!eable for the trust property comin! into their hands< and are ans"erable and accountable for their o"n acts< receipts< act of ne!lect< and default< and for the due administration of the trusts and trust property in the same manner and to the same e;tent as if the incorporation had not been effected> % company incorporated under the Companies :rdinance .Cap )#1 %>21 The fundamental difference bet"een a corporation and other business entities is that a corporation is treated in la" as a le!al person Ait is
1% 1(

1)

See 8on! Title< 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B> <Charitable purpose< is defined under section 2 of the 9e!istered Trustees Incorporation ,rdinance A1ap 3-%B to include X AaB the relief of po&ertyH AbB the ad&ancement of art< education< learnin!< literature< science or researchH AcB the ma:in! of pro&ision for X AiB the cure< alle&iation or pre&ention ofH or AiiB the care of persons sufferin! from or sub6ected to< any disease< infirmity or disability affectin! human bein!s Aincludin! the care of "omen before< durin! and after child birthBH AdB the ad&ancement of reli!ionH AeB any ecclesiastical purposeH AfB the promotion of the moral< social and physical "ell-bein! of the communityH and A!B any other purpose beneficial to the community not specified in para!raphs AaB to AfB> (alsbury9s Laws of (on -on A Commentary A8e;is4e;is 2--*B< at para 335>+-*>

)5

often described as <an artificial person< or <a body corporate<B> The fact of incorporation confers le!al personality and a corporation is usually referred to as ha&in! a separate le!al personality> 1* 2ccordin!ly< the la" "ill treat a corporation as independent from the persons "ho ma:e up the company> 2%>22 Section 21A1B of the 1ompanies ,rdinance A1ap 32B states that "here it is pro&ed to the satisfaction of the 9e!istrar of 1ompanies that an association about to be formed as a limited company is to be formed for promotin! commerce< art< science< reli!ion< charity< or any other useful ob6ect< and intends to apply any of its profits or other income in promotin! its ob6ects< as "ell as to prohibit the payment of any di&idend to its members< the 9e!istrar may by licence direct that the association be re!istered as a company "ith limited liability< "ithout the addition of <Limited< to its name in 3n!lish andCor 1hinese> %>23 Many charitable entities re!ister as a company <limited by uarantee<< if there is no capital in&ol&ed< or <limited by shares<> Similar to the structure of a pri&ate limited company< such an or!anisation "ill ha&e a Foard of .irectors< members and a local secretary> The members can either be indi&iduals or corporations>21 If a charity is also a limited liability company< it "ill be re@uired as a matter of course to comply "ith all the statutory disclosure re@uirements of the 1ompanies ,rdinance A1ap 32B> 3;amples of charitable bodies incorporated under the 1ompanies ,rdinance A1ap 32B are the #on! $on! 1ommittee for K4I13F and the Society for the 0re&ention of 1ruelty to 2nimals A#on! $on!B Trustees Incorporated> % body corporate incorporated by statute %>2+ There are a number of charitable bodies corporate in #on! $on! "hich ha&e been established by le!islation> The rele&ant statutes pro&ide for &arious matters relatin! to the body corporate< includin! the ob6ects and po"ers of the corporation< the membership of the corporation< the composition of the board< the ad&isory board< meetin!s and procedure> 3;amples of these bodies corporate are 1aritas X #on! $on! "hich is incorporated under the 1aritas X #on! $on! Incorporation ,rdinance A1ap 1-*2B< the 0o 8eun! $u: "hich is incorporated under the 0o 8eun! $u: ,rdinance A1ap 1-+-B and the Tun! Wah 7roup of #ospitals "hich is incorporated under the Tun! Wah 7roups of #ospitals ,rdinance A1ap 1-51B> % body corporate incorporated overseas %>25 There are a number of charitable bodies corporate "hich are incorporated o&erseas and "hich carry out charitable "or: substantially o&erseas> Fein! o&erseas companies incorporated outside #on! $on! and
1*

221

This le!al proposition is not set out in the 1ompanies ,rdinance A1ap 32B but is deri&ed from 3n!lish common la" cases: see +ood Profit =evelopment Ltd v Leun (oi I1**3J 2 #$89 1(%< I1**2J 2 #$1 53*H Salomon v Salomon L Co Ltd I1)*(J 21 22< #8H Eacaura v Corthern %ssurance Co Ltd and others I1*25J 21 %1*< #8H Lee v Lee9s %ir 'armin Ltd I1*%1J 21 12< I1*%-J 3 2ll 39 +2-< 01H Eultinational +as and Petrochemical Co v Eultinational +as and Petrochemical Services Ltd I1*)3J 1h 25)< I1*)3J 2 2ll 39 5%3< 12 A3n!B> #alsbury's 8a"s of #on! $on! X Commentary A8e;is4e;is 2--*B< at para *5>---(> In&est #$< Settin up a Con-profitJCharitable :r anisation in (on -on AMar 2-1-B>

)%

ha&in! an established place of business in #on! $on!< they are re@uired to re!ister under 0art GI of the 1ompanies ,rdinance A1ap 32B> Knder section 333 of the 1ompanies ,rdinance< a non-#on! $on! company that establishes a place of business in #on! $on! is re@uired "ithin one month of the establishment to apply to the 9e!istrar of 1ompanies in a specified form and to pro&ide documents< such as a certified copy of the charter< statutes or memorandum Aincludin! articles< if anyB of the company and a certified copy of the company's certificate of incorporation> The 9e!istrar of 1ompanies maintains a re!ister of non-#on! $on! companies that ha&e complied "ith section 333> 2n e;ample of a charitable body incorporated o&erseas is 0ro6ect ,rbis International< Inc> )overning in trument %>2% It is essential that a charity be established by a "ritten !o&ernin! instrument> 2s "e ha&e noted from the discussion of the &arious charity structures abo&e< the type of instrument adopted "ould depend on the particular circumstances of the proposed charity and the preferences of the promoters or founders of the or!anisation>

Le*a- )#r& #&re) $f (ar'#'e) '" $#(er 4&r')%' #'$")
%>2( Similar to the situation in #on! $on!< charitable or!anisations in other 6urisdictions e;ist in a &ariety of le!al forms> Some of these are hi!hli!hted belo"> A2 more detailed study of le!al structures of charities e;istin! in o&erseas 6urisdictions is at 2nne; 2 of this paperB> %>2) In 3n!land and Wales< a lar!e proportion of charities is established in the form of companies limited by !uarantee> ,ther charities e;ist in the form of a limited liability structure or as unincorporated associations> 2 ne" concept of the charitable incorporated or!anisation "as created in 3n!land under section %*2 of the 1harities 2ct 1**3 Aas inserted by section 3+ of the 1harities 2ct 2--%B> This ne" le!al form< the pro&isions of "hich are yet to be implemented< is intended to combine the ad&anta!es of a corporate structure "ith the burden of re!isterin! "ith both the 3n!lish 1harity 1ommission and the 9e!istrar of 1ompanies> The 1harity 1ommission is also established under the 2ct> 2 re!ister of charities< :ept by the 1harity 1ommission< contains the names of e&ery charity re!istered and other particulars and information relatin! to such charity> The 2ct pro&ides a frame"or: for reportin! and accountin! by charities> %>2* In Ireland< charities e;ist in the form of a body corporate or unincorporated body of persons or charitable trust> The 1harities 9e!ulatory 2uthority "as established under section 13 of the Irish 1harities 2ct 2--*> ,ne of the ma6or functions of the 1harities 9e!ulatory 2uthority is to establish and maintain a re!ister of charitable or!anisations and to monitor and ensure compliance of charitable or!anisations "ith the 2ct>

)(

%>3In Scotland< charities can be constituted in a &ariety of le!al forms< but most are constituted either as trusts< unincorporated associations or companies limited by !uarantee> 1haritable companies are sub6ect to dual re!ulation and ha&e to report to both the 9e!istrar of 1ompanies and the ,ffice of the Scottish 1harity 9e!ulator A,S19B> The Scottish le!islation< li:e the 1harities 2ct 2--% in 3n!land< has introduced a ne" le!al form that charities may "ish to adopt> Section +* of the 1harities and Trustee In&estment AScotlandB 2ct 2--5 pro&ides that a charity may be constituted as a <Scottish charitable incorporated or anisation< AS1I,B< "hich is a body corporate ha&in! a constitution< a principal office in Scotland< and "ith t"o or more members< but "ithout ha&in! to become a company or industrial and pro&ident society> S1I,s are to be re!ulated by the ,S19> Knli:e a company limited by !uarantee< the members of a S1I, "ill ha&e no liability to contribute to the assets if the body is "ound up> 2 public re!ister of charities is :ept by the ,S19 and it has the role of monitorin! re!istered charities for their compliance "ith charity le!islation>

O&r .r$.$)a%>31 2s "e ha&e seen< the common la" does not impose any particular restrictions on the structure that a charity may ta:e< and charities in #on! $on! ha&e been established in a &ariety of le!al forms> These include: unincorporated associations "hich may or may not be re@uired to be re!istered under the Societies ,rdinance A1ap 151BH trustsH companies incorporated under the 1ompanies ,rdinance A1ap 32B "hich are limited by shares or !uarantee< or companies in some cases incorporated o&erseasH or statutory bodies incorporated under specific ,rdinances> In the course of our re&ie"< "e ha&e considered certain options re!ardin! the le!al form that charitable or!anisations should adopt> Option 9 : a unitar! model for charitie %>32 ,ne option for reform "ould be to restrict charitable or!anisations to one type of entity< such as to companies limited by !uarantee or companies limited by shares> 2d&anta!es of this option are that there "ould be !reater clarity and certainty< both "ithin the charity sector and in the community< about the form and nature of charitable or!anisations< and it "ould also facilitate uniformity in monitorin! and re!ulatin! these entities> %>33 ,ne "ay that this reform could be effected "ould be to introduce a statutory re@uirement that all ne" applicants to become charitable or!anisations "ould need to adopt one type of entity< "hile e;istin! charitable or!anisations "ould be allo"ed to retain their ori!inal le!al form> 2lternati&ely< the reform could re@uire all e;istin! charitable or!anisations to be con&erted to the specified sin!le type of entity as "ell>

))

%>3+ The disad&anta!e of adoptin! this sin!le-entity corporate option< ho"e&er< is that it may be difficult to determine "hich le!al form should be adopted> We note that there ha&e been ar!uments in 2ustralia that all charities should be re@uired to be incorporated as companies limited by !uarantee as a "ay of ensurin! that the assets of a charity are used for the intended purposes> It "as su!!ested that: <F%Gll charities FshouldG be incorporated as companies limited by uarantee in order to provide hi h standards of accountability, ownership and purpose as well as transparency in their use of funds and distribution of assets N FandG uniform laws should be adopted in order to preserve the inte rity of charities.< ## %>35 The counter-ar!ument< ho"e&er< "as that it "as not practical to do so< as there "ould be !reat difficulty in re@uirin! charities< especially those established as trusts< to assume a ne" le!al !uise> In some cases< it mi!ht pro&e impossible> %>3% We note that at present in #on! $on!< for !ood ris: mana!ement reasons< social enterprises related to non-!o&ernmental or!anisations A47,sB are usually incorporated as companies limited by shares> %>3( We ha&e also considered the possibility of creatin! a ne" le!al form of charitable or!anisation alon! the lines of the charitable incorporated or!anisation A1I,B introduced in 3n!land and Wales> While "e note the &arious ad&anta!es of this ne" model "hich are anticipated by the 3n!lish 1harities 1ommission< "e also note that many of the re!ulatory re@uirements for companies e;istin! in 3n!land and Wales do not apply to companies in #on! $on!>23 Option ; " maintaining a variet! of legal form for charitie %>3) 2s "ell as the unitary model approach< "e ha&e also considered the option of maintainin! the status @uo of allo"in! different le!al forms of charitable or!anisation to co-e;ist> The ad&anta!es of this approach are< first< that charities are free to choose the le!al form best suited to their needs and secondly< e;istin! or!anisations "ill not ha&e to spend the time< effort and e;pense in con&ertin! from their e;istin! le!al form to another le!al form<
22

23

Report of the in8uiry into the definition of charities and related or anisations < 2ustralia< Dune 2--1< 1hapter 11> The companies le!islation in #on! $on! is based lar!ely on the K$ 1ompanies 2ct 1*+) and some subse@uent reforms< such as those contained in the K$ 1ompanies 2ct 1*(%> Since that time< ho"e&er< the companies le!islation in the K$ has under!one substantial reform and is no" comprised in the 1ompanies 2ct 2--%> 3;amples of the re!ulatory differences bet"een #on! $on! companies le!islation and that in the K$ are : AiB the e;istence of a company names ad6udication system under the K$ 1ompanies 2ct 2--%< "hich is not reflected in the 1ompanies ,rdinance A1ap 32B in #on! $on!H and AiiB the codification in the 1ompanies 2ct 2--% of some of the directors' fiduciary duties and duties of care and s:ill "hile the !eneral duties of directors in #on! $on! remain !o&erned by common la"> See Financial Ser&ices and the Treasury Fureau< Consultation Paper on =raft Companies Bill, 'irst Phase Consultation A.ecember 2--*B< at 1hapters 2 and 3>

)*

"hich may be particularly burdensome for small charities>

C$" -&)'$")
%>3* We note that at present< there is no ob&ious problem in #on! $on! "ith respect to the le!al forms that charitable or!anisations may ta:e> We note also that imposin! strin!ent re@uirements on the types of le!al forms that may operate here may cause considerable hardship to charitable bodies< especially small ones> %>+If a unitary approach "ere to be adopted< particularly for the purposes of re!istration of charities< "e consider that a company limited by !uarantee "ould be the preferred le!al form> %>+1 ,n balance< our preliminary &ie" is that there is no compellin! reason to re@uire charitable or!anisations to e;ist in only one le!al form rather than a &ariety of le!al forms> #o"e&er< "e remain open to consider other &ie"s on this> ,ur ma6or concern is that in "hate&er approach is adopted< charitable or!anisations should be "ell !o&erned and should be as transparent as possible in their operations> We therefore in&ite &ie"s from the public on "hat le!al form or forms charitable or!anisations should ta:e< includin! "hether different alternati&e le!al forms should co-e;ist< or a sin!le le!al form should be used>

Re $11e"%a#'$" / We '"+'#e +'e,) fr$1 #(e .&:-' $" ,(e#(er9 a"% #$ ,(a# e<#e"#9 #(e +ar'$&) e<')#'"* -e*a- f$r1) f$r (ar'#'e) )($&-% :e ref$r1e%! I" .ar#' &-ar9 ,e '"+'#e $11e"#) $"C G1H ,(e#(er #(e &rre"# )0)#e1 $f a--$,'"* a +ar'e#0 $f -e*a- f$r1) $f (ar'#a:-e $r*a"')a#'$") #$ e<')# )($&-% $"#'"&e9 a"% 'f )$9 ,(a# 1$%'f' a#'$")9 'f a"09 )($&-% :e 1a%e #$ '#I a"% ,(e#(er9 '" #(e a-#er"a#'+e9 a &"'#ar0 a..r$a ( $f '1.$)'"* $"e &"'f$r1 1$%e- $f (ar'#a:-e $r*a"')a#'$" )#r& #&re )($&-% :e a%$.#e%9 a"% 'f )$9 ,(a# f$r1 #(a# 1$%e- )($&-% #a2e!

G2H

*-

C(a.#er 7 C$" -&)'$") a"% .r$.$)a-) $" re*')#ra#'$" $f (ar'#'e)
=============================================

I"#r$%& #'$"
(>1 In this chapter< "e e;amine in more detail the current position re!ardin! re!istration of charities in #on! $on!> We loo: at the different approaches adopted in o&erseas 6urisdictions and consider the introduction of a re!istration system for charities in #on! $on!>

C&rre"# )'#&a#'$" '" H$"* K$"*
2ack of a formal regi ter of charitie (>2 2s discussed briefly in 1hapter 2< currently there is no formal< established re!istration system for charitable or!anisations in #on! $on! and no !o&ernment authority "ith o&erall responsibility in this area> Separate lists e;ist for different purposes but these are not formal lists of all charitable or!anisations> Some charitable or!anisations may not appear in any of these lists> This means that in some cases< members of the public may not be able to ascertain "hether an or!anisation in #on! $on! representin! itself as a charity is in fact a charity> The list of ta4- e4empt charities maintained by the Inland Revenue =epartment (>3 The Inland 9e&enue .epartment maintains the lar!est a&ailable list of charities in #on! $on!< but it only includes those or!anisations "hich ha&e successfully been reco!nised as charitable institutions or trusts of a public character for the purpose of section )) of the Inland 9e&enue ,rdinance A1ap 112B>1 This list is a&ailable online at the Inland 9e&enue .epartment homepa!e2 and runs at present to o&er )-- 2+ pa!es> The information on the list includes Ain alphabetical orderB: the name in 3n!lish andCor 1hinese of each ta;-e;empt charitable or!anisationH the date from "hich its ta; e;emption status "as reco!nisedH and the names of any of the or!anisation's branches>

1

2

2n or!anisation may be !ranted ta; e;emption in #on! $on! if it is reco!nised by the Inland 9e&enue .epartment as bein! a <charitable institution or trust of a public character< for the purpose of section )) of the Inland 9e&enue ,rdinance A1ap 112B> http:CC""">ird>!o&>h:Cen!Cta;Cach=inde;>htm>

*1

(>+ 2ccordin! to the Inland 9e&enue .epartment's statistics< the number of charities that "ere !ranted "ith ta; e;emption in recent years "as as follo"s: .Charities +ranted Ta4 54emption1 %s at year endin 31>3>2--5 31>3>2--% 31>3>2--( 31>3>2--) 31>3>2--* 31>3>2-1Cumber +<1%2 +<+35 +<)32 5<311 5<)*) %<3)-

(>5 It is e&ident from this that o&er the past si; years< the number of charities has been steadily increasin!> It should be emphasised< ho"e&er< that althou!h the Inland 9e&enue .epartment maintains its e;tensi&e list of ta; e;empt charities< it is neither responsible for the re!istration of charities nor for the monitorin! of their operations> Lists of charities maintained under other :rdinances (>% 2s "e sa" from the statistics on forms of charities set out in 1hapter %< the ma6ority of ta;-e;empt charities in #on! $on! "hich are reco!nised by the Inland 9e&enue .epartment are established as companies limited by !uarantee>3 2s such< they are re@uired to be re!istered under the 1ompanies ,rdinance A1ap 32B and to comply "ith the statutory disclosure re@uirements of that ,rdinance> 2part from this< ho"e&er< the 1ompanies 9e!istry< li:e the Inland 9e&enue .epartment< does not ha&e a role in monitorin! charities as such> The 1ompanies 9e!istry maintains lists of companies re!istered "ith it< includin! locally and o&erseas incorporated companies> Information< such as the date of a company's incorporation< re!istration< dissolution< company name history< company status< "indin!-up mode< char!es and place of incorporation Aof non-#on! $on! companiesB< are accessible to the public online &ia the electronic search ser&ices> + (>( The Social Welfare .epartment maintains a list of non!o&ernment or!anisations A47,sB recei&in! sub&ention allocation from the 7o&ernment> It contains a list of names in 3n!lish and 1hinese of the or!anisations recei&in! sub&ention and the respecti&e sub&ention amount> This list is accessible to the public &ia the internet and is re!ularly updated> (>) The Societies ,rdinance A1ap 151B pro&ides a notification system for the establishment of societies in #on! $on! and prohibits the

3

See the table sho"in! the different forms of charities in #on! $on! at para %>3< abo&e> http:CC""">icris>cr>!o&>h:CcsciC

+

*2

operation of certain societies> Section 5 of the ,rdinance re@uires a local society< "ithin one month of its establishment or deemed establishment< to apply in the specified form to the Societies ,fficer of the #on! $on! 0olice Force for re!istration or e;emption from re!istration under the ,rdinance> 1haritable or!anisations "hich are societies may see: e;emption by establishin! to the satisfaction of the Societies ,fficer that they are established solely for reli!ious or charitable purposes> 4ot all charitable societies see: e;emption< so some remain re!istered under the ,rdinance Afor e;ample< the Samaritans and the #on! $on! Flind KnionB< ho"e&er the number of re!istered societies is small "hen compared to the total number of ta;-e;empt charities in #on! $on!>5 (>* AiB The #ome 2ffairs Fureau maintains the follo"in! lists relatin! to: Trust funds This list contains the names of the trust funds and their annual statements of accounts relatin! to the funds> This information is a&ailable to the public for inspection on re@uest> % AiiB 1hinese temples There are se&eral lists maintained by the #ome 2ffairs Fureau re!ardin! 1hinese temples> The first is a list of 1hinese temples directly administered by the 1hinese Temples 1ommittee constituted under the 1hinese Temples ,rdinance A1ap 153B> This contains the names of the 1hinese Temples and their particulars< such as their bac:!round and address> 2 second list includes dele!ated temples "here mana!ement is dele!ated to other or!anisations> This contains the names of the 1hinese temples< their address and the dele!ated mana!ement or!anisations> 2 third list contains particulars of temples re!istered under the 1hinese Temples ,rdinance A1ap 153B< ho"e&er< a minority of 1hinese temples "hich ha&e not disclosed their particulars are not included in the list> These lists are a&ailable for public inspection at the reception counter of the #ome 2ffairs Fureau or on the internet> ( AiiiB 1hinese permanent cemeteries X There is a list of 1hinese 0ermanent 1emeteries "hich contains the names of these cemeteries and their statements of accounts> This information is a&ailable for public inspection at
5

See the table sho"in! the different forms of ta;-e;empt charities in #on! $on! at para %>3< abo&e> http:CC""">hab>!o&>h:Cen!Caccess=to=informaionClist=of=a&ailable=informationClistpub>htm> http:CC""">ctc>or!>h:>

%

(

*3

the reception counter of the #ome 2ffairs Fureau> (>1The 3ducation Fureau maintains a list of schools re!istered under the 3ducation ,rdinance A1ap 2(*B> This list contains in respect of each school the re!istration status Apro&isionally re!istered or re!isteredB< school re!istration number< date of pro&isional re!istration or re!istration< re!istered premises< permitted accommodation of classrooms and boardin! rooms< and the appro&ed courses and school fees> ) This list is accessible to the public on the 3ducation Fureau homepa!e> * 2lso< the Kni&ersity 7rants 1ommittee has uploaded on its homepa!e a current list of the appro&ed !rants for Kni&ersity 7rants 1ommittee-funded institutions> 1(>11 The #ospital 2uthority maintains a list of hospitals and clinics operated by the #ospital 2uthority> This list contains the names of the hospitals and clinics< addresses< scope of ser&ices< &isitin! hours and other !eneral information> This list is accessible to the public on the #ospital 2uthority homepa!e>11 (>12 2s "e ha&e seen in earlier chapters< there are also a number of charitable bodies in #on! $on! "hich ha&e been established by le!islation and so their names appear in the list of #on! $on! ,rdinances> 12 These or!anisations are monitored only "ithin the terms of their indi&idual statutory re!imes< ho"e&er< and represent a tiny minority of the total number of charitable or!anisations in #on! $on!> 9Re istration9 re8uirements for individual charity activities (>13 1haritable or!anisations ha&e to see: permission from the Social Welfare .epartment for indi&idual fundraisin! acti&ities in public places> The Social Welfare .epartment !rants public subscription permits for collections of charitable donations in public places in response to applications made to it under section +A1(BAiB of the Summary ,ffences ,rdinance A1ap 22)B> The .epartment maintains a list of subscription permits for charitable fundraisin! acti&ities in public places "hich are currently in effect> This list contains information about the dates and &enue of the appro&ed fundraisin! acti&ities< the name of the or!anisations and the respecti&e public subscription permit number> The Social Welfare .epartment also maintains a list of fla! day or!anisers for the current fla! sellin! year> This list contains information about the date and re!ion in "hich fla! sellin! "ill ta:e place and the respecti&e or!anisations issued "ith the public subscription permit> 13 Foth lists maintained by the Social Welfare .epartment are a&ailable on the internet< but there is a limit on the len!th of time that this information is maintained on the lists> It should be noted that< sa&e as to this limited role in relation to fundraisin! acti&ities< the Social Welfare .epartment is not
)

* 111 12

13

3;cludin! schools e;empted under the 3ducation A3;emptionB A0ri&ate Schools ,fferin! 4on-formal 1urriculumB ,rderB A1ap 2(*FB> http:CC""">edb>!o&>h:> http:CC""">u!c>edu>h:> http:CC""">ha>or!>h:> For the online 8a"s of #on! $on! database< see the .epartment of Dustice's Filin!ual 8a"s Information System AF8ISB at: http:CC""">le!islation>!o&>h:C http:CC""">s"d>!o&>h:CenCinde;Csite=pubs&cCpa!e=controlofcCsub=recentlyapC>

*+

responsible for the re!istration of charities or monitorin! of their operations> (>1+ Throu!h the procedure for !rantin! lottery licences< 1+ the Tele&ision and 3ntertainment 8icensin! 2uthority AT382B also plays a limited role in super&isin! charitable fundraisin! acti&ities> T382 maintains a list of or!anisations !ranted "ith lottery licences for a specified lottery period> The list contains the name and licence number of the rele&ant or!anisationAsB and the period in "hich the lottery is to ta:e place> 2 separate list is :ept by T382 in respect of the income and e;penditure statements of lottery e&ents "hich are a&ailable for public inspection> This list contains information about the name of the or!anisations< the respecti&e period of tic:et sales< the respecti&e licence number< the date of licence issued and the date of the income and e;penditure statements recei&ed> These lists are a&ailable on the internet and the information contained in the lists is time limited> 2!ain< T382 does not ha&e any responsibility in relation to the re!istration of charities or in other"ise monitorin! them> (>15 Foth charitable and non-charitable or!anisations are re@uired to apply for temporary ha":er licences from the Food and 3n&ironmental #y!iene .epartment AF3#.B in connection "ith on-street sellin! acti&ities> The temporary ha":er licence !ranted by the .irector of F3#. permits the licensee to ha": for a period not e;ceedin! one month for the purpose specified in the licence< and sub6ect to any conditions specified in the licence> In processin! these applications< the F3#. "ill consult rele&ant departments includin! the 0olice< 8ands .epartment< #ome 2ffairs .epartment or Social Welfare .epartment> The F3#. maintains a list of the or!anisation issued "ith temporary ha":er licences for fundraisin! purposes> It specifies the district of such fundraisin! acti&ities< the appro&ed period of acti&ity< the appro&ed time of acti&ity< the name of the or!anisations< the appro&ed location of the acti&ities and the main commodities for sale> 15

Re*')#ra#'$" )0)#e1) f$r (ar'#'e) '" $#(er 4&r')%' #'$")
(>1% 2 number of 6urisdictions that "e ha&e e;amined ha&e re!istration systems for charities> .etails of these re!istration systems in other 6urisdictions are at 2nne; 3 of this paper> (>1( We ha&e obser&ed that !enerally "ithin these systems< the re!ister of charities is maintained by the charity re!ulatory body of that
1+

15

2s discussed earlier in relation to fundraisin! acti&ities carried out throu!h a lottery< a licence is re@uired from the 1ommissioner for Tele&ision and 3ntertainment 8icensin! AT382B under section 22A1BAaBAiB of the 7amblin! ,rdinance A1ap 1+)B> Section 22A3B of the 7amblin! ,rdinance A1ap 1+)B pro&ides that the licence !ranted under section 22A1BAaBAiB shall be sub6ect to prescribed conditions and to any other conditions that the 1ommissioner for Tele&ision and 3ntertainment 8icensin! may impose> T382's Reference +uide on the :r anisation of Lottery %ctivities Asee: http:CC""">tela>!o&>h:CdocumentCen!CformClicensin!ClotteryC-1Clottery=e>pdfB sets out the prescribed conditions for the !rant of a lottery licence> These are lar!ely similar to the conditions imposed on the !rant of public subscription permits by the Social Welfare .epartment discussed abo&e> T382 also ma:es a&ailable for public inspection copies of auditors' reports and income and e;penditure statements for moneys raised by the sale of lottery tic:ets> http:CC""">fehd>!o&>h:Cen!lishCpleasant=en&ironmentCha":erCfundrasin!>html>

*5

6urisdiction> For e;ample< in 3n!land and Wales< a re!ister of charities is :ept by the 3n!lish 1harity 1ommission and the re!ister contains the name of e&ery charity re!istered and other particulars and information relatin! to each such charity> The 3n!lish 1harity 1ommission is empo"ered to remo&e from the re!ister any institution "hich is no lon!er considered as a charity< and any charity "hich has ceased to e;ist or does not operate> The re!ister Aincludin! the entries cancelled "hen institutions are remo&ed from the re!isterB is open to public inspection at all reasonable times> Knder section 32 of the 3n!lish 1harities 2ct 1**3< e&ery charity must be re!istered in the re!ister of charities unless they are <e4empted charities<< <e4cepted charities< or small charities>1% (>1) Similar to 3n!land and Wales< a 1harities 9e!ulatory 2uthority is to be set up by the Irish 1harities 2ct 2--*> The 2uthority "ill establish and maintain a re!ister of charitable or!anisations and "ill monitor and ensure the compliance of charitable or!anisations "ith the 2ct> The 1harities 9e!ulatory 2uthority is also empo"ered to remo&e a charitable or!anisation from the re!ister for other reasons< such as "here the name of the charitable or!anisation has been chan!ed< the charitable or!anisation "hich is a body corporate has con&icted an offence on indictment< or the 1harities 9e!ulatory 2uthority is of the opinion that the re!istered body is not a charitable or!anisation> (>1* The 4e" 5ealand 1harities 1ommission "as established under section ) of the 4e" 5ealand 1harities 2ct 2--5> Knder section 21 of the 2ct< a re!ister called <the re ister of charitable entities< has been established> 9e!istration by charitable or!anisations is &oluntary< but only charities re!istered "ith the 1harities 1ommission are eli!ible for ta; e;emption status> Knder section 22 of the 2ct< the purposes of the re!ister are to enable members of the public to determine "hether an entity is re!istered as a charitable entity under the 2ct< obtain information concernin! the nature< acti&ities< and purposes of charitable entities< and information as to ho" to contact a charitable entity> The 1ommission is empo"ered to remo&e an entity from the re!ister under certain circumstances specified in the 2ct> (>2The 1harities and Trustee In&estment AScotlandB 2ct 2--5 established the ,ffice of the Scottish 1harity 9e!ulator A,S19B> Knder section 3 of the 2ct< the ,S19 must :eep a re!ister of charities< to be :no"n as the <Scottish Charity Re ister<> The Scottish 1harity 9e!ister is a&ailable for public inspection at all reasonable times at its principal office< or at such other places as the ,S19 thin:s fit> Knder section 3- of the Scottish 2ct< the ,S19 is obli!ed to remo&e a charity from the Scottish 1harity 9e!ister if< as a result of in@uiries made about the charity< it is found that the charity no lon!er meets the charity test>1(

1% 1(

Further information on these types of charities can be found in 2nne; 3 of this paper> Knder section 5 of the 1harities and Trustee In&estment AScotlandB 2ct< the ,S19 may enter an applicant in the Scottish 1harity 9e!ister only if it considers that the applicant meets the charity test of the 2ct> 2 body meets the charity test if X AaB its purposes consist of one or more of the charitable purposes< and AbB it pro&ides Aor< in the case of an applicant< pro&ides or intends to pro&ideB public benefit in Scotland or else"here>

*%

S($&-% #(ere :e a re*')#er $f (ar'#'e) '" H$"* K$"*A
(>21 2s "e sa" earlier in this chapter< o&er the last si; years< the number of charities reco!nised for ta; e;emption purposes in #on! $on! has been steadily increasin!> We also sa" that there is no comprehensi&e system for re!istration of charitable or!anisations here and no !o&ernment authority "ith o&erall responsibility to maintain such a re!ister> Such lists of charities as do e;ist are piecemeal in their co&era!e and so do not enable members of the public to ascertain the charitable status of an or!anisation in all cases> This situation !i&es rise to !ro"in! concern< !i&en both the numbers of or!anisations and the enormous amounts of money in&ol&ed> (>22 We ha&e seen in this chapter that a number of 6urisdictions< such as 3n!land and Wales< Ireland< Scotland and 4e" 5ealand< ha&e systems of re!istration for charitable or!anisations> We consider that there is a need for a re!istration system in #on! $on!< particularly to co&er charitable or!anisations "hich ma:e charitable appeals to the public and those allo"ed to claim ta; e;emption> The effect of regi tration and non"regi tration compared (>23 We ha&e considered the &arious ad&anta!es and disad&anta!es of ha&in! a re!ister of charities in #on! $on!> We consider that the ad&anta!es are: AaB the charitable status of or!anisations "ill be determined based on a set of clear and transparent criteria adopted for the purpose of re!istrationH the list of charitable or!anisations "ill be contained in a re!ister "hich can be inspected by the publicH the charitable status of re!istered charitable or!anisations can be re&ie"ed re!ularly to ensure that they maintain their charitable statusH charitable or!anisations "ill be better monitored and administered< and "ill ha&e the benefit of the promotion of !ood !o&ernance and the enhancin! of transparency and accountability "ith respect to their charitable acti&ities and accountsH members of the public "ill ha&e easy access to up-to-date information about charitable or!anisations< thus the "or: carried out by these charitable or!anisations can be easily promoted to the publicH the public "ill be better protected from fraudulent and deceitful acts by or!anisations falsely claimin! to be charitiesH and

AbB AcB

AdB

AeB

AfB

*(

A!B

the re!ister of charitable or!anisations "ill ser&e as conclusi&e proof of an or!anisation's charitable status for the purposes of ta; e;emption< other pri&ile!es and administration>

(>2+ We note that the disad&anta!es of ha&in! a re!istration system in #on! $on! may include : AaB that e;tra administrati&e e;penses and "or: "ill be incurred and re@uired by e;istin! charitable or!anisations in order to become re!istered and maintain re!istration< and such e;penses and "or: "ill be especially burdensome for small charitiesH and the resources implications and the administrati&e and 6urisdictional issues that may arise in ha&in! a re!istration system>

AbB

(>25 2fter carefully considerin! the ad&anta!es and disad&anta!es set out abo&e< "e consider that it is ob&iously in the public interest that a re!istration system should be put in place> In principle< "e consider that an or!anisation can only en6oy ta; e;emption and ma:e public charitable appeals if it is a re!istered charitable or!anisation> 2 re!istration system "ill enhance accountability and transparency throu!h the disclosure of information and accounts by charitable or!anisations> Compul or! or voluntar! ! tem (>2% We ha&e considered a number of o&erseas 6urisdictions "ith re!istration systems for charitable or!anisations> 4early all of these re@uire compulsory re!istration> South 2frica is one of the fe" 6urisdictions "hich does not re@uire compulsory re!istration> #o"e&er< it is pro&ided in their la" that only re!istered non-profit or!anisations "hich @ualify as appro&ed public benefit or!anisations "ill be eli!ible for ta; e;emption> The re!istration of charitable or!anisations in 4e" 5ealand is also &oluntary> In line "ith South 2frica< ho"e&er< only re istered charitable or!anisation can en6oy ta; e;emptions> (>2( Ta:in! into account the o&erseas e;perience< "e consider that to better protect the public< re!istration should be compulsory for all charitable or!anisations "hich ma:e charitable appeals to the !eneral public and see: to en6oy ta; e;emption> (>2) We note that there are certain charities AfoundationsB in #on! $on! "hich do not ma:e appeals to the !eneral public for donations> If they "ere nonetheless to see: ta; e;emption< they should also be sub6ect to the proposed re!istration system> ,nly charitable or!anisations "hich do not claim ta; e;emption and do not ma:e any public charitable appeals "ould not be re@uired to re!ister as charities under the ne" system>

*)

,eci ion on charita&le tatu (>2* In 1hapter 12 of this paper< "e recommend the establishment of a charity commission for #on! $on!> We propose that it "ill be the role of this ne" body to establish and maintain a re!ister of charitable or!anisations> It "ill be the duty of the future charity commission to ensure that a charitable or!anisation satisfies the definition of charity Aie< that it has been established for e;clusi&ely charitable purposesB prior to its re!istration> The discussion of the definition of charity has already been dealt "ith in 1hapter 5> We consider also that the charitable status of an or!anisation should be determined by the future charity commission> O&'ection &! third partie to regi tration (>3We consider that an application for re!istration as a charitable or!anisation is a pri&ate application "hich should not be sub6ect to public notification> Therefore< "e do not thin: that there should be an ob6ection procedure established to allo" third parties to ob6ect to the re!istration of a particular body as a charity> 2ny or!anisation "hich considers that its name has been passed-off by another body may resort to ci&il proceedin!s a!ainst the particular body alle!ed to be in breach> We consider that the matter relatin! to allo"in! or disallo"in! the use of particular names of charitable bodies should be left to the future charity commission to determine on a case by case basis> E(emption from regulation and the regulation of pecific charitie (>31 2s discussed abo&e< "e consider that or!anisations "hich carry out fundraisin! acti&ities and see: to ha&e ta; e;emption should be sub6ect to re!istration> We ha&e considered the possibility of allo"in! some or!anisations to be e;empted from re!istration> For e;ample< should small churches be e;empted from re!istration< as the process of re!istration may !enerate additional administrati&e "or: and e;pense It is also noted from the table belo" that (2+ charitable or!anisations ha&e an annual income of or belo" ?5-<--->1) Therefore< the administrati&e costs in&ol&ed in re!istration may be out of proportion to the annual income of these small charitable or!anisations> .%ppro4imate income ran e of charities1 %nnual Income .(-H1 U 2--<--15-<--1 to 2--<--1)

Co. of Cases 2<-() 12+

These annual income fi!ures are based on the annual financial statements submitted by charities to the Inland 9e&enue .epartment AI9.B as at .ecember 2--(> Since the I9. conducts periodic re&ie"s on charities at different inter&als< the latest year in "hich the financial statements "ere a&ailable for each case differs> 2lso< some charities ha&e no financial statements a&ailable because they ha&e not yet been sub6ect to the I9.'s periodic re&ie" or their financial statements "ere still pendin! at that time>

**

%nnual Income .(-H1 1--<--1 to 15-<--5-<--1 to 1--<--- T 5-<--Total

Co. of Cases 12) 1(5 (2+ 3<22*

(>32 Further< some or!anisations< such as schools< uni&ersities< churches or statutorily incorporated bodies are already !o&erned by e;istin! ,rdinances> We note that in some 6urisdictions< such as 3n!land and Wales and Sin!apore< certain institutions are considered e;empt or e;cepted charities "hich do not re@uire re!istration as they are already re!ulated by other re!ulatory bodies> (>33 We ha&e considered in depth the issue of "hether e;emption from re!istration should be !ranted for some charitable institutions< especially small charities> #o"e&er< "e ha&e a concern that allo"in! small charitable or!anisations "hich ha&e an annual income belo" a stipulated threshold to be e;empt from re!istration may lead to abuses due to a lac: of monitorin!> In order to a&oid confusion to the public about the le!itimate charitable status of these small charities< and to a&oid possible abuses< "e consider that no e;emption from re!istration should be !ranted to any type of charitable institutions< e;cept those "hich do not claim ta; e;emption and do not ma:e any public charitable appeals> This "ill ensure that almost all charitable or!anisations "ill be sub6ect to the same re!ulatory and monitorin! system and accountability re@uirements> They "ill also en6oy the same ta; benefits and public reco!nition of their charitable status> Charitie with an over ea element (>3+ In respect of the future charity commission's po"ers in maintainin! and administerin! the re!ister of charities< "e note that some charities may ha&e an o&erseas element> These charities are bodies corporate "hich are incorporated o&erseas and "hich carry out charitable "or: substantially o&erseas> If these bodies corporate ha&e a place of business in #on! $on!< they are re@uired to re!ister under 0art GI of the 1ompanies ,rdinance A1ap 32B and comply "ith the statutory disclosure re@uirements of that ,rdinance> 2t present< such charities may also see: ta; e;emption from the Inland 9e&enue .epartment> We consider that these charities "ith an o&erseas element should be re@uired to re!ister "ith the future charity commission in the same "ay as <local< charities> (>35 In respect of the re!ulation of indi&idual fundraisin! acti&ities by charities "here the monies donated are to be spent outside #on! $on!< the Social Welfare .epartment has monitorin! measures "hich are set out in the

1--

permit conditions for conductin! !eneral charitable fundraisin! acti&ities> 1* These conditions apply "hether the charitable bodies are local charities or corporates "ith an o&erseas element> (>3% 2s mentioned earlier in this chapter< "e recommend the establishment of a charity commission for #on! $on!> We consider that there should not be any difference in the re!istration procedure bet"een charities "ith <an overseas element< and local charities> In relation to authorisin! charity fundraisin! acti&ities in public places and those in&ol&in! lotteries< includin! fundraisin! acti&ities by charities "ith an o&erseas element< "e propose in 1hapter * that the future charity commission should be &ested "ith the po"ers and duties currently e;ercised by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority> 2s for indi&idual fundraisin! acti&ities in&ol&in! monies donated to be spent outside #on! $on!< "e consider that it should be the role of this ne" body to determine the detailed re@uirements for these acti&ities>

O&r .r$.$)a(>3( There is at present no sin!le piece of le!islation !o&ernin! charitable or!anisations in #on! $on!> We consider that a charity commission should be established to monitor charitable or!anisations and "e "ill discuss this proposal in !reater detail in 1hapter 12> We are also of the &ie" that all charitable or!anisations "hich are !ranted ta; e;emption status and carry on fundraisin! acti&ities should be re!istered "ith the future charity commission> 2 list of the re!istered charitable or!anisations should be a&ailable for public inspection>

1*

1ondition A)B of the permit conditions re@uires that "here the monies donated are to be spent outside #on! $on!< the audited accounts to!ether "ith auditor's opinion should be published in at least one local 1hinese lan!ua!e ne"spaper and one local 3n!lish lan!ua!e ne"spaper "ithin *- days of the last day specified in the permit> 1opies of the ne"spaper cuttin!s should be for"arded to the .irector of Social Welfare at the same time> For fundraisin! e&ents "ith a !ross income not e;ceedin! #$?5-<---< permit holders may choose to either publish in local ne"spapers the audited accounts in 3n!lish and 1hinese "ithin *days of the last day of the appro&ed fundraisin! acti&ities specified in the permit< or publish the audited accounts by placin! them on the or!anisation's o"n "ebsite or in the or!anisation's annual report< its ne"sletter or a special circular to its members> 0ermit holders should also notify the .irector of Social Welfare of such publication> The abo&e permit condition can also be accessed &ia the follo"in! lin:: http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC0S0L2-conditionsL2-2--(12-3e>pdf>

1-1

Re $11e"%a#'$" 3 We re $11e"% #(a# a-- (ar'#a:-e $r*a"')a#'$") ,(' (C G1H G2H 1a2e a"0 (ar'#a:-e a..ea- #$ #(e .&:-' I a"%K$r )ee2 #a< e<e1.#'$"

)($&-% :e )&:4e # #$ #(e re>&'re1e"# $f re*')#ra#'$"! We re $11e"% #(a# #(e -')# $f re*')#ere% (ar'#a:-e $r*a"')a#'$") )($&-% :e e)#a:-')(e% a"% 1a'"#a'"e% :0 #(e f&#&re (ar'#0 $11'))'$" a"% #(a# #(') -')# )($&-% :e a+a'-a:-e f$r .&:-' '").e #'$"! We re $11e"% #(a# #(e a..-' a#'$" .r$ e)) f$r re*')#ra#'$" )($&-% "$# :e )&:4e # #$ .&:-' "$#'f' a#'$"! We re $11e"% #(a# #(e 1a##er re-a#'"* #$ a--$,'"* $r %')a--$,'"* #(e &)e $f .ar#' &-ar "a1e) $f (ar'#a:-e :$%'e) )($&-% :e -ef# #$ #(e f&#&re (ar'#0 $11'))'$" #$ %e#er1'"e9 $" a a)e :0 a)e :a)')!

1-2

C(a.#er 8 Pr$.$)e% fra1e,$r2 f$r *$+er"a" e9 a $&"#'"* a"% re.$r#'"* :0 (ar'#'e)
================================================

)>1 In this chapter< "e e;amine in detail the mana!ement and !o&ernance of charities as "ell as accountin! and reportin! by charities> We consider the re@uirements of charities to comply "ith the duty of public disclosure and declarations of conflicts of interest> We also consider the po"ers of the future charity commission to in&esti!ate reports of breaches of trust and maladministration by charities and their officers< as "ell as enforcement po"ers and remedies>

C&rre"# )'#&a#'$" '" H$"* K$"*
)>2 2s discussed in pre&ious chapters< in #on! $on! there is no sin!le piece of le!islation !o&ernin! charitable or!anisations> 3;istin! !o&ernment monitorin! of charities is fra!mented and is mainly confined to charitable fundraisin! acti&ities< such as the controls e;ercised by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority> We ha&e set out these re@uirements belo"< to!ether "ith those monitorin! and ser&ice standards re@uirements applyin! to non-!o&ernment or!anisations A47,sB "hich recei&e !o&ernment sub&ention> *nland +evenue ,epartment re4uirement )>3 2t present< ta;-e;empt charitable or!anisations reco!nised by the Inland 9e&enue .epartment are sub6ect to periodic re&ie"> Wuestionnaires are sent to these or!anisations for completion and return "ithin one month> They are also re@uired to file their financial statements and reports on acti&ities they ha&e conducted> The Inland 9e&enue .epartment e;amines their replies to the @uestionnaires and their financial statements to ensure that the ob6ects of these charitable or!anisations are still charitable and their acti&ities are compatible "ith their ob6ects< before they may continue to be !ranted ta; e;empt status> Failure to furnish information re@uired by the @uestionnaire may lead to the "ithdra"al of the ta; e;emption status>

1-3

Companie Ordinance .Cap <;/ and Societie re4uirement

Ordinance .Cap 9=9/

)>+ 2s most of the charitable or!anisations in #on! $on! are limited companies< they are re@uired also to prepare audited accounts in order to fulfil the re@uirement under the 1ompanies ,rdinance A1ap 32B> For charitable or!anisations "hich e;ist as unincorporated or!anisations< such as societies re!istered under the Societies ,rdinance A1ap 151B< there are no le!islati&e re@uirements for filin! audited accounts> Social 0elfare ,epartment re4uirement )>5 The Social Welfare .epartment pro&ides a one-stop ser&ice to!ether "ith ad&ice< !uidance and support to 47,s on issues relatin! to performance monitorin! and sub&entions matters> 1 The Ser&ice 0erformance Monitorin! System AS0MSB operated by the .epartment has the purpose of enablin! the Social Welfare .epartment and 47,s operatin! sub&ented ser&ices to pro&ide more efficient< customer-focused< accountable and outputdri&en "elfare ser&ices>2 Knder S0MS< ser&ice performance is to be assessed on the basis of Fundin! and Ser&ice 2!reements and a !eneric set of Ser&ice Wuality Standards dra"n up bet"een the Social Welfare .epartment and 47,s operatin! sub&ented ser&ices> These documents define the obli!ations of the Social Welfare .epartment to ser&ice operators< the role of the department in o&erseein! the performance of the ser&ice operators< the :ind of ser&ices to be pro&ided< the performance standards and the basis of sub&ention> 3 $ome 3ffair >ureau re4uirement )>% The #ome 2ffairs Fureau formulates and co-ordinates policy and le!islation for de&elopin! recreation and sport in #on! $on! and coordinates the strate!ic plannin! of recreational and sports facilities> Some of its principal ob6ecti&es include co-ordinatin! the pro&ision of @uality recreational and sports facilities< encoura!in! collaboration amon! different sectors of the community in fosterin! a stron! sportin! culture in the community< and supportin! and facilitatin! the implementation of initiati&es "hich help ma:e #on! $on! a ma6or location for international sportin! e&ents>+ The Fureau also has o&erall responsibility for o&erseein! the mana!ement of 1hinese temples and 1hinese permanent cemeteries< administration of trust funds for "hich the trustee is The Secretary for #ome

1

2 3 +

See Social Welfare .epartment "ebsite< at: http:CC""">s"d>!o&>h:CdocCannreport-5-(CenC1+=other>html> http:CC""">s"d>!o&>h:>CenCinde;Csite=n!oCpa!e=ser&iceperCsub=ob6ecti&esC> http:CC""">s"d>!o&>h:>CenCinde;Csite=n!oCpa!e=ser&iceperCsub=fundin!andC> See #ome 2ffairs Fureau "ebsite< at: http:CC""">hab>!o&>h:CenCpolicy=responsibilitiesC9ecreation=Sport=and=3ntertainment= 8icensin!Csport>htm>

1-+

2ffairs Incorporated5 and mana!ement of the properties of The Secretary for #ome 2ffairs Incorporated> The Trust Funds and Temples Doint Secretariat pro&ides administrati&e support for the 1hinese Temples 1ommittee and a number of trust funds> % In addition< the #ome 2ffairs Fureau pro&ides administrati&e support for the #on! $on! Doc:ey 1lub Music and .ance Fund and The 8ord Wilson #erita!e Trust> Education >ureau re4uirement )>( The 3ducation Fureau monitors the ser&ices pro&ided by the Kni&ersity 7rants 1ommittee< the Student Financial 2ssistance 2!ency< the #on! $on! 3;aminations and 2ssessment 2uthority< the #on! $on! 1ouncil for 2ccreditation of 2cademic and Mocational Wualifications and the Mocational Trainin! 1ouncil> It also o&ersees the effecti&e implementation of education pro!rammes>( )>) The mana!ement committee of a school is re@uired to si!n a Ser&ice 2!reement "ith the 7o&ernment under certain situations> ) The schools concerned are re@uired to submit a School .e&elopment 0lan * to the Fureau "hich "ill be used as a yardstic: to assess the performance of the
5

%

( )

*

The Secretary for #ome 2ffairs Incorporated is established as a corporation sole under the Secretary for #ome 2ffairs Incorporation ,rdinance A1ap 1-++B for the time bein! performin! the duties of the office of Secretary for #ome 2ffairs> 2 number of trust funds "ith education or other specific purposes are operated under the ,rdinance> http:CC""">hab>!o&>h:CenCpolicy=responsibilitiesC.istrict=1ommunity=and=0ublic= 9elationsCtrustfnd>htm> Trust funds administered by the #ome 2ffairs Fureau include Fre"in Trust Fund A1ap 1-((B< 1hinese Temples Fund A1ap 1532B< 7eneral 1hinese 1harities Fund A1ap 153FB< 7rantham Scholarships Fund A1ap 1-(%B< 8i 0o 1hun 1haritable Trust Fund A1ap>111-B< The 8ord Wilson Knited World 1olle!es Scholarship Fund< Sir 3d"ard Ooude Memorial Fund A1ap 11+-B< Sir 9obert Flac: Trust Fund A1ap 11-1B and Sir Murray Mac8ehose Trust Fund A1ap 111)B> http:CC"""Cedb>!o&>h:Cinde;>asp; nodeI.S12)Elan!noS1 These situations include: AaB The school sponsorin! body ASSFB has recei&ed substanti&e infrastructural support from the 7o&ernment for operatin! a ne" aidedC direct subsidy scheme A.SSB schoolH or "hole-day con&ersion of a primary schoolH or repro&isionin!C in-situ rede&elopmentC ne" e;tension of e;istin! school premises> AbB The school is admitted to the .SS> AcB T"o or more schools mer!e into one school e;cept under the follo"in! situations: The mer!ed school comprises school under the same SSFH or The mer!ed school< thou!h comprises schools under different SSFs< operates on the premises of its school sponsorin! body> To enter into the Ser&ice 2!reement< schools concerned ha&e to fulfil the follo"in! three conditions: AaB The mana!ement committee is an incorporated body> It can be incorporated under the 3ducation ,rdinance A1ap 2(*B as an Incorporated Mana!ement 1ommitteeH or the 1ompanies ,rdinance A1ap 32B as a School Mana!ement 1ommittee company> AbB The mana!ement committee as an incorporation has ac@uired a ta; e;emption status under section )) of the Inland 9e&enue ,rdinance A1ap 112B> AcB The proposed School .e&elopment 0lan has been endorsed by the rele&ant .istrict School .e&elopment Section of the Fureau> 2&ailable at http:CC""">edb>!o&>h:Cinde;>asp; nodeI.S(%(2Elon!noS1 The School .e&elopment 0lan should set out clearly the tas:s or measures to achie&e the tar!ets of the ma6or ob6ecti&es< the success criteria for assessin! the achie&ement< and the priorities of school de&elopment>

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school durin! the term of the first School Mana!ement 1ommittee Ser&ice 2!reement or Incorporated Mana!ement 1ommittee Ser&ice 2!reement> 1,epartment of $ealth re4uirement )>* The ,ffice for 9e!istration of #ealthcare Institutions< "hich "as formally set up in 2--5 under the .epartment of #ealth< is primarily responsible for ensurin! that healthcare institutions are fit for the ser&ices they are to pro&ide> In carryin! out these functions< the .irector of #ealth enforces rele&ant pro&isions of the #ospitals< 4ursin! #omes and Maternity #omes 9e!istration ,rdinance A1ap 1%5B< the Medical 1linics ,rdinance A1ap 3+3B and Ain relation to school health care facilitiesB the 3ducation ,rdinance A1ap 2(*B>11 The compliance of indi&idual institutions "ith these statutory re@uirements is monitored throu!h field inspections< scrutiny of the institution's acti&ities and complaint statistics< issuin! ad&ice and "arnin!s< and by direct handlin! of complaints lod!ed by the public a!ainst the institutions> )>10ri&ate hospitals are re@uired to be re!istered "ith the .irector of #ealth under the #ospitals< 4ursin! #omes and Maternity #omes 9e!istration ,rdinance A1ap 1%5B and this re!istration may be sub6ect to conditions relatin! to accommodation< staffin! or e@uipment> The .irector is also empo"ered to inspect any hospital premises and records "hich are re@uired to be :ept under the ,rdinance> For the purpose of applyin! for rere!istration< pri&ate hospitals are re@uired to submit annual reports on their or!anisational structure< staffin!< facilities< e@uipment and ser&ices< staff de&elopment< education and trainin!< and their future ser&ice and de&elopment plans> )>11 2 /Code of Practice for Private (ospitals, Cursin (omes and Eaternity (omes/ "as promul!ated in 2--3< and has been implemented since 2--+> This 1ode of 0ractice sets out the standards of !ood practice for health care institutions to adopt in order to pro&ide @uality care to patients> The 1ode states re@uirements relatin! to the mana!ement of staff< mana!ement of the premises and ser&ices< policies and procedures and the system to deal "ith complaints> The 1ode also includes re@uirements on specific types of clinical and support ser&ices> 0rofessional standards and re!ulatory standards are applicable to all pri&ate hospitals< nursin! homes and maternity homes> In assessin! the suitability for re!istration and re-re!istration of healthcare institutions under the ,rdinance< the .irector of #ealth "ill ta:e into account their compliance "ith the re@uirements of the 1ode> 12

M$"'#$r'"* )0)#e1) $f (ar'#'e) '" $#(er 4&r')%' #'$")

111

12

http:CC""">edb>!o&>h:Cinde;>asp; nodeI.S(%(2Elan!noS1 See .epartment of #ealth "ebsite< at: http:CC""">dh>!o&>h:Cen!lishCmainCmain=orhiCmain=orhi>html> .epartment of #ealth< =epartment of (ealth %nnual Report #$$"J#$$3 at 52< 53H .epartment of #ealth< /8e!islati&e 1ouncil 0anel on #ealth Ser&ices 1ode of 0ractice for 0ri&ate #ospitals/ ADan 2--+B>

1-%

)>12 In the course of our deliberations< "e ha&e e;amined the systems for re!ulatin! and monitorin! charities in a number of 6urisdictions> These are set out in detail in 2nne; + of this paper> Froadly spea:in!< the approach is for charities monitorin! authorities to set up a suitable frame"or: for reportin! and accountin! by charities> The authorities are empo"ered to conduct in@uiries of problematic charities and to act for their protection> England and 0ale )>13 In 3n!land and Wales< the 1harities 2ct 1**3 pro&ides a frame"or: for reportin! and accountin! by charities> 13 The 1harity 1ommission may re@uire re!istered charities shortly after the end of their financial year to complete< dependin! on their income< either an annual update form or an annual return> 1harities "ith a total income e;ceedin! £25<--- are re@uired to complete and submit their annual reports to the 1ommission under section +5 of the 1harities 2ct 1**3> The annual return contains basic financial details< and details of the charity's contacts< trustees< acti&ities and its classification> Knder section +1 of the 2ct< the trustees of a charity "hich is not a company must :eep accountin! records "hich are sufficient to sho" and e;plain all the charity's transactions> Knder section +2 of the 2ct< the charity trustees are re@uired to prepare a statement of accounts in respect of each financial year> #o"e&er< they may elect to prepare a receipts and payments account and statement of assets and liabilities instead of a statement of accounts if the charity's !ross income in any financial year does not e;ceed £25-<---> The 1harity 1ommission has a po"er to institute in@uiries "ith re!ard to charities either !enerally or for particular purposes under section ) of the 2ct> Knder section 1) of the 2ct< the 1ommission is empo"ered to act for the protection of charities in &arious "ays< such as to suspend any charity trustee< to appoint additional charity trustees necessary for the proper administration of the charity and to &est any property held by or in trust for the charity in the official custodian> *reland )>1+ In Ireland< the charity trustees of a charitable or!anisation are re@uired under section +( of the Irish 1harities 2ct 2--* to :eep proper boo:s of account> They are also re@uired under section +) in respect of each financial year to prepare a statement of accounts in a prescribed form containin! prescribed information> Where the !ross income or e;penditure of a charitable or!anisation in a financial year does not e;ceed €1--<---< the charity trustees may< instead of preparin! an annual statement of accounts in respect of that year< prepare an income and e;penditure account and a statement of the assets and liabilities of the charitable or!anisation> 2 charitable or!anisation is also re@uired under section 5- of the 2ct to file an
13

It should be noted that a ne" 1harities Fill "as put before the K$ 0arliament in March 2-11 "ith the ob6ect of consolidatin! the 1harities 2ct 1**3 and other enactments relatin! to charities> 2s part of this consolidation< the Fill has included pro&isions from the 9ecreational 1harities 2ct 1*5)< the 1harities 2ct 1**3 and the 1harities 2ct 2--%< leadin! to the repeal of the former t"o 2cts and some sections Asections 1 to * and 11 to ++B and some Schedules of the 1harities 2ct 2--%>

1-(

annual audited account if its !ross income or total e;penditure e;ceeds a prescribed amount not !reater than €5--<---> Knder section 52 of the 2ct< the charity trustees of a charitable or!anisation are re@uired to prepare and submit to the 2uthority a report in respect of its acti&ities in that financial year not later than ten months after the end of each financial year> The 1harities 9e!ulatory 2uthority "ill ma:e a&ailable for inspection by members of the public all annual reports and documents :ept by the 1harities 9e!ulatory 2uthority at all reasonable times and at such place or places as it determines> It is also empo"ered under the 2ct to protect any charitable or!anisations by appointin! an inspector to in&esti!ate the affairs of a charitable or!anisation> New ?ealand )>15 In 4e" 5ealand< e&ery charitable entity is re@uired under section +1 of the 4e" 5ealand 1harities 2ct 2--5 to ensure that "ithin si; months after each balance date of the entity< an annual return is submitted to the 4e" 5ealand 1harities 1ommission> The form of the return and particulars contained in the returns and directions to be complied "ith are prescribed by the Minister> Knder section 5- of the 2ct< the 1ommission is empo"ered to in@uire into any charitable entity and any person "ho "as en!a!ed in conduct that is in breach of the 2ct< or serious "ron!doin! in connection "ith a charitable entity> The 1ommission may !i&e a "arnin! notice to a charitable entity or a person in connection "ith a charitable entity that has en!a!ed in a breach of the 2ct< includin! a breach of section 3( 1+ Apassin! itself off as a re!istered charitable entityB or serious "ron!doin!< or "here a charitable entity is no lon!er @ualified to be re!istered as a charitable entity> The 1ommission may de-re!ister a re!istered charitable entity under section 31 of the 2ct upon satisfaction of certain !rounds specified in the 2ct>

O&r .r$.$)e% fra1e,$r2 f$r re.$r#'"* a"% a (ar'#'e) '" H$"* K$"*

$&"#'"* :0

)>1% Fased on our study on reportin! and monitorin! mechanisms in o&erseas 6urisdictions< "e consider that it is important that a monitorin! mechanism should be in place in order to ser&e the ma6or ob6ecti&es of transparency< openness and accountability to the donors and beneficiaries of charities and to the !eneral public> 2 monitorin! mechanism "hich aims to achie&e these ma6or ob6ecti&es "ould help to promote trust and confidence on the part of the public "hile meetin! their philanthropic needs>
1+

<.!1

.#1 .)1

Section 3( of the 4e" 5ealand 1harities 2ct reads X % person must not A .a1 use a style or title includin the words 9re istered charitable entity9P or .b1 state or imply, or permit a statement or implication, that A .i1 the person is re istered as a charitable entity under this %ctP or .ii1 an entity that the person acts on behalf of is re istered as a charitable entity under this %ct. Subsection .!1 does not apply to A .a1 a charitable entityP or .b1 a person who acts on behalf of a charitable entity. % person must not state or imply, or permit a statement or implication, that the person acts on behalf of a charitable entity if the person does not act on behalf of that charitable entity.<

1-)

)>1( To achie&e these ob6ecti&es< "e consider that the monitorin! of charities should be based on the follo"in! principles> .9/ Compliance with charita&le o&'ect

)>1) We consider that the future charity commission should be under a duty to ensure that a re!istered charitable or!anisation "ill comply "ith its charitable ob6ects in order to maintain its re!istration> 2 re!istered charitable or!anisation should be re@uired to file annually an acti&ity report statin! any chan!e of charitable ob6ects and the main acti&ities carried out to fulfil the charitable ob6ects> With due consideration to the burden that may be imposed on small charities< such a report should be pro&ided in a standard form specified by the future charity commission> .;/ Notification of change of particular

)>1* We consider that a re!istered charitable or!anisation should be re@uired to notify the future charity commission of any chan!e of directors and re!istered office address in its annual acti&ity report> )>2The future charity commission should be empo"ered to ta:e appropriate and proportionate measures to in&esti!ate and enforce compliance "ith these re@uirements> AWe "ill discuss these po"ers in !reater detail in 1hapter 12 of this paper>B

Re $11e"%a#'$" 5 We re $11e"% #(a# re*')#ere% (ar'#a:-e $r*a"')a#'$") )($&-% :e re>&'re% #$ f'-e a" a""&a- a #'+'#0 re.$r# #$ #(e f&#&re (ar'#0 $11'))'$"! S& ( a re.$r# )($&-% :e .r$+'%e% '" a )#a"%ar% f$r1 a"% 1a##er) $+ere% )($&-% '" -&%e L G1H G2H G/H G3H (a"*e $f (ar'#a:-e $:4e #)I 1a'" a #'+'#'e) $:4e #)I arr'e% $&# #$ f&-f'- #(e (ar'#a:-e

(a"*e $f %'re #$r)I (a"*e $f re*')#ere% $ff' e a%%re))!

1-*

.</

,i clo ure of intere t and matter relating to governance

)>21 We consider that the future charity commission should be responsible for the mana!ement and !o&ernance of charities by promotin! the !reater compliance "ith the le!al obli!ations of charity trustees or directors "hen mana!in! their charitable or!anisations> 1ompliance on the part of the charity trustees or directors "ith their le!al obli!ations is necessary to ensure that charities are accountable to donors< beneficiaries and the !eneral public> This could be done by re@uirin! charity trustees or directors of a re!istered charitable or!anisation to :eep and produce accounts< to pro&ide an annual report and an annual return to the future charity commission> Such documents may be accessible to the public to ensure that the charity trustees or directors are under a duty of public disclosure> )>22 Furthermore< charity trustees or directors are under a fiduciary duty to e;ercise their po"ers for the purposes for "hich they "ere conferred< and bona fide for the benefit of the charity and not to put themsel&es in a position in "hich their duties to the charity and their personal interests conflict>15 1haritable trustees or directors should be sub6ect to a duty to declare any conflicts of interest> )>23 We propose that the future charity commission should be empo"ered to conduct in&esti!ations of problematic charities> If misconduct or mismana!ement is found in the administration of the charity< the future charity commission should be empo"ered to suspend or remo&e the rele&ant persons from mana!in! the charity< or order any property held by the charity to be &ested instead in an official custodian> )>2+ 2s "ill be discussed in 1hapter 12< "e also consider that the future charity commission should establish statutory or non-statutory codes of practice relatin! to disclosure< conflicts of interest< declarations of personal interest and !ood !o&ernance>

15

Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB at 2)2>

11-

Re $11e"%a#'$" 6 We re $11e"% #(a# (ar'#0 #r&)#ee) $r %'re #$r) $f a re*')#ere% (ar'#0 )($&-% :e &"%er a %&#0 #$ %e -are a"0 $"f-' #) $f '"#ere)# a"% .er)$"a- '"#ere)#)!

.@/

Ainancial reporting

'ilin accounts and statements )>25 From our study of o&erseas 6urisdictions< "e note that nearly all of the monitorin! authorities re@uire charitable or!anisations to submit an annual financial return after the end of their financial year> 2 table summarisin! the le!al re@uirements for filin! of annual financial reports "ith the charities monitorin! authorities in o&erseas 6urisdictions is at 2nne; 5 of this paper> We note that in some 6urisdictions< such as 3n!land and Wales< different filin! re@uirements are imposed accordin! to a charity's !ross income and the a!!re!ate &alue of its assets> )>2% While "e can appreciate that there "ould be ad&anta!es in applyin! different thresholds to charities dependin! on their siNe< "e are of the &ie" that< for the local situation< there "ould be si!nificant benefit in ha&in! a simple structure< especially "hen the re!istration system for charities is to be first established> We are also concerned about some small charitable or!anisations that may be affected by the filin! re@uirements> We note that a number of small charitable or!anisations in #on! $on! operate on a self-help basis< "ith no< or at most one< full-time member of staff> We consider that small charities should not be o&erburdened "ith the administrati&e re@uirements of preparin! and filin! audited accounts> We also consider that an annual income of ?5--<--- is an appropriate threshold to determine "hether an or!anisation is financially capable of hirin! full-time staff for the purpose of complyin! "ith the more strin!ent filin! re@uirements> )>2( Ta:in! into account the financial and resource implications for charities in meetin! filin! re@uirements< "e recommend that only charitable or!anisations "ith an annual income e;ceedin! ?5--<--- should be re@uired to file audited accounts and a statement of accounts "ith the future charity commission> We propose that re!istered charitable or!anisations "ith an annual income not e;ceedin! ?5--<--- "ould not be re@uired to file audited accounts Athou!h "ithout pre6udice to any re@uirements to "hich they< if a company< are sub6ect under the 1ompanies ,rdinance A1ap 32BB< but "ould still be re@uired to file an account or financial statement certified by the board of the charitable or!anisation< and these accounts should also be sub6ect to the po"er of in&esti!ation by the future charity commission> )>2) 2part from the need for charitable or!anisations to file an annual statement of accounts to the future charity commission and an annual acti&ity

111

report in a standard form< "e consider that these documents filed "ith the future charity commission should be accessible to the public> This "ould achie&e the ob6ecti&es of transparency< openness and accountability by charitable or!anisations< and "ould pre&ent abuse and encoura!e proper application of funds> )>2* 0ro&isionally< "e consider that e&ery charity re!isterin! "ith the future charity commissioner should file both its acti&ities report and financial statements annually "ith the charity commission in a standard form specified by the charity commission>

Re $11e"%a#'$" 7 We re $11e"% #(a#C G1H Re*')#ere% (ar'#a:-e $r*a"')a#'$") ,'#( a" a""&a'" $1e e< ee%'"* M5009000 )($&-% :e re>&'re% #$ f'-e a" a&%'#$r)B re.$r# a"% f'"a" 'a- )#a#e1e"#) ,'#( #(e f&#&re (ar'#0 $11'))'$"! W'#($&# .re4&%' e #$ #(e )#a#&#$r0 re>&'re1e"#) &"%er #(e C$1.a"'e) Or%'"a" e GCa. /2H9 re*')#ere% (ar'#a:-e $r*a"')a#'$") ,'#( a" a""&a- '" $1e "$# e< ee%'"* M5009000 )($&-% :e re>&'re% #$ f'-e f'"a" 'a- )#a#e1e"#) er#'f'e% :0 #(e B$ar% $f #(e)e (ar'#a:-e $r*a"')a#'$") ,'#( #(e f&#&re (ar'#0 $11'))'$"! T(e a&%'#$rB) re.$r# a"% f'"a" 'a- )#a#e1e"#) )&:1'##e% :0 (ar'#a:-e $r*a"')a#'$") #$ #(e f&#&re (ar'#0 $11'))'$" )($&-% :e a e))':-e #$ #(e .&:-' !

G2H

G/H

We a-)$ '"+'#e +'e,) fr$1 #(e .&:-' $" L G1H ,(e#(er9 f$r e+er0 (ar'#0 re*')#ere% ,'#( #(e f&#&re (ar'#0 $11'))'$"9 a" a #'+'#'e) re.$r# a"% f'"a" 'a)#a#e1e"#) )($&-% :e f'-e% ,'#( #(e f&#&re (ar'#0 $11'))'$" $" a" a""&a- :a)')I a"% 'f )$ #(e $"#e"#) #$ :e '" -&%e% '" #(e a""&a- re.$r# $f a #'+'#'e)!

G2H

Eaintainin accountin records )>3We ha&e considered a number of o&erseas 6urisdictions< and many of them< such as 3n!land and Wales< Ireland< Scotland and Sin!apore

112

impose a le!al obli!ation on the charity or the charity trustees to :eep proper boo:s of account> )>31 #a&in! ta:en into account the e;perience of these o&erseas 6urisdictions< "e consider that charity trustees or directors of a charity should be re@uired to ensure that accountin! records in respect of the charity are :ept "hich are sufficient to sho" and e;plain all the transactions of the charity> These records must disclose at any time< "ith reasonable accuracy< the financial position of the charity at that time< and enable the trustees or directors to ensure that any statements of accounts prepared by them comply "ith the statutory re@uirements> )>32 With re!ard to the period that such records must be maintained< in some 6urisdictions< such as Scotland and 4e" 5ealand< it is specified that accountin! records of charitable or!anisations must be retained for at least si; years> In determinin! the appropriate period for charities to retain accountin! records in #on! $on!< "e ha&e also considered local practice> It is a re@uirement under section 121 of the 1ompanies ,rdinance A1ap 32B that boo:s of account of companies should be :ept for se&en years> 2ccordin! to 9ule 1- of the Solicitors' 2ccounts 9ules A1ap 15*FB and the Solicitors' 7uide to 0rofessional 1onduct< e&ery solicitor is re@uired to preser&e for at least si; years from the date of the last entry< all boo:s< accounts and records :ept by him> Knder section + of the 8imitation ,rdinance A1ap 3+(B< the time bar for brin!in! a ci&il claim is si; years>1% )>33 To ensure consistency "ith the re@uirement under the 1ompanies ,rdinance< "e consider that se&en years is an appropriate period for the retention of accountin! records by charities>

Re $11e"%a#'$" 8 We re $11e"% #(a# (ar'#0 #r&)#ee) $r %'re #$r) $f a re*')#ere% (ar'#0 )($&-% :e &"%er a )#a#&#$r0 %&#0 #$ 2ee. .r$.er a $&"#'"* re $r%) $f #(e (ar'#0 ,(' ( are )&ff' 'e"# #$ )($, a"% e<.-a'" a-- #ra")a #'$") $f a (ar'#0! S& ( re $r%) )($&-% :e re#a'"e% f$r a# -ea)# )e+e" 0ear)!

.=/

Power of inve tigation

)>3+ We consider that the ability of the future charity commission to in&esti!ate and chec: abuses is crucial to buildin! and maintainin! public confidence> In most o&erseas 6urisdictions< the re!ulatory authority is &ested "ith statutory po"er to in&esti!ate any reports of breaches of trust and maladministration by charities or their officers> In 3n!land and Wales< the 1harity 1ommission is &ested "ith "ide po"ers to in&esti!ate and institute in@uiries< either !enerally or for particular purposes< and to in&esti!ate any
1%

Thou!h not "here the action is brou!ht by a beneficiary under a trust in a case of fraud: see section 2-< 8imitation ,rdinance A1ap 3+(B>

113

mismana!ement and misconduct "ithin charities> It also has the po"er to protect charity assets at ris: and ta:e action a!ainst those persons responsible for misconduct and mismana!ement in a charity> )>35 When charities' assets< reputation< ser&ices or beneficiaries ha&e been harmed or are at ris: of abuse or dama!e< the aim of the 1harity 1ommission is to stop the abuse or dama!e and put charities bac: on a proper footin! for the future> Its "or: in&ol&es identifyin! and in&esti!atin! causes of misconduct or mismana!ement in the administration of charities and resol&in! the problems that it finds>1( )>3% The 1harity 1ommission has issued a !uideline entitled< CC20 Re ulatory Compliance Casewor6& +uidance for charities and their advisers, "hich see:s to pro&ide !uidance to help trustees of charities and their ad&isers to understand the re!ulatory role of the 1ommission< includin! its compliance "or: in relation to identifyin! and in&esti!atin! apparent misconduct or mismana!ement in the administration of charities> .etails of the 1ommission's re!ulatory role and ho" it conducts re!ulatory compliance "or: are set out in section 11 of 11 +5> 2ccordin! to 11 +5< <misconduct< includes <any act that the person committin it 6new .or ou ht to have 6nown1 was criminal, unlawful or improper.< <Eismana ement< includes <doin anythin to& lose or misuse si nificant charitable resourcesP seriously undermine a charity9s reputationP or put beneficiaries at ris6.< )>3( In more serious cases< the 1ommission may open a statutory in@uiry< "hich may in&ol&e usin! its remedial and protecti&e po"ers "hen it is appropriate and proportionate to do so> )>3) The 1ommission's !uideline 11 +5 lists a number of e;amples of problems "ithin charities "hich may !i&e rise to a re!ulatory compliance case and ha&e the potential to be dealt "ith under a statutory in@uiry> These e;amples include: ․ a charity has poor internal controls or administrati&e procedures that pre&ent the charity from functionin! properly or put charity assets at some ris:H ․ a charity has !o&ernance problems that ha&e been created by a failure to act on the part of trustees or officers of a charityH ․ there is an unresol&ed disa!reement bet"een trustees that has resulted in failure to obser&e charity la" or put the charity's assets or beneficiaries at ris:H ․ charity assets ha&e been lost or misappliedH ․ charity trustees or indi&iduals "ith connections to the charity ha&e recei&ed unauthorised or si!nificant pri&ate benefits throu!h their "or: "ith the charityH or the "ay the charity is run
1( The 1harity 1ommission for 3n!land and Wales< 11+5 - 9e!ulatory 1ompliance 1ase"or::

advisers ADune 2--)B< at section commission>!o&>u:C0ublicationsCcc+5>asp;>

11<

a&ailable

+uidance for charities and their at : http:CC""">charity-

11+

is allo"in! these to arise and conflicts of interest are not bein! properly mana!edH ․ irre!ular fundraisin! acti&ity has ta:en place< "hether by the charity or by others on behalf of the charity and the charity trustees are not dealin! "ith this properly> 1) )>3* In Scotland< the ,ffice of the Scottish 1harity 9e!ulator is &ested "ith similar "ide po"er to ma:e in@uiries and in&esti!ate charitable or!anisations> )>+While it is essential for the future charity commission to be empo"ered to in&esti!ate and chec: into alle!ed abuses "ithin charities< "e consider that care "ould need to be ta:en in definin! the tri!!er-points for initiatin! an in&esti!ation so as to ensure that these "ere not too open-ended> We consider also that it is important to safe!uard the reputation of a charity under in&esti!ation by a&oidin! premature disclosure of information relatin! to the in&esti!ation "hich could ha&e an ad&erse or dama!in! effect on the charity's credibility> )>+1 We note that in 3n!land and Wales< the 1harity 1ommission ta:es a cautious approach to"ards the disclosure of information relatin! to charities bein! in&esti!ated> The 1ommission has issued a !uideline entitled< CC2" - Statutory In8uiries into Charities& +uidance for charities and their advisers> The purpose of this !uideline is to help charities and their ad&isers to understand "hat it means "hen the 1ommission opens a statutory in@uiry> Section 32 of 11+% deals "ith the @uestion as to "hether the information pro&ided by the charity trustees "ill be :ept confidential> It is stated in the !uideline that all information< "hether personal or other"ise< is held securely by the 1ommission< and the 1ommission underta:es to treat and handle the information pro&ided for the purposes of an in&esti!ation appropriately and "ith care> The !uideline !oes on to note that in certain circumstances< ho"e&er< the 1ommission may be re@uired to disclose the information in accordance "ith the principles of data protection< or "ithin its role as the re!ulator of charities> The most common form of disclosure is "here the 1ommission publishes the outcome of the in@uiry in a Statement of 9esults of In@uiry>1* )>+2 In line "ith the approach adopted in the Knited $in!dom models< "e consider that it is essential that the future charity commission should ha&e the po"er< "hen necessary< to in&esti!ate charities< and obtain information on acti&ities< documents< records< boo:s and accounts from charities under in&esti!ation> We also consider that appropriate safe!uards are needed to ensure the confidentiality of such in&esti!ations in the li!ht of their sensiti&ity and the need to protect the credibility of charities>

1)

1*

The 1harity 1ommission for 3n!land and Wales< CC20 - Re ulatory Compliance Casewor6& +uidance for charities and their advisers ADune 2--)B< at section 12< a&ailable at: http:CC""">charity-commission>!o&>u:C0ublicationsCcc+5>asp;> CC2" - Statutory In8uiries into Charities& +uidance for charities and their advisers, AMarch 2-1-B at section 32< a&ailable at: http:CC""">charitycommission>!o&>u:C0ublicationsCcc+%>asp;>

115

Re $11e"%a#'$" ; We re $11e"% #(a# #(e f&#&re (ar'#0 $11'))'$" )($&-% :e +e)#e% ,'#( #(e .$,er #$ '"+e)#'*a#e a"0 a--e*e% 1')1a"a*e1e"# a"% 1') $"%& # $f (ar'#a:-e $r*a"')a#'$") ,'#( re*ar% #$ '#) (ar'#a:-e $:4e #)! I" #(e e<er ')e $f #(') .$,er #$ '"+e)#'*a#e a--e*e% 1')1a"a*e1e"# a"% 1') $"%& # $f a (ar'#a:-e $r*a"')a#'$"9 #(e f&#&re (ar'#0 $11'))'$" )($&-% (a+e .$,er9 '" re).e # $f a .ar#' &-ar (ar'#0 &"%er '"+e)#'*a#'$"9 #$ '"+e)#'*a#e #(e (ar'#0B) f&"%'"*9 .r$.er#0 a"% a #'+'#'e) a"% #$ $:#a'" re-e+a"# '"f$r1a#'$"9 '" -&%'"* %$ &1e"#)9 re $r%)9 :$$2) a"% a $&"#) fr$1 #(e (ar'#0! D&r'"* #(e $&r)e $f )& ( '"+e)#'*a#'$")9 #(ere )($&-% :e a..r$.r'a#e )afe*&ar%) #$ e")&re $"f'%e"#'a-'#0!

.B/

Providing fal e or mi leading information to &e an offence

)>++ To buttress the po"er of in&esti!ation of the future charity commission "here it has been e;ercised< "e also recommend that any person "ho intentionally or rec:lessly pro&ides false or misleadin! information to the future charity commission or its appointed in&esti!ators should be !uilty of an offence> In line "ith the approach in some o&erseas 6urisdictions< "e propose that this offence should be statutory> This "ould pro&ide an appropriate deterrent in the case of persons under in&esti!ation for any misconduct or maladministration in relation to charities>

Re $11e"%a#'$" 10 We re $11e"% #(a# a"0 .er)$" ,($ '"#e"#'$"a--0 $r re 2-e))-0 .r$+'%e) fa-)e $r 1')-ea%'"* '"f$r1a#'$" #$ #(e f&#&re (ar'#0 $11'))'$" $r '#) a..$'"#e% '"+e)#'*a#$r)9 $r fa'-) #$ .r$+'%e #(e '"f$r1a#'$" re>&'re% f$r #(e .&r.$)e $f '"+e)#'*a#'$"9 $r a-#er)9 $" ea-) $r %e)#r$0) a"0 %$ &1e"# re>&'re% f$r .r$%& #'$" f$r #(e .&r.$)e $f a" '"+e)#'*a#'$"9 ,'-- :e *&'-#0 $f a" $ffe" e!

E"f$r e1e"# a"% re1e%'e)
)>+5 Monitorin! charities throu!h proper enforcement procedures and remedial action "ill ensure charities meet their le!al obli!ations and operate in accordance "ith their proper purposes> The future charity commission should be empo"ered to ta:e appropriate and proportionate measures to in&esti!ate and enforce compliance "ith specified re@uirements> Fased on

11%

the e;perience of o&erseas 6urisdictions< "e note that there are different enforcement po"ers and remedies and that these may be applied to charitable or!anisations to different de!rees< dependin! on the se&erity and persistence of the default in complyin! "ith their le!al obli!ations> Sub6ect to due process< the follo"in! are possible approaches to the issues of enforcement and remedies> .9/ +emoval of charita&le tatu

)>+% In all of the o&erseas 6urisdictions "hich ha&e a re!istration system< the re!ulatory authorities of re!istered charities ha&e the po"er to dere!ister charities> #o"e&er< such an act is only e;ercised in cases of si!nificant or persistent failure to meet the charity's le!al obli!ations or those of the persons in char!e> In 4e" 5ealand< for e;ample< de-re!istration of charities due to non-compliance by charities "ith their le!al obli!ations is preceded by a "ritten "arnin! to the concerned charitable or!anisation or the person connected "ith the or!anisation> .;/ +eferring criminal offence to the appropriate law enforcement agencie

)>+( In case of possible criminal acts in&ol&ed in the misconduct or mismana!ement in the administration of the charity "hich come to li!ht in the course of an in@uiry< the future charity commission should ha&e po"er to refer the case to appropriate la" enforcement a!encies> .</ Civil action

)>+) Should possible ci&il actions be called for in the course of an in@uiry into charitable or!anisations or persons connected "ith the misconduct or mismana!ement of the charity< the future charity commission should ha&e the po"er to refer the matter to the Secretary for Dustice< as protector of charities< to pursue further action> .@/ Protection of the propert! of a charit!

)>+* 2 practical and effecti&e remedial action is to protect the property of a charity in order to pre&ent further dama!e arisin! from misconduct or mismana!ement> In o&erseas 6urisdictions< such as 3n!land and Wales< the 1harity 1ommission has "ide po"er to act for the purposes of protection of property< such as to appoint additional charity trustees and suspend or remo&e trustees or officers of the charity< to &est property of a charity in an official custodian and to re@uire persons holdin! property on behalf of the charity not to part "ith the property "ithout the appro&al of the 1ommission> )>5We consider that in order to maintain public confidence and to

11(

encoura!e proper !o&ernance "ithin charities< proper enforcement po"ers and remedies should be in place< and that these po"ers< as set out in 9ecommendation 11< should be &ested in the future charity commission>

Re $11e"%a#'$" 11 We re $11e"% #(a# #(e f&#&re (ar'#0 $11'))'$" )($&-% :e +e)#e% ,'#( .$,er) re-a#'"* #$ e"f$r e1e"# a"% re1e%'e) '" #(e a)e $f "$"- $1.-'a" e :0 (ar'#'e) ,'#( #(e'r -e*a- $:-'*a#'$")! T(e)e .$,er) )($&-% '" -&%e9 :&# "$# :e -'1'#e% #$C G1H G2H G/H G3H %e-re*')#ra#'$" $f a (ar'#'e)I (ar'#0 fr$1 #(e re*')#er $f #$ a..r$.r'a#e -a,

referr'"* r'1'"a- $ffe" e) e"f$r e1e"# a*e" 'e)I referr'"* .$))':-e J&)#' eI a"%

'+'- a #'$") #$ #(e Se re#ar0 f$r

.$,er) f$r #(e .&r.$)e $f .r$#e #'$" $f .r$.er#0 $f (ar'#'e)!

)>51 Further< "e consider that the po"er of the future charity commission to protect the property of charities in cases of misconduct or mismana!ement should include &arious po"ers< as set out in 9ecommendation 12 belo"> 2s these po"ers "ould be e;ercised only in e;treme cases A"here< for e;ample< a charity's trustees are suspected of en!a!in! in ille!al acti&ities in&ol&in! charitable trust propertiesB< "e consider that the &estin! of these po"ers in the future charity commission "ould be appropriate and necessary for the better protection of the public>

11)

Re $11e"%a#'$" 12 We re $11e"% #(a# #(e f&#&re (ar'#0 $11'))'$" )($&-% :e +e)#e% ,'#( #(e .$,er #$ .r$#e # .r$.er#0 $f (ar'#'e) '" a)e) $f 1') $"%& # $r 1')1a"a*e1e"# '" #(e a%1'"')#ra#'$" $f (ar'#'e)9 a"% #(a# #(') .$,er )($&-% '" -&%e9 :&# "$# :e -'1'#e% #$9 #(e .$,er) #$C G1H G2H G/H G3H a..$'"# a%%'#'$"a- #r&)#ee) $r %'re #$r) $f #(e (ar'#0I )&).e"% $r re1$+e #r&)#ee)9 %'re #$r) $r $ff' er) $f #(e (ar'#0I +e)# .r$.er#0 $f (ar'#'e) '" a" $ff' 'a- &)#$%'a"I a"% re>&'re .er)$") ($-%'"* .r$.er#0 $" :e(a-f $f #(e (ar'#0 "$# #$ .ar# ,'#( #(e .r$.er#0 ,'#($&# #(e a..r$+a- $f #(e f&#&re (ar'#0 $11'))'$"!

11*

C(a.#er ; C$" -&)'$") a"% .r$.$)a-) $" #(e re*&-a#'$" $f f&"%ra')'"* a #'+'#'e)
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

I"#r$%& #'$"
*>1 In this chapter< "e e;amine in detail the &arious measures currently in use in #on! $on! to re!ulate the fundraisin! acti&ities conducted by charitable or!anisations> The ade@uacy or other"ise of these measures "ill be considered> We also e;amine the &arious measures adopted in other 6urisdictions to re!ulate fundraisin!> ,ur proposals for impro&in! the re!ulation of charitable fundraisin! in #on! $on! are set out later in this chapter>

C&rre"# )'#&a#'$" '" H$"* K$"*
The e(tent of tatutor! regulation of charita&le fundrai ing activitie *>2 The fundraisin! acti&ities of all charitable or!anisations in #on! $on!< "hether statutory or non-statutory< "hich are conducted in public places Asuch as collections of donations or charity salesB< or in&ol&e the sale of lottery tic:ets< ha&e to be appro&ed by the 7o&ernment in ad&ance< and a permit or a licence has to be obtained from the appropriate 7o&ernment authority before these acti&ities can be carried out> The !o&ernment departments and bureaus concerned include the Social Welfare .epartment< the #ome 2ffairs Fureau< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority> The &arious re@uirements for these authorisations are discussed later in this chapter> *>3 ,ther charity acti&ities in&ol&in! appeals to the public< such as charity auctions< balls< concerts< dinners< "al:s< film premieres< sho"s in the mass media< re@uests for donations by mail and ad&ertisements or phone-in arran!ements< do not re@uire a permit or licence> The or!anisers of these charitable acti&ities are not obli!ed to disclose< either to the 7o&ernment or the public< the amount of donations recei&ed or ho" these funds are disposed of>1 The use of these proceeds is therefore <not sub;ect to any +overnment monitorin or public scrutiny.<2

1

2

,ffice of the ,mbudsman< Investi ation Report& Eonitorin Raisin %ctivities AFeb 2--3B< at para 3>1> Same as abo&e>

of Charitable 'und

12-

Re ulation of fundraisin activities by the Social ,elfare =epartment and the (ome %ffairs Bureau *>+ 2s noted abo&e< there are !enerally t"o situations "here the 7o&ernment's prior appro&al is re@uired for the carryin! out of charitable fundraisin! acti&ities> The first is "here the fundraisin! acti&ity is held in a public place> The purpose of re@uirin! appro&al in this case appears to be to ensure that public order is maintained> *>5 Section +A1(BAiB and AiiB of the Summary ,ffences ,rdinance A1ap 22)B< under the section headin! /4uisances and miscellaneous offences/< pro&ides: <%ny person who without lawful authority or e4cuse A .!31 or ani@es, provides e8uipment for, or participates in any collection of money or sale or e4chan e for donations of bad es, to6ens or similar articles in a public place e4cept under and in accordance with a permit issued.i1 .ii1 for a collection, sale or e4chan e for charitable purposes, by the =irector of Social ,elfareP or for a collection, sale or e4chan e for any other purpose, by the Secretary for (ome %ffairsPN<

Section 2A1B of the Summary ,ffences ,rdinance A1ap 22)B defines <public place< to include: < N all piers, thorou hfares, streets, roads, lanes, alleys, courts, s8uares, archways, waterways, passa es, paths, ways and places to which the public have access either continuously or periodically, whether the same are the property of the +overnment or of private persons.< *>% Social ,elfare =epartment authorisation. If any charity "ishes to collect donations for a charitable purpose throu!h an acti&ity to be held in a public place< it must first obtain a <public subscription permit< from the Social Welfare .epartment> Fefore the permit is issued< the .epartment "ill chec: to ensure that the purpose of the proposed fundraisin! acti&ity is consistent "ith the charitable ob6ects of the charity and that appro&al from the mana!ement authority of the &enues concerned has been !ranted for the acti&ity> *>( There are t"o different application procedures under the public subscription permit system< dependin! on "hether the acti&ity held is a <fla day< or a < eneral charitable fundraisin activity in a public place< Asuch as the sale of bad!es or to:ens for donations< or the collection of donations by the

121

settin! up of donation bo;es in stationed countersB> T"o separate application forms and eli!ibility criteria apply>3 *>) The Social Welfare .epartment's document< 54planatory Cotes for the application of Public Subscription Permit <+ e;plains the &arious conditions "hich must be complied "ith< and to "hich the applicant for the permit must a!ree< in order for the permit to be issued> These conditions include that the funds raised must be used for the purpose specified in the application form> 1ondition A+B in the 54planatory Cotes states that: <,ithin *$ days of the last date specified in the Permit, the Permittee shall cause the money received from the public subscription, less any e4penses incurred, includin e4penses in printin and stationery, to be applied or to be credited to the ban6 account, for the purpose for which the permit is issued.< *>* 2 further re@uirement is that an audited account of the fundraisin! acti&ity must be produced and presented to the .epartment "ithin *- days of the last date specified in the permit> The audited account must indicate the amount of net proceeds collected and ho" and for "hat purpose these ha&e been used> For fla! days< as "ell as other !eneral fundraisin! acti&ities "here the monies are to be spent outside #on! $on!< the audited accounts to!ether "ith the auditor's opinion or re&ie" report for fla! days should be published in one 1hinese and one 3n!lish local ne"spaper "ithin *- days after the fundraisin! acti&ities> *>1(ome %ffairs Bureau authorisation. 2s noted abo&e< section +A1(BAiiB of the Summary ,ffences ,rdinance A1ap 22)B pro&ides that a permit from the Secretary for #ome 2ffairs is re@uired for fundraisin! in a public place for purposes "hich are other than charitable> Fundraisin! acti&ities carried out by <non-charitable< or!anisations< such as political or!anisations for e;ample< fall "ithin the ambit of the section> Failin! to obtain a &alid permit constitutes an offence under section +A1(B of the ,rdinance< and a person committin! such an offence is liable to a ma;imum fine of ?2<--- and imprisonment for three months>5 The la" primarily intends to ensure that the collections of donations are made in an orderly manner and that unauthorised collections "hich may cause a nuisance are prohibited>

3

+ 5

The t"o application forms< "ith e;planatory notes< and separate notes of eli!ibility criteria are a&ailable on the SW. "ebsite at: Afor fla! daysB http:CC""">s"d>!o&>h:Cdoc=scC1ontrol=of=1harCF.L2-2pplicationL2-FormL2-2-1--11>pdf> http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harCF.L2-eli!ibilityL2-criteriaL2-2--)-2-1e>pdf> Afor !eneral fundraisin! acti&itiesB http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC0S0L2-2pplicationL2-FormL2-2-11-21)>doc> http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC0S0L2-criteriaL2-2--%1-1*e>pdf> http:CC""">s"d>!o&>h:CenCinde;C> See: section 1131A2B of the 1riminal 0rocedure ,rdinance A1ap 221B>

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Re ulation of fundraisin activities by the 'ood and 5nvironmental (y iene =epartment *>11 2nother re!ulatory measure that applies to charitable fundraisin! acti&ities carried out in public places is the need to apply in ad&ance to the Food and 3n&ironmental #y!iene .epartment for a temporary ha":er licence for on-street sellin! acti&ities> Kpon receipt of an application for a temporary ha":er licence< the Food and 3n&ironmental #y!iene .epartment consults other rele&ant !o&ernment departments< includin! the 0olice< the 8ands .epartment< the #ome 2ffairs .epartment or the Social Welfare .epartment to see if there is any ob6ection> % ,nce !ranted< the temporary ha":er licence permits the licensee to ha": for a period not e;ceedin! one month> The or!anisation concerned is re@uired to comply "ith the licensin! conditions contained in the licence as "ell as the rele&ant pro&isions imposed under the #a":er 9e!ulation A1ap 1322IB> The rele&ant !o&ernment departments may also impose further conditions to re!ulate the fundraisin! acti&ities of the or!anisation> Re ulation of fundraisin Licensin %uthority activities by the Television and 5ntertainment

*>12 The second situation "here the 7o&ernment's prior appro&al is re@uired for charitable fundraisin! is "here the fundraisin! acti&ity is carried out throu!h a lottery> If a charity "ishes to raise funds by this means a licence is re@uired from the 1ommissioner for Tele&ision and 3ntertainment 8icensin! AT382B under section 22A1BAaBAiB of the 7amblin! ,rdinance A1ap 1+)B> This section states: <.!1 .a1 The Commissioner for Television and 5ntertainment Licensin may by licence authori@e .i1 the promotion and conduct of any lottery for the purposes of a club, association or other body of persons approved by the Commissioner for Television and 5ntertainment Licensin P N<

*>13 The applicant or!anisation must be a bona-fide non-profitma:in! or!anisation re!istered in #on! $on!> If the or!anisation is not a charitable institution or trust of a public character e;empt from ta; under Section )) of the Inland 9e&enue ,rdinance A1ap 112B< a lottery e&ent may still be or!anised by such an or!anisation for the benefit of a charity if the charity pro&ides an ac:no"led!ement consent letter and an appro&al letter certifyin! ta; e;emption under section )) of the Inland 9e&enue ,rdinance> *>1+ to include: Section 2 of the 7amblin! ,rdinance A1ap 1+)B defines <lottery<

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http:CC""">fehd>!o&>h:Cen!lishCne"sCdetailsC23-1--2--*-22-->html>

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a raffleP a sweepsta6eP tse fa A字字BH hun piu A字字BH po piu A字字BH any competition for money or other property success in which .i1 involves uessin or estimatin the results of future events, or of past events the results of which are not enerally 6nownP or does not depend to a substantial de ree upon the e4ercise of s6ill by the competitorsP and

.ii1 . 1

any ame, method, device or scheme for distributin or allottin pri@es by lot or chance,

whether promoted, conducted or mana ed in or outside (on -on P N .< *>15 Section 22A3B of the 7amblin! ,rdinance A1ap 1+)B pro&ides that the licence !ranted under section 22A1BAaBAiB shall be sub6ect to prescribed conditions and to any other conditions that the 1ommissioner for Tele&ision and 3ntertainment 8icensin! may impose> T382's Reference +uide on the :r anisation of Lottery %ctivities ( sets out the prescribed conditions for the !rant of a lottery licence> These are lar!ely similar to the conditions imposed on the !rant of public subscription permits by the Social Welfare .epartment discussed abo&e> T382 also ma:es a&ailable for public inspection copies of auditors' reports and income and e;penditure statements for moneys raised by the sale of lottery tic:ets> These documents are :ept for one year at the office of the 8icensin! Section of T382> *>1% 4on-compliance "ith any of the conditions pro&ided in the licence constitutes a criminal offence under section 22A%B and A(B of the 7amblin! ,rdinance A1ap 1+)B< "hich pro&ides: <."1 ,here a condition of any such licence is contravened, the person to whom the licence was issued commits an offence unless he proves that the contravention occurred without his consent or connivance and that he e4ercised all due dili ence to prevent it.

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http:CC""">tela>!o&>h:CdocumentCen!CformClicensin!ClotteryC-1Clottery=e>pdf

>

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.31 %ny person who commits an offence under subsection ."1 is liable on conviction to a fine of H0$,$$$ and to imprisonment for # years.< *>1( In cases of breach< section 22A+B the ,rdinance also pro&ides that the lottery licence may be cancelled at any time by the 1ommissioner for T382< re!ardless of "hether any person has been con&icted of an offence under section 22A%B the ,rdinance> The development of voluntar! guideline on charita&le fundrai ing *>1) To supplement these limited statutory measures "hich re!ulate fundraisin!< the initiati&e has been ta:en by the Social Welfare .epartment< the #on! $on! Institute of 1ertified 0ublic 2ccountants and< more recently< by the Independent 1ommission 2!ainst 1orruption< to produce non-mandatory practice !uidelines for those in&ol&ed "ith charitable fundraisin! acti&ities> +uidelines issued by the Social ,elfare =epartment *>1* The Social Welfare .epartment issued t"o sets of !uidance notes related to charitable fundraisin! in 1**) and 2--+< respecti&ely> In its +uidance Cote on Internal 'inancial Controls for Charitable 'und-raisin %ctivities< issued in !**/,) the .epartment <proposes some basic controls to be considered by charitable fund-raisin or anisations with a view to ensurin that the income enerated from charitable fund-raisin activities is spent for the desi nated purpose and that such income and e4penditure is properly documented.<* Specific topics co&ered by the 7uidance 4ote include that: ․ ․ ․ charitable fundraisin! or!anisations should ha&e a "ell defined or!anisational structureH they should ensure that their staff in&ol&ed in fundraisin! are competent and properly trainedH and measures to pre&ent financial mista:es and abuse< such as se!re!atin! duties related to financial collection< preparation of receipts< payments and accounts recordin! should be obser&ed< and carefully defined procedures should be de&eloped "ithin the or!anisation to deal "ith these areas>

*>2The 7uidance 4ote offers the follo"in! further <helpful hints< in relation to the most common fundraisin! acti&ities in #on! $on!< includin! fla! days< collection bo;es placed in stationed counters< charity sales of commodities< charity "al:s< charity balls< concerts< &ariety sho"s and film premieres:

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2&ailable on the SW. http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC!nifc=e>pdf> Same as abo&e< at para 1>

"ebsite

at:

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<'or fla days ․ ․ ․ ․ Collectors should be properly supervised. Collections should be carried out by a two-person team. Collection ba sJbo4es should be properly numbered and sealed. Collectors should si n a receipt and return collection ba sJbo4es.

'or collection bo4es placed in stationed counters which are manned by collectors ․ Collection bo4es should be re ularly open and the contents should be counted and recorded in the presence of at least two people authori@ed by the a ency mana ement. Issue of official receipts si ned by the collectors, if possible, upon the receipt of donations. These receipts may be issued in two copies, one to the donor and the other to be attached to the report addressed by the collectors to their supervisor.

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'or charity sale of commodities .such as coo6ies and ift pac6s1 ․ The sale proceeds should be re ularly counted and recorded in the presence of at least two people authori@ed by the charitable fund-raisin or anisation. Issue of official receipts si ned by the collectors, if possible, upon the receipt of donations. These receipts may be issued in two copies, one to the donor and the other to be attached to the report addressed by the collectors to their supervisor. Reconciliation should be made between the openin and closin balances and units sold.

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․

'or charity wal6 receivin donations after the event ․ Incomin post should be opened at the earliest opportunity and in the presence of two responsible people. Rotation of post-openin staff should be considered where practical. %ll incomin che8ues and cash should be recorded immediately and entries verified by someone other than the person who has made the entry.

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The security of unopened mail should be ensured.

'or charity ball, concert and film premiere ․ Issue of official receipts si ned by the collectors should be made for each transaction of tic6et sale. These receipts may be issued in two copies, one to the purchaser and the other to be attached to the report addressed by the collectors to their supervisor. %ll tic6ets must be pre-numbered and their issue or delivery must be properly recorded. % record be 6ept of which tic6ets have been sold. % reconciliation be made of receipts a ainst tic6ets sold.

․ ․ ․

'or charity show throu h the mass media ․ The pled ed donation made by donors should be properly recorded. Should cancellation of the pled ed donation be re8uired afterwards, it has to be verified by someone other than the person who has made the entry. The incomin che8ues and cash from the donors should be recorded immediately and entries verified by someone other than the person who has made the entry.

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'or appeal for donations throu h advertisements, telephone calls, letters and leaflets ․ Similar controls as charity wal6.<

*>21 The second set of !uidance issued by the Social Welfare .epartment is the Reference +uide on Best Practices for Charitable 'undraisin %ctivities1- issued in 2--+> The 9eference 7uide is di&ided into three parts< co&erin! donors' ri!hts< fundraisin! practices and financial accountability> The 9eference 7uide is for &oluntary adoption by charities> 0ara!raph ( of the document states that: <Charities that voluntarily adopt this Reference +uide commit to fundraisin practices that respect donors9 ri ht to truthful information and to privacy. They also commit to mana in responsibly the funds that donors entrust to them, and to reportin their financial affairs accurately and completely.< *>22 The e;planatory 8eaflet11 for the 9eference 7uide sets out the follo"in! <+ist of Reference +uide provisions<:

1-

11

2&ailable on the SW. "ebsite at: http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harCFoo:letL2-2-1--%-3e>pdf> http:CC""">s"d>!o&>h:CdocC1ontrol=of=1harC8eafletL2-2-1--%-3e2>0.F>

12(

<%. ․ ․ ․

=onors9 Ri ht %ll donors are entitled to receive an official receipt for the amount of the donation. %ll fundraisin solicitations will disclose the Charity9s name and the purpose for which funds are re8uested. =onors and prospective donors are entitled to .or an opportunity to e4amine1, upon re8uest, the Charity9s most recent annual report and audited financial statements, etc. =onor9s re8uests to remain anonymous will be respected. 'undraisin Practices 'undraisin solicitations on behalf of the Charity will be truthful. The Charity will cease immediately solicitation of a prospective donor who identifies the solicitation as harassment or undue pressure. The Charity will respond promptly to a donor9s re8uest to amend the donor9s standin donation instruction. 'und-raisers should not be paid finders9 fees, commissions or other payments based on the number of donors secured or the value of funds raised, etc. 'inancial %ccountability The Charity9s financial affairs will be conducted in a responsible manner, consistent with the applicable le al re8uirements and relevant ethical or professional obli ations. %nnual financial report will be factual and accurate in all material respects and e4ternally audited, disclosin & e. . the total amount of fund-raisin revenues and the total amount of fund-raisin e4penses, etc. Co more will be spent on administration and fund-raisin than is re8uired to ensure effective mana ement and resource development. The cost-effectiveness of the Charity9s fundraisin pro ramme will be reviewed re ularly by the overnin board.<

․ B. ․ ․

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C. ․

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+uidelines issued by the (on -on Institute of Certified Public %ccountants *>23 Further !uidance on financial reportin! on fundraisin! acti&ities carried out in public places "ith permits issued by the Social Welfare .epartment has been issued by the #on! $on! Institute of 1ertified 0ublic 2ccountants> The Practice Cote /0$ Review of 'la =ay %ccounts "as first issued in 2u!ust 1***12 and the Circular on Reportin on +eneral Charitable 'undraisin %ctivities Covered by Public Subscription Permits issued by the Social ,elfare =epartment .:ther than 'la =ays1 "as published in 4o&ember 2--(<13 both of "hich "ere aimed primarily at accountin! practitioners> +uidelines issued by the Independent Commission % ainst Corruption *>2+ In ,ctober 2--*< the Independent 1ommission 2!ainst 1orruption published its Best Practice Chec6list& Eana ement of Charities and 'undraisin %ctivities>1+ In issuin! these best practice !uidelines< the 1ommissioner for the I121 stressed that <despite the relatively small number of complaints, the ris6 of corruption and other crimes involvin mana ement of charities and fund-raisin activities should not be underestimated in view of the substantial donations made each year.< 15 *>25 The 1ommissioner noted that the I121 recommends in the practice !uidelines< <practical measures to help these or anisations minimi@e such ris6s throu h stren thenin internal controls.< 1% These include that charitable or!anisations should adopt: ․ ․ ․ ․ ․ ․ proper bud!etin! !ood record-:eepin! re!ular auditin! of accounts cappin! of administrati&e e;penses safe-:eepin! of donations< and publicisin! audited accounts of fundraisin! acti&ities> !3

*>2% In order to promote the use of these best practice !uidelines< it is intended that the Social Welfare .epartment< T382 and the Inland 9e&enue .epartment "ill help distribute copies of the I121 !uidelines to charitable bodies upon their application for permits< e;emptions or licenses> 1)
12

13

1+

15

1% 1( 1)

2&ailable on the #$I102's "ebsite at: http:CCapp1>h:icpa>or!>h:Ceboo:C#$S2=Members=#andboo:=MasterC&olumeIIICpn)5->pdf> 2&ailable on the #$I102 "ebsite at: http:CC""">h:icpa>or!>h:C professionaltechnicalCassuranceCrmC71F2=-(11>pdf> 2&ailable on the I121 "ebsite at: http:CC""">icac>or!>h:Cfilemana!erCenC1ontent=1-31Cfund=raisin!>pdf> See 0ress 9elease< /I121 launches !uidelines to enhance !o&ernance and transparency in fund-raisin!/ A% ,ctober 2--*B at: http:CC""">icac>or!>h:CenCne"s=and=e&entsCpr2Cinde;=uid=)+%>html> Same as abo&e> Same as abo&e> Same as abo&e>

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*>2( We ha&e set out in 2nne; % of this paper a detailed re&ie" of the systems for re!ulatin! fundraisin! acti&ities "hich apply in a number of o&erseas 6urisdictions> It is e&ident from this that the nature and de!ree of o&ersi!ht &aries from 6urisdiction to 6urisdiction> We ha&e found the e;amples of the systems in 3n!land and Ireland particularly instructi&e and ha&e summarised these belo"> We note that under the Irish system in particular< recent le!islation has been enacted to pro&ide detailed pro&isions on ho" charity proceeds are to be collected< handled and accounted for> These measures ha&e "ide application< and include pro&isions dealin! "ith the most modern methods of charity collection as "ell as the ad&ent of <professional fundraisers<> England and 0ale *>2) In 3n!land and Wales< the statutory re@uirements !o&ernin! public fundraisin! collections are pro&ided in the #ouse-to-#ouse 1ollections 2ct 1*3* and the 0olice< Factories etc AMiscellaneous 0ro&isionsB 2ct 1*1%> In addition< the 1harity 1ommission has issued t"o sets of !uidance notes: CC/ A Internal 'inancial Controls for Charities 1* and CC#$ A Charities and 'undraisin .2*>2* For fundraisin! acti&ities carried out by telephone< 112- states that charities should ensure that they do not ma:e unsolicited calls to numbers re!istered on the Telephone 0reference System AT0SB> AT0S is the official central opt-out re!ister in K$ on "hich customers can record their preference not to recei&e unsolicited sales or mar:etin! calls> 21B 1harities may ho"e&er continue to call donors on the T0S "ho they ha&e an on!oin! relationship "ith and "ho ha&e a!reed to be contacted by the charity> 2ll fundraisin! acti&ity in&ol&in! recordin! or ta:in! do"n personal details is sub6ect to data protection la"s> 1harities that use face-to-face fundraisin!< online fundraisin!< direct mail< e&ents< broadcast or telephone fundraisin! and "hich handle personal details such as names< contact details and credit or debit details should be a"are of and comply "ith the .ata 0rotection 2ct 1**)>22 *>3For charity funds sent to charities by post< charity trustees are ad&ised in 11)23 that charities should open the incomin! post at the earliest opportunity and in the presence of t"o unrelated persons> 1he@ues and cash that come in by post ha&e to be immediately recorded and ban:ed> It is also su!!ested in 11) that the post-openin! staff should be rotated and security of unopened mail should be ensured>
1* 221 22 23

http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp; http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 21> http:CC""">mpsonline>or!>u:CtpsC http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3+> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 11>

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*>31 Where fundraisin! is conducted by means of public collections< 11) ad&ises2+ that trustees ha&e to ensure that these collections are carried out in accordance "ith the statutory re@uirements !o&ernin! public collections Aset out in the #ouse-to-#ouse 1ollections 2ct 1*3* and the 0olice< Factories etc AMiscellaneous 0ro&isionsB 2ct 1*1%B> 11) also ad&ises that in the course of public collections< collection bo;es must be sealed< indi&idually numbered and documented> Static collection bo;es should be opened re!ularly and contents counted in the presence of at least t"o persons so authorised by the trustees> *>32 With re!ard to fundraisin! and sponsored e&ents< 11) states 25 that charity trustees holdin! these e&ents should ensure that the charities are in control of the funds raised on their behalf< so that they can recei&e all the money they are entitled to from these e&ents> *>33 For society lotteries< 112- states2% that it "ill be necessary to re!ister "ith the 7amblin! 1ommission "here the sale of lottery tic:ets e;ceeds Y2-<--- in &alue< or e;ceeds Y25-<--- "hen ta:en to!ether "ith sales from pre&ious lotteries in the same year> Sale of lottery tic:ets belo" these thresholds "ould only re@uire re!istration "ith the local authority> *>3+ Where a charity en!a!es the ser&ices of a <professional fundraiser< or a <commercial participator<2( in a fundraisin! acti&ity< 112pro&ides2) that the <solicitation statement< made by these professionals has to pro&ide certain information to the public> Where the ser&ices of a commercial participator are re@uired< the commercial participator must pro&ide certain information< such as "hich charity "ill benefit from the promotional &enture and "hat proportion of the proceeds "ill be !i&en to the charity> 2*

2+ 25 2% 2(

http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 11> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 12> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 35> The terms <professional fundraiser< and <commercial participator< are defined in section 2+ of 112- at http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;> The definitions are as follo"s: <% professional fundraiser is anyone who carries on a commercial fundraisin business, wholly or mainly fundraisin for charitable purposesP or any other person who is paid to solicit money or other property for charity. This does not include& • a charity or a 9connected company9P • any officer or employee of the charity or connected companyP • a trustee of the charity, actin as trusteeP • any public charitable collector, other than promotersP • people who solicit funds on TI or radioP • any commercial participatorP or • anyone who is paid no more than V!,$$$ for a particular appeal, or no more than V!$ per day or V!,$$$ per year where there is no specific appeal. 2 commercial participator is not a fundraisin! business but a commercial enterprise that ta:es part in a promotional &enture< such as an ad&ertisin! or sales campai!n< "here the public are informed that contributions "ill be !i&en to or applied for the benefit of a charity> 2 commercial participator may be sub6ect to the same re!ulatory re@uirements as professional fundraisers if all of its acti&ities are for 'charitable purposes'>/
http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3(>

2) 2*

http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3(>

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*reland *>35 Kntil 2--*< charitable fundraisin! acti&ities in Ireland "ere solely re!ulated by the 1harities 2cts 1*%1 and 1*(3< and the Street and #ouse to #ouse 1ollections 2ct 1*%2> In February 2--*< the 1harities 2ct 2--* "as enacted and this no" co-e;ists "ith the earlier controllin! le!islation> The pro&isions of the 2--* 2ct "ill come into force in sta!es> 3*>3% The main areas of impact of the 2--* 2ct on the pre&ious system of fundraisin! controls appear to be that: 31 <Both cash and non-cash .i.e. direct debits, standin orders etc1 charitable fundraisin from the public will re8uire permits from the +ardaW Fthe Irish PoliceG, and only re istered charities will be able to conduct charitable fundraisin . Sealed collection bo4es will be the standard re8uirement for collections in public places and the bo4es will have to display the name and charity number of the charity .the Re ulator has the discretion to ma6e an e4ception to the sealed collection bo4 rule to facilitate the ma6in of chan e for to6en sellers1. Charities that fundraise will be e4pected to comply with the nonstatutory Statement of Principles for 'undraisin .available at www.ictr.ie1, and will also be e4pected to comply with specific Codes of +ood Practice for 'undraisin when they are developed.< )# *>3( 2 ne" definition of <collection< is pro&ided under section *3 of the 2--* 2ct "hich states: <9collection9 means the collection or attempted collection of money from the public in any public place or places or by house to house visits or both in such place or places and by such visits for the benefit .actual, alle ed or implied1 of a particular ob;ect, whether charitable or not, and whether U .a1 .b1 any consideration is or is not iven, or any bad e, emblem or other to6en is or is not e4chan ed or offered in e4chan e,

3-

31

32

http:CC""">pobail>ieCenC1harities9e!ulationC09I4 L2-F32TT#31#29ITI3S21T-*>pdf< at 1< para 1> See Factsheet issued by the Wheel entitled The Charities %ct #$$* at: http:CC""">"heel>ieCsitesCdefaultCfilesC1harities=2ct=2--*=Factsheet>pdf 2ccordin! to the information pro&ided at http:CC""">"heel>ieCabout< <The ,heel is a support and representative body connectin community and voluntary or anisations and charities across Ireland. 5stablished in !***, The ,heel has evolved to become a resource centre and forum for the community and voluntary sector.< http:CC""">"heel>ieCsitesCdefaultCfilesC1harities=2ct=2--*=Factsheet>pdf< at para 2>3>

132

for money so collected, but does not include e4empt activity, be in or receivin almsP N .< *>3) Section *3 also introduces ne" definitions of <money< and <noncash collection<. Throu!h the 2--* reforms< ne" methods of collection< "hich "ere pre&iously un:no"n under the 1*%2 2ct Asuch as direct debits and standin! ordersB< are no" "ritten into the la" and are sub6ect to re!ulation and control "hen used in a charity fundraisin! acti&ity> *>3* The ne" reforms "ill also encompass the use of non-statutory codes of practice> In line "ith this< a draft Statement :f +uidin Principles 'or 'undraisin has already been issued>33 This document< "hich "as dra"n up by charity fundraisin! practitioners and donors< 3+ is stated to be intended <to complement and build on the e4istin le al framewor6 within which all charities operate<< and <see6s to o further than the minimum le al re8uirements by offerin a set of overarchin principles and some uidance about how fundraisin should be approached and or anised.< 35

O&r $" -&)'$") a"% .r$.$)a-) $" #(e re*&-a#'$" f&"%ra')'"* a #'+'#'e) '" H$"* K$"*

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*>+2s "e sa" earlier in this chapter< re!ulation of fundraisin! acti&ities in #on! $on! under the e;istin! system is confined to measures to maintain public order< public hy!iene< and to pre&ent !amblin!> For charity collections not re@uirin! prior appro&al from the Social Welfare .epartment ASW.B< the Food and 3n&ironmental #y!iene .epartment AF3#.B or the Tele&ision and 3ntertainment 8icensin! 2uthority AT382B Aie< those not carried out in a public place or in&ol&in! lotteries 3%B< there seems to be no mechanism throu!h "hich the 7o&ernment or the public can effecti&ely monitor ho" the monies raised are spent> *>+1 Some :ey limitations of the e;istin! re!ulatory measures on fundraisin! are summarised belo"> • 2s "e ha&e seen< charities "ishin! to conduct certain fundraisin! acti&ities Aie< those in a public place or in&ol&in! lotteriesB ha&e to apply to one or more of a ran!e of !o&ernment departments Aincludin! SW. and T382B< each "ith &aryin! procedures and re@uirements< in order to be !ranted permission> While SW. and T382 endea&our responsibly to carry out "hat chec:s they can< neither SW. nor T382 appear to impose a <fit

•

33

3+ 35 3%

See Irish 1harities Ta; 9esearch 8td< Statement ,f 7uidin! 0rinciples For Fundraisin!: .raft 0roposals AFeb 2--)B at: http:CC""">ictr>ieCfilesC93>L2-7uidin!L2-0rinciplesL2-ofL2-Fundraisin!L2-.raft L2-StatementL2--L2-,ctL2-2--(>pdf Same as abo&e< at *> Same as abo&e> Such as charitable auctions< balls< concerts< dinners< "al:s< film premiere< sho"s in mass media< re@uest for donation by mail< ad&ertisements or phone-in arran!ements: see The :mbudsman Report< at para % at ii>

133

and proper< test on applicant or!anisations to ensure that they are persons of inte!rity> A,nly in the case of fla! day applications is the applicant re@uired to ha&e a three-year trac: record of charity "or:< and for other !eneral fundraisin! acti&ities< the applicant may not be !ranted "ith a permit if the applicant has breached the permit conditions in its pre&ious fundraisin! acti&ity>B • There is a lac: of public access to information on fundraisin! acti&ities and there is no centralised information point or hotline "here the public can ma:e en@uiries about fundraisin! acti&ities carried on in public> While some broad !uidelines and best practice manuals on fundraisin! e;ist< there are no statutory pro&isions settin! out detailed fundraisin! re@uirements of charitable or!anisations< co&erin! such issues as internal controls< accountability and transparency> The &arious !uidelines "hich ha&e been issued in the area of charity fundraisin! in #on! $on! are all &oluntary< non-statutory !uidelines "hich charitable or!anisations may or may not choose to follo"> These !uidelines ha&e been de&eloped o&er time by different departments or authorities> 1onse@uently< there may be certain areas of o&erlap as "ell as !aps< "here important issues may be co&ered in insufficient detail or may not be co&ered at all> While the terms and conditions imposed on lottery licences by T382 are bac:ed by criminal sanction< and it is an offence under section +A1(B of the Summary ,ffences ,rdinance A1ap 22)B to hold a fundraisin! acti&ity in a public place "ithout a permit< the terms and conditions imposed on the !rant of permits by SW. and temporary ha":er licences by F3#. are administrati&e only> The only sanction for a breach of these terms appears to be that the charity may not be !ranted a permit or licence in future>

•

•

•

Our recommendation on charita&le fundrai ing *>+2 In the course of our deliberations< "e ha&e endea&oured to formulate proposals to directly address the percei&ed "ea:nesses in the current system of re!ulatin! charitable fundraisin! in #on! $on!> ,ur !uidin! principle has been that such acti&ities should be conducted in future in a more transparent and accountable manner> 4onetheless< "e are also hi!hly conscious that any future re!ulatory measures should be no more than is necessary to impro&e the system< as "e "ould not "ish to see introduced unnecessary incon&enience< either to the dedicated charitable or!anisations and &oluntary a!encies "hich carry out this important charity "or:< or to the

13+

philanthropic public "hich pro&ides their donations so !enerously> In balancin! these t"o ob6ecti&es< "e belie&e o&erall a relati&ely li!ht-handed approach in this area is appropriate> Re ulatory measures on fundraisin activities in public places and lotteries *>+3 The Sub-committee considers that the e;istin! limited re!ulation of fundraisin! acti&ities by charities in #on! $on! is a matter of concern> 2 particular issue is the lac: of transparency in ho" charity donations "hich are collected are used< and to "hat e;tent they are used for their intended charitable purposes> We also note the potential for confusion "hich may arise from the differin! re@uirements and procedures of the &arious !o&ernment departments "hich ha&e responsibilities in this area> Furthermore< there is a lac: of public access to information on fundraisin! acti&ities> *>++ 2fter careful deliberation of different possible options for reform< the Sub-committee has concluded that the re!ulatory functions in relation to fundraisin! acti&ities "hich are currently performed by SW.< F3#. and T382 should be transferred to the future charity commission< "hich "e ha&e recommended else"here in this paper should be established> Re $11e"%a#'$" 1/ We re $11e"% #(a#C G1H #(ere )($&-% :e a )$-e re*&-a#$r0 :$%0 Ga "one" top hop"H #$ .r$ e)) a"% *ra"# a-- .er1'#) a"% -' e" e) "e e))ar0 f$r (ar'#a:-e f&"%ra')'"*9 a"% #$ 1$"'#$r #(e &)e $f f&"%) ra')e% :0 )& ( a #'+'#'e)I #(') "one" top hop" )er+' e )($&-% :e .r$+'%e% :0 #(e f&#&re (ar'#0 $11'))'$" ,(' ( )($&-% :e +e)#e% ,'#( #(e .$,er) a"% %&#'e) &rre"#-0 e<er ')e% :0 #(e S$ 'a- We-fare De.ar#1e"#9 #(e F$$% a"% E"+'r$"1e"#a- H0*'e"e De.ar#1e"# a"% #(e Te-e+')'$" a"% E"#er#a'"1e"# L' e")'"* A&#($r'#0 '" re-a#'$" #$ a&#($r')'"* (ar'#0 f&"%ra')'"* a #'+'#'e) '" .&:-' .-a e) a"% #($)e '"+$-+'"* -$##er'e)I a"% #(e f&#&re (ar'#0 $11'))'$" )($&-% :e re).$")':-e f$r e"a:-'"* .&:-' a e)) #$ '"f$r1a#'$" re-a#'"* #$ f&"%ra')'"* a #'+'#'e) a"% f$r .r$+'%'"* a" e">&'r0 re).$")e )er+' e #$ #(e .&:-' !

G2H

G/H

:ther types of fundraisin activity *>+5 For the time bein!< the Sub-committee does not propose le!islation to re!ulate other types of fundraisin! acti&ity< such as charitable

135

balls and concerts< or solicitation letters and solicitation throu!h electronic means such as internet and SMS from indi&iduals or charities> We consider< ho"e&er< that for all charitable fundraisin! acti&ities< "hether in the public domain or other"ise< the fundraisin! body concerned should be re@uired prominently to display its charity re!istration number in the course of carryin! out its fundraisin! acti&ities> That should include a re@uirement that the charity display its re!istration number on its "ebsite or on any material solicitin! donations> *>+% There has recently been e;tensi&e press co&era!e of a case in&ol&in! the founder of a charity "ho "as con&icted of ha&in! se;ual relations "ith an under-a!e child at a children's home in Ounnan run by the charity concerned>3( 1oncern "as e;pressed that the charity continued to solicit contributions &ia its "ebsite after the con&iction> In the li!ht of that case< there ha&e been calls for this a&enue of collection to be re!ulated> There are< ho"e&er< practical difficulties in de&isin! "or:able controls on internet collection and there is little that can be done to pre&ent the deliberately fraudulent from solicitin! donations online< particularly if the indi&idual or or!anisation has no physical presence in #on! $on!> *>+( ,ne measure "hich "e belie&e could assist the public is a statutory re@uirement that any charity re!istered in #on! $on! under our proposed ne" le!islati&e scheme should be re@uired to display its re!istration number on its "ebsite> 1oupled "ith a campai!n to raise public a"areness of the ne" pro&isions< "e thin: that "ould offer the public some assurance of the le!itimacy of the particular charity "hen donatin! online> We en&isa!e that members of the public "ould be able to chec: the &alidity of the charity's re!istration &ia the future charity commission> *>+) Solicitation of donations &ia the internet is an e;pandin! and fast-chan!in! area of charitable !i&in!> We "ould particularly "elcome &ie"s and su!!estions from the public as to ho" and to "hat e;tent these acti&ities should be re!ulated in order to minimise the ris: of abuse "hile at the same time not unduly inhibitin! the "or: of bona fide charities>

Re $11e"%a#'$" 13 We re $11e"% #(a#9 f$r a-- f$r1) $f (ar'#a:-e f&"%ra')'"* a #'+'#'e)9 #(e re*')#ra#'$" "&1:er $f a"0 (ar'#a:-e $r*a"')a#'$" '"+$-+e% '" #(e a #'+'#'e) )($&-% :e .r$1'"e"#-0 %').-a0e% $" a"0 re-a#e% %$ &1e"#)9 $r %').-a0e% $" a"0 1ea") #(r$&*( ,(' ( a..ea-) f$r (ar'#a:-e %$"a#'$") are 1a%e G)& ( a) )$-' '#a#'$" -eaf-e#)H!

3(

See< for instance< /Social "or:er !ets ei!ht years for child se;/< SCEP< ( Danuary 2-11 and /,rphan mercy man !ets ) years for child se;/< The Standard< ( Danuary 2-11> Similar reports appeared the same day in Ein Pao< the :riental =aily Cews< the Sun and the (- 5conomic Times>

13%

Professional fundraisers *>+* The Sub-committee is a"are that there has been a substantial !ro"th in the use of professional fundraisers in recent years and "e consider that the e;tent to "hich their acti&ities should be re!ulated is an important issue> We note that in o&erseas 6urisdictions< such as Ireland< non-statutory codes of !ood practice are adopted to re!ulate the acti&ities of professional fundraisers> The Sub-committee is of the &ie" that the future charity commission should de&elop codes of practice alon! these lines> We also propose that the future charity commission should consider the feasibility of re@uirin! professional fundraisers to re!ister "ith the commission> *>5We note that one reason for re&ie"in! the position of professional fundraisers in #on! $on! is that at present< a donor si!nin! a standin! order to donate to a particular charity may not realise that the donation collectors are professional fundraisers "ho are in fact paid by the charity on "hose behalf the funds are raised< and that part of the funds donated "ould be used to pay these professional fundraisers> The remuneration may be paid in different "ays< such as by a monthly basic fee or a commission fee> The Sub-committee belie&es that there is a need for !reater disclosure to the future charity commission and the public about the remuneration of professional fundraisers> The Sub-committee considers that as a matter of !ood practice< professional fundraisers or commercial participators and charities should ma:e sufficient disclosure of any prior "ritten a!reement bet"een them> The ma:in! of a solicitation statement< such as that used under the system in 3n!land and Wales discussed earlier< is also a !ood practice "hich should be encoura!ed> *>51 The Sub-committee is also concerned about the hirin! of elderly persons by professional fundraisers to solicit donations on the street> In order to a&oid any e;ploitation of the elderly durin! such acti&ities< "e propose that the future charity commission should re&ie" the matter and issue appropriate !uidelines>

Re $11e"%a#'$" 15 I" re-a#'$" #$ .r$fe))'$"a- f&"%ra')er)9 ,e re $11e"% #(a#C G1H #(e f&#&re (ar'#0 $11'))'$" )($&-% %e+e-$. a"% '))&e "$"-)#a#&#$r0 $%e) $f *$$% .ra #' e #$ re*&-a#e #(e a #'+'#'e) $f .r$fe))'$"a- f&"%ra')er)I #(e f&#&re (ar'#0 $11'))'$" )($&-% $")'%er #(e fea)':'-'#0 $f re>&'r'"* .r$fe))'$"a- f&"%ra')er) #$ re*')#er ,'#( '#I

G2H

13(

G/H

#(e f&#&re (ar'#0 $11'))'$" )($&-% e" $&ra*e a) a 1a##er $f *$$% .ra #' e a1$"* .r$fe))'$"af&"%ra')er) $r $11er 'a- .ar#' '.a#$r) G'" -&%'"*9 :&# "$# -'1'#e% #$H GaH #(e 1a2'"* $f )$-' '#a#'$" )#a#e1e"#) G)& ( a) #($)e &)e% &"%er #(e )0)#e1 '" E"*-a"% a"% Wa-e)H :0 .r$fe))'$"a- f&"%ra')er)I %') -$)&re $f #(e'r re1&"era#'$" #$ #(e f&#&re (ar'#0 $11'))'$" a"% #(e .&:-' I %') -$)&re #$ #(e f&#&re (ar'#0 $11'))'$" $f a"0 .r'$r ,r'##e" a*ree1e"# :e#,ee" #(e1 a"% (ar'#'e)I a"%

G:H G H

G3H

#(e f&#&re (ar'#0 $11'))'$" )($&-% re+'e, #(e .$)'#'$" a"% '))&e *&'%e-'"e) $" er"'"* #(e ('r'"* $f e-%er-0 .er)$") #$ )$-' '# %$"a#'$") $" #(e )#ree#!

%d hoc fundraisin *>52 Knfortunately< in recent years there appears to ha&e been an increasin! need for charities to underta:e ad hoc fundraisin! acti&ities in response to ma6or natural disasters> We ha&e considered therefore "hether a special mechanism is re@uired for these ad hoc fundraisin! efforts> We note that at present< there are special arran!ements in place "here the Social Welfare .epartment accords hi!h priority and e;ercises fle;ibility in processin! applications for such ad hoc public subscription permits> *>53 2s there is an e;istin! special arran!ement for the fast-trac: processin! of applications relatin! to ad hoc fundraisin! for natural disasters< the Sub-committee considers that similar administrati&e measures should be adopted in future> We also consider that the details of these arran!ements should be a matter for the future charity commission to determine> 'urther possible issues for consideration in the future *>5+ ,ne area on "hich the Sub-committee has not yet formulated any pro&isional proposals is "hether there should be further le!al sanctions introduced for non-compliance "ith re!ulatory measures o&er charitable fundraisin! acti&ities> *>55 2s "e noted earlier in this chapter< le!al sanctions are already in place for carryin! out certain fundraisin! acti&ities "ithout the necessary permits and licences> ,ffenders "ho raise funds in a public place "ithout a permit are liable to be prosecuted under the Summary ,ffences ,rdinance A1ap 22)B< "hile those raisin! funds throu!h the sale of lottery tic:ets "ithout

13)

a licence are liable to be prosecuted under the 7amblin! ,rdinance A1ap 1+)B> There is also the administrati&e sanction imposed by the Social Welfare .epartment a!ainst non-complyin! or!anisations< "hich is that a permit may in future be refused to charities "hich ha&e pre&iously breached permit conditions> *>5% The Sub-committee has recommended in 9ecommendation 13 that the po"ers and duties currently e;ercised by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority in relation to authorisin! charity fundraisin! acti&ities in public places and those in&ol&in! lotteries should be &ested "ith the future charity commission> The Sub-committee is of the &ie"< ho"e&er< that the role and authority of these departments in initiatin! prosecutions of charitable or!anisations "hich are in breach of the la" should be ta:en up by the 0olice or other rele&ant authorities> The Sub-committee does not consider that the future charity commission should be responsible for prosecutin! non-complyin! or!anisations> #o"e&er< concerns ha&e been raised by members of the Sub-committee as to "hat administrati&e sanctions the future charity commission may be able to impose "hen the charity's noncompliance relates to a breach of re@uirements laid do"n in !uidelines or codes of conduct issued by the charity commission> The Sub-committee has not yet de&eloped any firm &ie"s on this> *>5( The Sub-committee "ould li:e to see: public input on "hether there should be an e;press po"er !i&en to the future charity commission to sanction or!anisations for non-compliance "ith the terms laid do"n in codes of conduct issued by the commission>

13*

C(a.#er 10 C(ar'#'e) a"% #a<
============================================

I"#r$%& #'$"
1->1 2s "e ha&e obser&ed earlier< a si!nificant benefit of creatin! a charitable or!anisation is that the or!anisation itself is not !enerally liable to ta; and those "ho ma:e donations to it may claim the amount donated as a deduction from their assessable income> 1 In this chapter< "e re&ie" the special ta;ation position of charities< both in #on! $on! and o&erseas< and consider the e;tent to "hich any reform may be re@uired>

C&rre"# )'#&a#'$" '" H$"* K$"*
1->2 2n entity may be !ranted ta; e;emption in #on! $on! if it is accepted by the Inland 9e&enue .epartment as a <charitable institution< or <trust of a public character< under section )) of the Inland 9e&enue ,rdinance A1ap 112B> The .epartment maintains a list of charities in #on! $on! "hich ha&e successfully applied for ta; e;empt status> #o"e&er< as "e ha&e seen earlier in this paper< the .epartment is not responsible for re!isterin! charities< nor for monitorin! their conduct> 2ccordin! to the Inland 9e&enue .epartment's statistics< the number of charities that ha&e been !ranted ta; e;emption in recent years is as follo"s: .Charities +ranted Ta4 54emption1 %s at year endin 31>3>2--5 31>3>2--% 31>3>2--( 31>3>2--) 31>3>2--* 31>3>2-1Cumber +<1%2 +<+35 +<)32 5<311 5<)*) %<3)-

1->3 There is no statutory re@uirement in #on! $on! for charitable or!anisations to prepare Aunless they are in the form of a company incorporated under the 1ompanies ,rdinance A1ap 32BB< or in any case to submit< annual reports or accounts reportin! their finances> The Inland

1

See 1hapter 1< abo&e< at para 1>5>

1+-

9e&enue .epartment "ill only call for accounts< annual reports or other documents for the purpose of conductin! a periodic re&ie" of a ta; e;empt or!anisation so as to ensure that the or!anisation is still charitable and its acti&ities are compatible "ith its ob6ects> 2 Ta( e(emption for charita&le organi ation 1->+ 2s noted abo&e< ta; e;emption may be !ranted to an or!anisation if it is a charitable institution or trust of a public character "ithin the scope of section )) of the Inland 9e&enue ,rdinance A1ap 112B>3 The definition of charitable purposes "as discussed in 1hapters 2 and 5 of this paper> We ha&e noted that "hile the terms <charitable institution<< <trust of a public character< and <charitable purposes< are not defined in the Inland 9e&enue ,rdinance< the term <approved charitable donation< is defined< as meanin! <a donation of money to any charitable institution or trust of a public character which is e4empt from ta4 under section // or to the +overnment, for charitable purposes.<+ 1->5 In practice< the Inland 9e&enue .epartment loo:s to the common la" to determine "hether an or!anisation can be accepted as bein! established for charitable purposes< 5 in particular to 8ord Macna!hten's four principal di&isions of charitable purpose set out in Income Ta4 Special Purposes Commissioners v Pemsel. % Further< the or!anisation must ha&e been established for e;clusi&ely charitable purposes> ( 1->% Section )) of the Inland 9e&enue ,rdinance A1ap 112B states: <Cotwithstandin anythin to the contrary in this :rdinance contained there shall be e4empt and there shall be deemed always to have been e4empt from ta4 any charitable institution or trust of a public character& Provided that where a trade or business is carried on by any such institution or trust the profits derived from such trade or business shall be e4empt and shall be deemed to have been e4empt from ta4 only if such profits are applied solely for charitable purposes and are not e4pended substantially outside (on -on and either -

2 3

+

5

% (

See 1hapter 2< abo&e< at para 2>2)> The online &ersion of this list is a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=inde;>htm> Section 2A1B< Inland 9e&enue ,rdinance A1ap 112B> See 1hapter 2< abo&e< at para 2>22> Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed< Sept 2-1-B< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> I1)*1J 21 531 A#8B> See also 1hapter 5< abo&e< at paras 5>3 to 5>)> Inland 9e&enue .epartment< =epartmental Interpretation and Practice Cotes, Co )3 .Revised1 Concessionary =eductions& Section #"C& %pproved Charitable =onations ASep 2--%B< a&ailable at: http:CC""">ird>!o&>h:Cen!CpdfCe=dipn3(>pdf>

1+1

.a1

the trade or business is e4ercised in the course of the actual carryin out of the e4pressed ob;ects of such institution or trustP or the wor6 in connection with the trade or business is mainly carried on by persons for whose benefit such institution or trust is established.<

.b1

1->( 2 further condition is that only charities under the 6urisdiction of the #on! $on! courts are eli!ible for e;emption> These include charities that ha&e been established in #on! $on!< or the <(on -on establishment of overseas charities such as those deemed to be established in (on -on under section 2 of the Societies :rdinance or re istered under Part MI of the Companies :rdinance.<) 1->) It is e&ident that under the pro&iso to section )) of the Inland 9e&enue ,rdinance A1ap 112B a charity may trade or carry on a business and still be entitled to ta; e;emption "here the conditions set out in the pro&iso are satisfied< namely that:   the profits from the trade or business carried on by the charity are applied solely for charitable purposesH the profits are not e;pended substantially outside #on! $on!H and either:   the trade or business of the charity is e;ercised in the course of the actual carryin! out of the e;pressed ob6ects of the charityH or the "or: in connection "ith the trade or business of the charity is mainly carried on by those for "hose benefit the charity is established>

1->* The application of the pro&iso to section )) of the ,rdinance has been considered recently by the Inland 9e&enue Foard of 9e&ie" * and the 1ourt of First Instance1- in a case concernin! the 1hurch Fody of the #on! $on! Shen! $un! #ui< "hich is the incorporation of the 2n!lican 1hurch in #on! $on!> 1->1The case turned on the application of the pro&iso to section )) and "hether the profit to the 1hurch !enerated from a land de&elopment

)

*

1-

Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed< Sept 2-1-B< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> 1ase 4o .1+C-)< A2--)--*B Mol 23 Inland 9e&enue Foard of .ecisions> .ecision a&ailable at: http:CC""">info>!o&>h:CborCen!CpdfCd&=23firstCd1+-)>pdf> Church Body of the (on -on Shen -un (ui v Commissioner of Inland Revenue H (on -on Shen -un (ui 'oundation v Commissioner of Inland Revenue ADan 2-1-B #1I2 2C2--*> .ecision a&ailable at: http:CCle!alref>6udiciary>!o&>h:ClrsCcommonC6uC6u=frame>6sp .ISS%*523Ecurrpa!eST>

1+2

transaction "as to be considered as 'capital holdin!' for charitable purposes or 'tradin! or business' for non-charitable purposes> Foth the Inland 9e&enue Foard of 9e&ie" and the 1ourt of First Instance on appeal held that the onus "as on the charity to positi&ely establish that it had satisfied all of the re@uirements of section ))> In this case< it "as held that there "as a lac: of e&idence substantiatin! the 1hurch's claim that the profits deri&ed from the transaction Athe 'trade or business' in this caseB "ere used <solely for charitable purposes<> 2ccordin!ly< the 1hurch "as found to be liable to profits ta; on the monies "hich it had made from the transaction> 1->11 2t the time of "ritin! this paper< an appeal has been lod!ed to the 1ourt of 2ppeal> Ta( deduction for charita&le donation 1->12 2s "e noted in 1hapter 2<11 under section 2%1 of the Inland 9e&enue ,rdinance A1ap112B< a ta;payer may deduct any <approved charitable donations< made by him Ain the a!!re!ate sum of not less than #$?1--B from his assessable profits or char!eable income durin! a year of assessment> The term <approved charitable donation< is defined< as noted abo&e< under section 2A1B of the ,rdinance> Section 1%. of the ,rdinance also allo"s deductions for appro&ed charitable donations to be made by a ta;payer "ho is sub6ect to profits ta;> .eductions under both sections are sub6ect to a current ceilin! of 35L of the assessable income or profits> 12 The table belo" sets out fi!ures pro&ided by the Inland 9e&enue .epartment for the total amount of appro&ed charitable donations allo"ed as ta; deductions in #on! $on! in recent years> .%mount of %pproved Charitable =onations %llowed for =eduction1 Kear of %ssessment 2--3C-+ 2--+C-5 2--5C-% 2--%C-( 2--(C-) 2--)C-* Profit Ta( .H billion1 1>2) 1>(2 1>(* 2>15 2>51 3>-3 Salaries Ta4 .H billion1 2>)* 3>3* 3>+3>(% +>52 5>-1 Total .C &illion/ +>1( 5>11 5>1* 5>*1 (>-3 )>-+

11 12

See 1hapter 2< abo&e< at para 2>13> Section 1%.A2BAbB or 2%1A22BAcB< Inland 9e&enue ,rdinance A1ap 112B> This ceilin! fi!ure may &ary from year to year> For e;ample< section 2%1A22B states that: <The percenta es specified N shall be - .a1 for any year of assessment up to and includin the year of assessment commencin on ! %pril #$$#, !$OP .b1 for the year of assessment commencin on ! %pril #$$) or any subse8uent year of assessment up to and includin the year of assessment commencin on ! %pril #$$3, #0OP .c1 for any year of assessment commencin on or after ! %pril #$$/, )0O.<

1+3

1->13 The Inland 9e&enue .epartment has made a&ailable to the public the interpretation and practice notes 13 that it applies in determinin! "hether particular donations are considered <approved charitable donations< for ta; deduction purposes> These are discussed in 1hapter 2 of this paper> #o"e&er< the interpretation and practice notes ha&e no bindin! force< and do not affect a ta;payer's ri!ht of ob6ection or appeal <to the Commissioner Fof Inland RevenueG, the Board of Review or the Court.< 1+ Ailing of account and report 1->1+ 2t present< the ta; e;emption status of a charity is sub6ect to periodic re&ie" by the Inland 9e&enue .epartment> In !eneral< the re&ie" is conducted e&ery four years in respect of each charity> The .epartment conducts more fre@uent or earlier re&ie"s on indi&idual cases as and "hen necessary to protect the re&enue> In conductin! the re&ie"< the .epartment re@uests the charity to furnish "ithin one month its accounts< annual reports< other documents and information Aincludin! details of the charity's acti&itiesB to &erify that its ob6ects are still charitable and its acti&ities are compatible "ith its e;pressed ob6ects> 1->15 If a ta;-e;empt charity is found to ha&e en!a!ed in other acti&ities< clarification "ill be sou!ht if these appear to be at &ariance "ith the charitable ob6ects stated in its !o&ernin! instrument> The Inland 9e&enue .epartment "ill then !o o&er the further information recei&ed and ta:e a decision on "hether the ta; e;emption status should be continued or "ithdra"n> Fefore the ta; e;emption status is "ithdra"n< the .epartment "ill usually as: the charity< should it "ish to maintain its e;emption status< for e;planations and to ta:e remedial measures such as immediate termination of the inappropriate in&estments and acti&ities< and to pay the ta; payable> Knder the current le!islation< the .epartment is empo"ered to raise assessments and demand ta; "ithin si; years after the e;piration of the rele&ant year of assessment> If the charity fails to comply "ith the necessary re@uirements "ithin a stipulated period< the .epartment "ould immediately "ithdra" its ta; e;emption status< similar to its action a!ainst those charities "hich ha&e !i&en no reply to the re&ie" or ha&e ceased operation> 1->1% The decision of the Inland 9e&enue .epartment is ta:en pursuant to the Inland 9e&enue ,rdinance A1ap 112B for the purposes of re&enue protection> The charity has a ri!ht to apply to the court for 6udicial re&ie" of the .epartment's "ithdra"al of its ta; e;emption status> It could also dispute the ta; assessments throu!h the statutory ob6ection and appeal procedures under the ,rdinance> 1->1( 2s most charitable or!anisations are limited companies by !uarantee< they are re@uired to satisfy the re@uirements for preparin! audited accounts under the 1ompanies ,rdinance A1ap 32B> For charitable
13 1+

Same as abo&e> Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed< Sept 2-1-B< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm> See 1hapter 2< abo&e< at para 2>22>

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or!anisations "hich e;ist as unincorporated or!anisations< such as societies re!istered under the Societies ,rdinance A1ap 151B< there are no le!islati&e re@uirements for the preparation of audited accounts>

C(ar'#'e) a"% #a< '" $#(er 4&r')%' #'$")
1->1) 2s is the case in #on! $on!< in other common la" 6urisdictions< charitable or!anisations are !ranted ta; e;emptions on the income they recei&e for charitable purposes> 2nne; ( presents a detailed analysis of the la" relatin! to charities and ta;ation in a number of these o&erseas 6urisdictions> 1->1* 2s part of our deliberations on the po"ers and duties "hich should reside "ith the future charity commission for #on! $on!< one of the issues "e ha&e considered is the e;tent to "hich its role should interface "ith that of the Inland 9e&enue .epartment for the purposes of assessin! the ta; e;emption status of charities> 9e&ie"in! the position o&erseas< "e ha&e focused on the charity commissions or similar bodies in 3n!land< Scotland< Ireland and 4e" 5ealand< and ha&e studied the 'di&ision of labour' bet"een their respecti&e charity commissions and ta;ation authorities in handlin! ta; e;emptions for charities> 2s our findin!s belo" indicate< !enerally there is a clear demarcation in the roles bet"een these t"o types of authorities< "ith the responsibility for assessin! a charity's eli!ibility for ta; e;emption restin! firmly "ith the rele&ant ta; authority> England and 0ale 1->2The main pro&isions dealin! "ith statutory e;emptions from ta; on the income and profits of a charity in 3n!land and Wales are contained in section 5-5 of the Income and 1orporation Ta;es 2ct 1*))< and co&er a "ide ran!e of financial !ains> The authority to "hich charities ha&e to apply for ta; e;emption is noted in section 5-5A1B of the 1*)) 2ct as bein! <the Board<> 1->21 The "ord <Board< is defined in section )32 of the 1*)) 2ct to mean <the Commissioners of Inland Revenue< Aie< of #M 9e&enue and 1ustomsB> Thus< under section 5-5A1B of the 1*)) 2ct< a claim for e;emption from ta;ation for the types of income and profits mentioned in section 5-5A1B has to be made to the 1ommissioners of Inland 9e&enue< not the 1harity 1ommission for 3n!land and Wales> 1->22 The 1harities 2ct 1**3< "hich "as amended by the 1harities 2ct 2--%< pro&ides in section 12 that one of the main responsibilities of the 1harity 1ommission is to re!ulate the runnin! of charities in 3n!land and Wales> Section 11 of the 1**3 2ct pro&ides that the ma6or functions of the 3n!lish 1harity 1ommission are: to facilitate the better administration of charitiesH to in&esti!ate any misconduct or mismana!ement in the administration of charitiesH and to pro&ide remedial or protecti&e actions to

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charities that ha&e been mismana!ed> Section 1. of the 1**3 2ct pro&ides for the !eneral duties of the 1harity 1ommission> 1->23 In section 32 of the 1**3 2ct< it is stated that< unless other"ise pro&ided< charities ha&e to re!ister "ith the 1harity 1ommission and section 3F of the 1**3 2ct places charity trustees under a duty to apply to the 1harity 1ommission for their charities to be re!istered> Section 3 of the 1**3 2ct pro&ides that the 9e!ister of 1harities is to be :ept by the 1harity 1ommission> ,nce a charity has been re!istered "ith the 1ommission< it "ill be reco!nised by the 1ommissioners of Inland 9e&enue as a charity for the purposes of ta;-e;emption> If #M 9e&enue and 1ustoms is satisfied that a body is established for "holly charitable purposes< it "ill then allocate a charity ta; reference number to the charity> 1->2+ With re!ard to the re@uirements for charities to submit accounts to the 1harity 1ommission< althou!h section +3 of the 1**3 2ct pro&ides that annual audits or e;aminations of accounts of charities "hich are not companies ha&e to be submitted to the 1harity 1ommission< and section ++2A2B of the 1**3 2ct pro&ides that an auditor of a charity "hich is not a company has a duty to report matters mentioned in the section to the 1harity 1ommission< there is no indication in these pro&isions that the submission of these financial documents or information is for the purposes of ta;assessment or the !rantin! of ta;-e;emption> 1->25 From the pro&isions discussed abo&e< in particular section 5-5 of the 1*)) 2ct< it "ould appear that in 3n!land and Wales the ta; assessment po"ers and functions in relation to charities lie "ith the Foard Aie< the 1ommissioners of Inland 9e&enue< as part of the #M 9e&enue and 1ustomsB and not "ith the 3n!lish 1harity 1ommission> *reland 1->2% In Ireland< the 1harities 9e!ulatory 2uthority "as created under the 1harities 2ct 2--*< and the !eneral functions of the 2uthority are set out in section 1+ of the 2--* 2ct> Knder this section< the 2uthority is tas:ed "ith the responsibility for ensurin! that charities are operatin! "ithin the conditions and re@uirements imposed upon charities and their trustees under the 2--* 2ct> AWe note< ho"e&er< that this le!islation "ill be comin! into force in Ireland in phases>B 1->2( Section 3* of the 2--* 2ct pro&ides that a re!ister of charitable or!anisations is to be established and maintained by the 1harities 9e!ulatory 2uthority> Section 3*A3B of the 2ct pro&ides that a charitable or!anisation intendin! to operate or carry on acti&ities has to apply to the 2uthority to be re!istered> Trustees of charities are under a duty to re!ister on behalf of their charities>

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1->2) 4ot"ithstandin! the super&isory role of the 2uthority "ith respect to the operation of charities in Ireland< section (A1B of the 2--* 2ct specifically pro&ides that nothin! in the 2--* 2ct / shall operate to affect the law in relation to the levyin or collection of any ta4 or the determination of eli ibility for e4emption from liability to pay any ta4 >/ Further< in pro&idin! for charities' e;emption from liabilities to pay ta;< section (A2B of the 2--* 2ct states that: <.#1 The Revenue Commissioners shall not be bound by a determination of the FCharities Re ulatoryG %uthority as to whether a purpose is of public benefit or not in the performance by them of any function under or in connection with .a1 .b1 .c1 section #$3, #$/ or Consolidation %ct !**3, "$* of the Ta4es

section !3 or 3" of the Capital %c8uisitions Ta4 Consolidation %ct #$$), or section /# of the Stamp =uties Consolidation %ct !***."

1->2* In other "ords< the !rantin! of ta; e;emptions appears to be a matter solely for the 9e&enue 1ommissioners> 2 2--* boo:let issued by the 9e&enue 1ommissioners< entitled %pplyin 'or Relief 'rom Ta4 on The Income and Property of Charities,15 sets out the &arious ta; e;emptions "hich are a&ailable to charities< includin! income ta;< corporation ta; Ain the case of companiesB< capital !ains ta;< deposit interest retention ta;< capital ac@uisitions ta;< stamp duty and di&idend "ithholdin! ta;> 1% The boo:let states that the 9e&enue 1ommissioners are responsible for determinin! claims for ta; e;emptions from charities< and for assessin! "hether claims are established for charitable purposes only>1( New ?ealand 1->3In 4e" 5ealand< the processes of reco!nition of charitable status and the !rantin! of ta; e;emptions are :ept separate and are dealt "ith by the 4e" 5ealand 1harities 1ommission and the Inland 9e&enue respecti&ely< but the t"o or!anisations "or: in close collaboration on the aspect of charities' !o&ernance> 1->31 The 4e" 5ealand 1harities 1ommission "as established under the 1harities 2ct 2--5> The ma6or functions of the 1harities 1ommission are to establish and maintain a re!istration and monitorin! system for charitable or!anisations>1) 1haritable or!anisations in 4e" 5ealand ha&e to be re!istered in the 1harities 9e!ister> ,ne of the benefits of re!isterin! a
15 1% 1( 1)

http:CC""">re&enue>ieCenCta;CitCleafletsCchy1>doc> Same as abo&e< at 2> Same as abo&e< at 3> 4e" 5ealand 1harities 1ommission< % +uide to the Charities %ct < A* Feb 2-1-B> http:CC""">charities>!o&t>nNC8in:1lic:>asp; filetic:etS:(itel-eNdWL3dEtabidS21(EmidS)33

1+(

charity is that re!istration entitles a re!istered charity to ta; e;emptions< and only re!istered charities "ill be e;empt from income ta; char!eable under the Income Ta; 2ct 2--(> The 1harities 1ommission's "ebsite states: <Charities re istered under the Charities %ct are enerally eli ible for e4emptions from income ta4 on some, or all, of their income. They do not need to apply to Inland Revenue for those e4emptions. :nce re istered, they receive information from Inland Revenue outlinin the e4emptions they are entitled to and what they have to do to comply with the re8uirements for the e4emptions.< !* 1->32 ,r!anisations that re@uire reco!nition as re!istered charities apply to the 1harities 1ommission> If the 1ommission decides that they meet the criteria< they "ill be listed on its public re!ister> 2- ,nce they are re!istered< charities ha&e to file an annual return "ithin si; months of their balance date Athe end of their financial yearB and notify the 1harities 1ommission "ithin three months if certain information about their or!anisation chan!es> 1->33 The 1harities 1ommission is responsible for monitorin! the annual returns submitted by re!istered charities> 21 This "ould appear to be carried out for the purpose of maintainin! !ood !o&ernance of charities< rather than necessarily to determine "hether or not ta; e;emption status should be !ranted< or continue to be !ranted< to them> The 1ommission's "ebsite states< <the Inland Revenue remains responsible for administerin the revenue acts and retains the ri ht to audit charities to ensure that they continue to be eli ible for ta4 e4emptions.< 1->3+ We ha&e been ad&ised by the 1harities 1ommission< ho"e&er< that it ma:es an electronic transmission to the Inland 9e&enue e&ery day< pro&idin! it "ith a data-feed of its decisions< as "ell as detailed information about charities> It "ould appear that the Inland 9e&enue !enerally accepts the 1ommission's 6ud!ment as to "hether an entity is a !enuine charity and then !rants the appropriate ta; e;emptions based on the rele&ant ta; la"s> The 1harities 1ommission also ad&ises the Inland 9e&enue of applicants "ho ha&e had their applications declined and charities that ha&e been dere!istered> AThe 1ommission de-re!isters charities because they do not meet their obli!ations to file annual returns and financial records "ith the 1ommission or< upon closer e;amination of their acti&ities< they appear to be en!a!ed in non-charitable pro6ects or in serious "ron!-doin!> In addition< a number of charities re@uest to be de-re!istered because they are "ound up>B Scotland 1->35 While there is no charity commission in Scotland< there is an or!anisation performin! functions similar to a charity commission called the ,ffice of the Scottish 1harity 9e!ulator A,S19B< "hich has the
1* 221

Same as abo&e> http:CC""">re!ister>charities>!o&t>nNC1harities9e!isterC> Same as abo&e>

1+)

responsibilities of !rantin! charitable status to a charity< :eepin! a public re!ister of charites and re!ulatin! the operation of charities in Scotland> The !eneral functions of the ,S19 are set out in section 1A5B of the 1harities and Trustee In&estment AScotlandB 2ct 2--5 as bein!: <.a1 .b1 .c1 .d1 to determine whether bodies are charities, to 6eep a public re ister of charities, to encoura e, facilitate and monitor compliance by charities with the provisions of this %ct, to identify and investi ate apparent misconduct in the administration of charities and to ta6e remedial or protective action in relation to such misconduct, and to ive information or advice, or to ma6e proposals, to the Scottish Einisters on matters relatin to :SCR9s functions.<

.e1

1->3% Section + of the 2--5 2ct pro&ides that or!anisations intendin! to be reco!nised as charities and to be entered in the 9e!ister of 1harities ha&e to apply for re!istration "ith the ,S19> Section 5A1B of the 2ct pro&ides that the ,S19 may appro&e an applicant and enter the name of the applicant in the 9e!ister of 1harities only if it is satisfied that the applicant has met the charity test set out in section ( of the 2--5 2ct> 3ntry of the name of an or!anisation in the 9e!ister of 1harities means that the or!anisation has been !ranted charitable status> ,nly once such status has been conferred can the charity apply to #M 9e&enue and 1ustoms for ta; e;emption> 1->3( In Scotland< all applications from charities for ta; e;emption ha&e to be made to< and are considered by< #M 9e&enue and 1ustoms> If #M 9e&enue and 1ustoms is satisfied that a body is established for "holly charitable purposes< it "ill allocate a charity ta; reference number to the body> 1->3) 2lthou!h section ++ of the 2--5 2ct imposes upon a charity the duty to :eep proper accountin! records< and to pro&ide a copy of the statement of account to the ,S19< there is no indication in the section Aor in section +5 that follo"s X on the failure of charities to pro&ide statements of accountB that these t"o sections are for any ta; assessment purposes> 2!ain< the ,S19 is authorised to obtain documents and information from charities under sections 22 and 2* of the 2--5 2ct> #o"e&er< it appears that the ob6ecti&e for obtainin! information is not to facilitate the ,S19's chec:in! of charities' accounts for the purposes of considerin! the !rantin! of ta; e;emption status< but rather because if any charity no lon!er meets the charity test< section 3- of the 2--5 2ct pro&ides that the charity can be remo&ed from the 9e!ister of 1harities>

O&r $" -&)'$") a"% .r$.$)a-) $" #(e #a<a#'$" $f (ar'#'e) '" H$"* K$"*
1->3* In the course of our deliberations< "e ha&e carefully considered

1+*

"hether any chan!e should be made to the ta;ation position of charities in #on! $on!> We ha&e also re&ie"ed "hether< in the e&ent of the future charity commission bein! established< the e;istin! ta; e;emption po"ers and functions of the Inland 9e&enue .epartment in periodic re&ie" of charities should be transferred to the future charity commission> 1->+2fter carefully considerin! these issues< "e ha&e concluded that< "hile applications for reco!nition of charitable status should be made to the future charity commission Aas proposed else"here in this paperB< the e;istin! ta; e;emption po"ers and periodic re&ie" of charities for ta;ation purposes should remain "ith the Inland 9e&enue .epartment> We ha&e reached this conclusion on the basis that the current system is !enerally "or:in! "ell and lar!ely reflects the position adopted in other common la" 6urisdictions< includin! those "here charity commissions ha&e already been established> 1->+1 We note the e;ample of useful administrati&e collaboration< ho"e&er< bet"een the charity commission and the ta; authority in 4e" 5ealand> We are of the &ie" that the future charity commission< by the pro&ision of rele&ant charities' accounts information to the Inland 9e&enue .epartment< should facilitate as far as possible the periodic re&ie" by the .epartment of a charity's entitlement to continued ta; e;emption> In particular< the future charity commission should report suspicious cases of possible abuse to the .epartment for in&esti!ation> 1->+2 2 further point that "e "ould li:e to stress is the importance of sufficient resources bein! allocated to the Inland 9e&enue .epartment to carry out the function of re&ie"in! the accounts of charities to ensure that their income is !enerated solely for charitable purposes in compliance "ith the la"> This is a hi!hly important function< underpinnin! to a lar!e e;tent< the public's confidence in the charity sector>

Re $11e"%a#'$" 16 We re $11e"%C G1H #(a# e<')#'"* .$,er) $f #a< e<e1.#'$" a"% f&" #'$") $f .er'$%' re+'e, $f (ar'#'e) f$r #a<a#'$" .&r.$)e) )($&-% re1a'" ,'#( #(e I"-a"% Re+e"&e De.ar#1e"#I #a< e<e1.#'$" 1a0 :e *ra"#e% #$ a (ar'#0 :0 #(e I"-a"% Re+e"&e De.ar#1e"# $"-0 ,(e" #(e (ar'#0 (a) :ee" re*')#ere% ,'#( #(e f&#&re (ar'#0 $11'))'$"I )&:4e # #$ G2H a:$+e9 "$ (a"*e #$ #(e e<')#'"* -a, $" #(e #a<a#'$" $f (ar'#'e) '" H$"* K$"*I

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#(a# #(e f&#&re (ar'#0 $11'))'$" )($&-% $--a:$ra#e ,'#( #(e I"-a"% Re+e"&e De.ar#1e"# a) far a) .$))':-e9 .ar#' &-ar-0 :0 #(e .r$+')'$" $f re-e+a"# (ar'#'e)B a $&"#) '"f$r1a#'$"9 #$ fa '-'#a#e #(e De.ar#1e"#B) f&" #'$") '" a))e))'"* (ar'#'e) f$r #a< ,(ere a..r$.r'a#eI a"% #(a# #(e A%1'"')#ra#'$" )($&-% e")&re #(a# )&ff' 'e"# re)$&r e) are a--$ a#e% #$ #(e I"-a"% Re+e"&e De.ar#1e"# #$ arr0 $&# #(e f&" #'$" $f re+'e,'"* a""&a- a $&"#) )&:1'##e% :0 (ar'#'e) #$ #(e f&#&re (ar'#0 $11'))'$"!

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151

C(a.#er 11 C$" -&)'$") a"% .r$.$)a-) $" #(e 0-.r=) %$ #r'"e
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I"#r$%& #'$"
11>1 In this chapter< "e e;amine the la" relatin! to the &ariation and dissolution of charities< focusin! in particular on the <cy-pr?s doctrine< and ho" this is applied in #on! $on! and in other 6urisdictions> 1 ,ur conclusions and proposals for reform in this area are presented at the end of this chapter>

T(e )'#&a#'$" '" H$"* K$"* re*ar%'"* #(e c!"pr# %$ #r'"e9 re)&-#'"* #r&)#) a"% %'))$-&#'$" $f (ar'#'e)
11>2 While a number of other 6urisdictions ha&e mo&ed to"ards a statutory frame"or: for the &ariation of charities< #on! $on! still adopts the common la" basis for the cy-pr?s doctrine> The scope of this doctrine is discussed belo"> The c!"pr# doctrine and re ulting tru t at common law 11>3 2s "e ha&e discussed in earlier chapters of this paper< !enerally charitable trusts are set up for the ad&ancement of particular charitable purposes> The trustees of a charitable trust are under a duty to ma:e use of the property &ested in the charitable trust to ad&ance the charitable purposes of the trust> ,ccasionally< a situation mi!ht arise "here the stated purpose becomes <impossible or impractical to be effectuated,< 2 that is< the trust can no lon!er carry out the purposes for "hich it "as first created> Without the court's inter&ention< a !ift in these circumstances may fail and the trust property may ha&e to be returned to the donor or the donor's estate under the resultin trust principle> This is because the charitable trustees are not the intended beneficiary of the charitable trust< and so do not ha&e any beneficial interest in the trust's property> If certain re@uired conditions are met< ho"e&er< the court can use the cy-pr?s doctrine to order that the property of the charity should be used for a purpose "hich is as near as possible to the e;pressed or ori!inal intention of the donor> If this is achie&ed< the !ift "ill not fail>

1

2

The term <cy-pr?s< means <as near as<: See F 2 7arner AedB< Blac69s Law =ictionary AWest 7roup< 1***B at 3*2> 8 Ma< 58uity and Trusts Law in (on -on A8e;is 4e;is< 2--*B< at para 1%-%(>

152

11>+ The donor's intention is crucial in decidin! "hether the cy-pr?s doctrine can be applied> If any < eneral charitable intention< is found under the trust< the doctrine of cy-pr?s "ill allo" the trust property to be applied for other purposes "hich are as near as possible to the e;pressed intentions of the donor< so that the trust property can remain dedicated to charity> It has been stated that: <It is a fundamental principle of the law of charities that wherever a clear intention to devote property to charity is shown, and that intention is not confined to a particular form of charity which is initially impracticable, or a purpose which is ille al, effect must be iven to it. The law distin uishes between the charitable intention and the mode of e4ecutin it and ma6es provision for the charitable intention to be carried into effect cypr?s, that is to say, by substitutin for the mode indicated by the donor another mode as similar as possible to the mode indicated.<) 11>5 2 !ift may be in dan!er of failin! because it is impossible from the outset to carry out> In Re =avis,+ a specific !ift of 字 5-- <to the (ome for the (omeless, #3, Red Lion S8uare, London< failed because the institution nominated by the testatri; in her "ill had ne&er e;isted> 5 The court ne&ertheless held that as a !eneral charitable intention could be inferred from the "ill< the cy-pr?s doctrine "ould apply> 11>% The decision in Ironmon ers9 Company v %+ % is another illustration of this point> In this case< a testator clearly and une@ui&ocally directed that his estate "as to be applied only to certain specific purposes< includin! one half of the estate to <the redemption of British slaves in Tur6ey or Barbary N <( and one @uarter of the estate to / charity schools in the city and suburbs of London, where the education is accordin to the Church of 5n land N .<) Fy the time the estate "as to be di&ided< ho"e&er< there "ere no lon!er any Fritish sla&es in Tur:ey or Farbary to be redeemed< so this purpose had become impossible to perform> It "as held in this case that the cy-pr?s doctrine could apply so that the bul: of the money from the estate could be used for the second purpose< of supportin! charity schools in 3n!land and Wales "here the education "as accordin! to the 1hurch of 3n!land> The court held that althou!h the first ob6ect A"hich it found "as intended to benefit the Fritish community at lar!eB could not be e;tended because the court could find nothin! analo!ous or cy-pr?s to it< one of the other charitable purposes specified by the testator could be e;tended< as somethin! in this "as found to be cy-pr?s to the !eneral charitable purpose of the first ob6ecti&e>*

3 + 5 % (

) *

Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at +35 to +3%> I1*-2J 1 1h )(%> 8 Ma< 58uity and Trusts Law in (on -on A8e;is 4e;is< 2--*B< at para 1%-%*> A1)++B 1- 1I E F *-)< ) 39 *)3> A1)++B 1- 1I E F *-)< ) 39 *)3< at *)3 to *)+> ASla&es "ere <redeemed< by bein! purchased and then set free>B A1)++B 1- 1I E F *-)< ) 39 *)3< at *)3 to *)+> Ironmon ers9 Company v %+ A1)++B 1- 1I E F *-)< ) 39 *)3< at *)(>

153

11>( In the case of Re ,elsh (ospital .Cetley1 'und,1- the charitable purpose could ori!inally be carried out< but this position later chan!ed> This case concerned a lar!e charitable fund "hich had been raised in Wales at the outbrea: of the First World War for the buildin! and runnin! of a hospital for "ounded and ailin! Welsh soldiers> The fund "as created by contributions from &arious sources< includin! substantial donations from pri&ate indi&iduals< as "ell as proceeds from concerts and other entertainments< and from street and church collections all across Wales> The hospital "as closed in 1*1* after the "ar had ended< but a surplus of funds remained> It "as su!!ested that this should be applied for the foundation of scholarships for the study of medicine and sur!ery by persons of Welsh nationality at the Kni&ersity of Wales> The matter "as brou!ht before the court for a direction on "hether the trustees could apply the surplus funds in this "ay< or "hether the funds had to re&ert bac: to the subscribers under a resultin! trust> 11>) The court held that a !eneral charitable intention to benefit sic: and "ounded Welshmen could be inferred from the trust< and so the court "as at liberty to apply the surplus funds cy-pr?s> 8a"rence D set out the follo"in! reasons for the decision: <The fund was created by contributions from various sources and in varyin amounts N . So far as re ards the contributors to entertainments, street collections, etc., I have no hesitation in holdin that they must be ta6en to have parted with their money out and out. It is inconceivable that any person payin for a concert tic6et or placin a coin in a collectin bo4 presented to him in the street should have intended that any part of the money so contributed should be returned to him when the immediate ob;ect for which the concert was iven or the collection made had come to an end. To draw such an inference would be absurd on the face of it. So far as re ards individual subscribers of substantial amounts, the proper inference to be drawn is not 8uite so plain. In my opinion, however, these subscribers must be ta6en to have 6nown that they were contributin to a eneral fund which was bein raised in the manner I have described, and that their contributions would be a re ated with the proceeds of entertainments, street collections, etc., and would not in any way be ear-mar6ed. They must, I thin6, also be ta6en to have 6nown that the total funds collected from every source would be applied for the purpose of the charity without discriminatin between the moneys derived from any particular source. In these circumstances I am of opinion that the true inference to be drawn is that these subscribers intended to part with their contributions out and out, and that they did not intend that the surplus, if any, of their contributions should be returned to them when the immediate ob;ect of the charity should have come to an end.

1-

I1*21J 1 1h %55>

15+

In the result I hold that althou h all the contributions were in the first instance made for the particular purpose of buildin , e8uippin and maintainin the ,elsh (ospital at Cetley, the main underlyin ob;ect of the contributors was to provide money for the comfort of sic6 and wounded ,elshmen, and that all the subscribers intended to devote their contributions not only to the particular ob;ect, but enerally to the benefit of their sic6 and wounded countrymen. That bein so, the Court is, in my ;ud ment, at liberty to apply the surplus of the fund cy-pr Rs.<!! 11>* 2 #on! $on! e;ample "here the cy-pr?s doctrine "as discussed is the case of (on -on (ousin Services for Refu ees Ltd v Secretary for >ustice. 12 This concerned a charitable company< the purpose of "hich "as to promote the "elfare of Mietnamese refu!ees in #on! $on! refu!ee camps> When these camps "ere subse@uently closed and the charitable company dissol&ed< directions "ere sou!ht from the court as to "hether 1aritas< "hich also ran pro6ects for refu!ees< "as dis@ualified under clause ) of the charitable company's memorandum from bein! able to recei&e the company's surplus assets and income> 9ibeiro D Aas he then "asB held that on the facts of the case and on the true construction of clause )< 1aritas had not been dis@ualified as a recipient of the company's surplus assets and income> 9ibeiro D further held that< e&en if his &ie"s about the effect of clause ) "ere incorrect< he "ould be prepared to rely on the court's 6urisdiction to direct the surplus charitable assets to be applied cy-pr?s, and to direct a transfer of the surplus charitable assets and income to 1aritas> 13 11>12ssociated "ith this po"er of the court to pro&ide ne" purposes as near as possible to the ori!inal ones under the cy-pr?s doctrine is a specific pro&ision in the 0robate and 2dministration ,rdinance A1ap 1-B concernin! !eneral charitable testamentary !ifts< "hich empo"ers the court< on the application of the Secretary for Dustice< to appro&e a scheme for the disposal of the !ift for such charitable purposes as it thin:s fit> 1+ ,i olution of charita&le organi ation

11>11 The method throu!h "hich a charitable or!anisation in #on! $on! may be dissol&ed depends on the type of le!al structure that the charitable or!anisation comprises> AThe different types of charitable or!anisation structure "ere discussed earlier in 1hapter %>B

11 12 13

1+

I1*21J 1 1h %55< at %%- to %%1> I1***J 3 #$89. 51-> I1***J 3 #$89. 51-< at 51*> For a "ider discussion of the application of the cy-pr?s doctrine in #on! $on!< see: (alsbury9s Laws of (on -on - Commentary A2--* 8e;is4e;is #on! $on!B< at para +-->1-2> See section 3A+B of the 0robate and 2dministration ,rdinance A1ap 1-B< "hich pro&ides: <,here a testator ives, devises or be8ueaths any part of his estate for unspecified charitable purposes, otherwise than on trust, the court shall have ;urisdiction, on the application of the Secretary for >ustice, to approve a scheme for the disposal of the ift, devise or be8uest for such charitable purposes as it thin6s fit.<

155

11>12 3lse"here in this paper< "e ha&e e;amined the conditions "hich must be met before a charitable or!anisation can be !ranted e;emption from ta; by the Inland 9e&enue .epartment> In its !uide to charitable or!anisations "ishin! to see: ta; e;emption under section )) of the Inland 9e&enue ,rdinance A1ap 112B< the .epartment states that one of the clauses "hich the !o&ernin! instrument of such an or!anisation should contain is a clause <specifyin how the assets should be dealt with upon its dissolution. .The remainin assets should normally be donated to other charities1.< 15 2ccordin!ly< or!anisations see:in! ta; e;emption under section )) should pro&ide a clause to this effect in the or!anisation's !o&ernin! instrument for the .epartment's consideration> 11>13 For a charity "hich e;ists in the form of an unincorporated association< there may be a dissolution clause in its rules re@uirin! surplus property to be !i&en to other charitable purposes and not distributed amon! its members> This clause should appear in the constitution of a charity re!istered under the Societies ,rdinance A1ap 151B> AIn addition< section 1+ of the ,rdinance pro&ides that "here a re!istered society or an e;empted society dissol&es itself< the office-bearers of the society immediately before such dissolution must< not later than one month after the dissolution ta:es effect< notify the Societies ,fficer of the dissolution in "ritin!>B 11>1+ In the case of charitable trusts< the rele&ant clause relatin! to the distribution of assets on dissolution "ill appear in the trust deed of the charitable trust> For a charitable company incorporated under the 1ompanies ,rdinance A1ap 32B< the rele&ant clause "ill appear in its memorandum and articles of association> The mode of dissolution of a charitable body established by statute is !o&erned by the pro&isions of its creatin! le!islation>

T(e a..-' a#'$" $f #(e c!"pr# %$ #r'"e '" $#(er 4&r')%' #'$")
11>15 While the cy-pr?s doctrine as applied in #on! $on! is deri&ed from and follo"s the common la"< a number of o&erseas 6urisdictions ha&e broadened the scope of the doctrine and codified it in le!islation> We ha&e closely e;amined a number of statutory cy-pr?s re!imes in different o&erseas 6urisdictions such as 3n!land and Wales< Scotland< Ireland< 2ustralia< 4e" 5ealand and South 2frica> While le!islati&e chan!es in these 6urisdictions ha&e< in different "ays< broadened the application of the cy-pr?s doctrine< "e consider the 3n!lish model< "hich is analysed in detail belo"< to be a particularly useful model for #on! $on!> 11>1% 2n analysis of each of the other 6urisdictions "e ha&e considered under this head is presented in 2nne; ) of this paper> England and 0ale 11>1(
15

In 3n!land and Wales< the cy-pr?s doctrine has under!one
See Inland 9e&enue .epartment information pamphlet< % Ta4 +uide for Charitable Institutions and Trusts of a Public Character Are&ised ed Sept 2-1-B< at para *AeB< a&ailable at: http:CC""">ird>!o&>h:Cen!Cta;Cach=t!c>htm>

15%

substantial chan!e from the common la" position still follo"ed in #on! $on!> 2s a result< the occasions on "hich the doctrine may be applied are much "ider than simply "here the charitable purpose of a trust property has become impossible or impracticable to be carried out< as in #on! $on!> The statutory pro&isions "hich brou!ht about this chan!e "ere comprised in section 13 of the 1harities 2ct 1*%-< then by sections 13 and 1+ of the 1harities 2ct 1**3 Athe 1**3 2ctB< "hich "as amended by the 1harities 2ct 2--% Athe 2--% 2ctB by the addition of ne" sections 1+2 and 1+F> 1% 11>1) The occasions on "hich the cy-pr?s doctrine can apply to trust property in 3n!land and Wales are no" pro&ided in section 13A1B of the 1**3 2ct< as re&ised by the 2--% 2ct> Knder this ne" section 13A1B< property in a charitable trust can be applied cy-pr?s e&en "here it is not impossible or impractical to carry out the charitable purpose for "hich it "as created> Section 13A1B of the 1**3 2ct states: <.!1 Sub;ect to subsection .#1 below, the circumstances in which the ori inal purposes of a charitable ift can be altered to allow the property iven or part of it to be applied cy-pr?s shall be as follows U .a1 where the ori inal purposes, in whole or in part U .i1 have been as far as may be fulfilledP or .ii1 cannot be carried out, or not accordin to the directions iven and to the spirit of the iftP or where the ori inal purposes provide a use for part only of the property available by virtue of the iftP or where the property available by virtue of the ift and other property applicable for similar purposes can be more effectively used in con;unction, and to that end can suitably, re ard bein had to the appropriate considerations, be made applicable to common purposesP or where the ori inal purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased to be suitable, re ardbein had to the appropriate considerations, or to be practical in administerin the iftP or where the ori inal purposes, in whole or in part, have, since they were laid down A

.b1

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Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at +35 to +3%>

15(

.i1 .ii1 .iii1

been ade8uately provided for by other meansP or ceased, as bein useless or harmful to the community or for other reasons, to be in law charitableP or ceased in any other way to provide a suitable and effective method of usin the property available by virtue of the ift, re ard bein had to the appropriate considerations.<

11>1* Section 13A1B of the 1**3 2ct refers to the <ori inal purposes< of a charitable !ift> This term is defined in section 13A3B of the 1**3 2ct to also mean <the e4istin or current purposes if the ori inal purposes have already been amended>< The term <the appropriate considerations< mentioned in section 13A1B of the 1**3 2ct is defined in section 13A12B of the 1**3 2ct in the follo"in! terms: <.!%1 In subsection .!1 above 9the appropriate considerations9 means.a1 .b1 .on the one hand1 the spirit of the ift concerned, and .on the other1 the social and economic circumstances prevailin at the proposed alteration of the ori inal purposes.<

11>2It is noted in the :perational +uidance on %pplication of Property Cy-pr?s< issued by the 1harity 1ommission for 3n!land and Wales 1( that failure of ob6ects is not al"ays re@uired for applyin! property cy-pr?s: <(owever, it is important to note that the circumstances which permit a cy-pr?s application of a charity9s property are not restricted to 9failure9 and therefore the trustees do not necessarily have to demonstrate that the charity9s purposes are incapable of bein carried out or wholly impracticable, particularly when current social and economic circumstances are also ta6en into account. In some cases a cy-pr?s application may be ;ustified under the other provisions of section !).!1, even thou h the purposes of the charity can still be carried out. 'or e4ample, we can ma6e cy-pr?s Schemes without the current ob;ects 9failin 9 under& • s.!).!1.b1, where a charity9s ob;ects may be completely wor6able but do not provide a use for all of the available income or propertyP

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http:CC""">charitycommission>!o&>u:Cabout=usCo!sCinde;--2>asp;>

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s.!).!1.c1, where a charity is proposin to amal amate with another charity with similar ob;ectsP the 8uestion of 9failure9 is irrelevantP or s.!).!1.e1, which may allow a charity to ma6e a case that the purposes have ceased in any way to be a suitable and effective method of usin the charity9s property .bearin in mind the spirit of the ift and current social and economic circumstances1.<

•

11>21 Knder the 1**3 2ct< another situation in "hich the cy-pr?s doctrine can apply is "here the purpose of property !i&en for a specific charitable purpose has failed< and the donors are either un:no"n or ha&e disclaimed their ri!hts to ha&e the property returned> In these circumstances< section 1+ of the 1**3 2ct pro&ides that the cy-pr?s doctrine applies> This section states: <.!1 Property iven for specific charitable purposes which fail shall be applicable cy-pr?s as if iven for charitable purposes enerally, where it belon s U .a1 to a donor who after Z .i1 the prescribed advertisements and in8uiries have been published and made, and .ii1 the prescribed period be innin with the publication of those advertisements has e4pired, cannot be identified or cannot be foundP or to a donor who has e4ecuted a disclaimer in the prescribed form of his ri ht to have the property returned.

.b1

.#1

,here the prescribed advertisements and in8uiries have been published and made by or on behalf of trustees with respect to any such property, the trustees shall not be liable to any person in respect of the property if no claim by him to be interested in it is received by them before the e4piry of the period mentioned in subsection .!1.a1.ii1 above. 'or the purposes of this section property shall be conclusively presumed without any advertisement or in8uiry to belon to donors who cannot be identified, in so far as it consists U .a1 of the proceeds of cash collections made by means of collectin bo4es or by other means not adapted for distin uishin one ift from anotherP or

.)1

15*

.b1

of the proceeds of any lottery, competition, entertainment, sale or similar money-raisin activity, after allowin for property iven to provide pri@es or articles for sale or otherwise to enable the activity to be underta6en.

.21

The court or the Commission may by order direct that property not fallin within subsection .)1 above shall for the purposes of this section be treated without any advertisement or in8uiry as belon in to donors who cannot be identified where it appears to the court or the Commission either A .a1 that it would be unreasonable, havin re ard to the amounts li6ely to be returned to the donors, to incur e4pense with a view to returnin the propertyP or that it would be unreasonable, havin re ard to the nature, circumstances and amounts of the ifts, and to the lapse of time since the ifts were made, for the donors to e4pect the property to be returned.

.b1

.01

,here property is applied cy-pr?s by virtue of this section, the donor shall be deemed to have parted with all his interest at the time when the ift was madeP but where property is so applied as belon in to donors who cannot be identified or cannot be found, and is not so applied by virtue of subsection .)1 or .21 above U .a1 .b1 the scheme shall specify the total amount of that propertyP and the donor of any part of that amount shall be entitled, if he ma6es a claim not later than si4 months after the date on which the scheme is made, to recover from the charity for which the property is applied a sum e8ual to that part, less any e4penses properly incurred by the charity trustees after that date in connection with claims relatin to his iftP and the scheme may include directions as to the provision to be made for meetin any such claim.

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,here U .a1 any sum is, in accordance with any such directions, set aside for meetin any such claims, but the a re ate amount of any such claims actually made e4ceeds the relevant amount,

.b1

then, if the Commission so directs, each of the donors in 8uestion shall be entitled only to such proportion of the relevant amount as the amount of his claim bears to the a re ate amount referred to in para raph .b1 aboveP and for this purpose 9the relevant amount9 means the amount of the sum so set aside after deduction of any e4penses properly incurred by the charity trustees in connection with claims relatin to the donors9 ifts. .31 'or the purposes of this section, charitable purposes shall be deemed to 9fail9 where any difficulty in applyin property to those purposes ma6es that property or the part not applicable cy-pr?s available to be returned to the donors. In this section 9prescribed9 means prescribed by re ulations made by the CommissionP and such re ulations may, as respects the advertisements which are to be published for the purposes of subsection .!1.a1 above, ma6e provision as to the form and content of such advertisements as well as the manner in which they are to be published. %ny re ulations made by the Commission under this section shall be published by the Commission in such manner as it thin6s fit. In this section, e4cept in so far as the conte4t otherwise re8uires, references to a donor include persons claimin throu h or under the ori inal donor, and references to property iven include the property for the time bein representin the property ori inally iven or property derived from it. This section shall apply to property iven for charitable purposes, notwithstandin that it was so iven before the commencement of this %ct.<

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11>22 Section 1+2 of the 1**3 2ct pro&ides that the cy-pr?s doctrine applies in the situation "here property is !i&en for a specific charitable purpose in response to <a solicitation<< "hich is defined in section 1+2A2B of the 1**3 2ct> Section 1+2 pro&ides:

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This section applies to property iven A .a1 for specific charitable purposes, and .b1 in response to a solicitation within subsection .#1 below. % solicitation is within this subsection if A .a1 it is made for specific charitable purposes, and .b1 it is accompanied by a statement to the effect that property iven in response to it will, in the event of those purposes failin , be applicable cy-pr?s as if iven for charitable purposes enerally, unless the donor ma6es a relevant declaration at the time of ma6in the ift. % 9relevant declaration9 is a declaration in writin by the donor to the effect that, in the event of the specific charitable purposes failin , he wishes the trustees holdin the property to ive him the opportunity to re8uest the return of the property in 8uestion .or a sum e8ual to its value at the time of the ma6in of the ift1. Subsections .01 and ."1 below apply if A .a1 a person has iven property as mentioned in subsection .!1 above, .b1 the specific charitable purposes fail, and .c1 the donor has made a relevant declaration. The trustees holdin the property must ta6e the prescribed steps for the purpose of U .a1 informin the donor of the failure of the purposes, .b1 en8uirin whether he wishes to re8uest the return of the property or .a sum e8ual to its value1, and .c1 if within the prescribed period he ma6es such a re8uest, returnin the property .or such a sum1 to him. If those trustees have ta6en all appropriate prescribed steps but U .a1 they have failed to find the donor, or .b1 the donor does not within the prescribed period re8uest the return of the property .or a sum e8ual to its value1, section !2.!1 above shall apply to the property as if it belon ed to a donor within para raph .b1 of that subsection .application of property where donor has disclaimed ri ht to return of property1. If A .a1 a person has iven property as mentioned in subsection .!1 above,

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.b1 the specific charitable purposes fail, and .c1 the donor has not made a relevant declaration, section !2.!1 above shall similarly apply to the property as if it belon ed to a donor within para raph .b1 of that subsection. ./1 'or the purposes of this section U .a1 9solicitation9 means a solicitation made in any manner and however communicated to the persons to whom it is addressed, .b1 it is irrelevant whether any consideration is or is to be iven in return for the property in 8uestion, and .c1 where any appeal consists of both solicitations that are accompanied by statements within subsection .#1.b1and solicitations that are not so accompanied, a person ivin property as a result of the appeal is to be ta6en to have responded to the former solicitations and not the latter, unless he proves otherwise. In this section 9prescribed9 means prescribed by re ulations made by the Commission, and any such re ulations shall be published by the Commission in such manner as it thin6s fit. Subsections .31 and .!$1 of section !2 shall apply for the purposes of this section as they apply for the purposes of section !2.<

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11>23 The 3n!lish statutory model ma:es specific pro&ision for the dissolution of a charitable incorporated body> Section %1A1B of the 1**3 2ct states that the 1harity 1ommission may ma:e an order to dissol&e an incorporated charitable body "here it is satisfied as to one of the follo"in! situations: <.a1 .b1 .c1 that an incorporated body has no assets or does not operate, or that the relevant charity in the case of an incorporated body has ceased to e4ist, or that the institution previously constitutin , or treated by the Commission as constitutin , any such charity has ceased to be, or as the case may be was not at the time of the body9s incorporation, a charity, or that the purposes of the relevant charity in the case of an incorporated body have been achieved so far as is possible or are in practice incapable of bein achieved.< 2ccordin!ly< "here< for e;ample< the purpose of a charity is

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incapable of bein! achie&ed and the cy-pr?s doctrine is considered inappropriate< dissolution of the incorporated body "ould be a possible outcome> 11>25 The po"ers of the 1harity 1ommission to deal "ith the property held by the charity at the time of the dissolution order are set out in section %1A3B and A+B of the 1**3 2ct: <.)1 Sub;ect to subsection .21 below, an order made under this section with respect to an incorporated body shall have the effect of vestin in the trustees of the relevant charity, in trust for that charity, all property for the time bein vested U .a1 .b1 in the body, or in any other person .apart from the official custodian1,

in trust for that charity. .21 If the Charity Commission so directs in the order U .a1 all or any specified part of that property shall, instead of vestin in the trustees of the relevant charity, vest .i1 .ii1 .b1 in a specified person as trustee for, or nominee of, that charity, or in such persons .other than the trustees of the relevant charity1 as may be specifiedP

any specified investments, or any specified class or description of investments, held by any person in trust for the relevant charity shall be transferred.i1 .ii1 to the trustees of that charity, or to any such person or persons as is or are mentioned in para raph .a1.i1 or .ii1 aboveP

and for this purpose 9specified9 means specified by the Commission in the order.<

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11>2% We note that cases in #on! $on! re@uirin! the application of the cy-pr?s doctrine appear to be relati&ely rare< but that the conditions "hich must be met under the common la" before the doctrine can be utilised are e;tremely strict> We are concerned that this could lead to situations "here funds raised for a charitable purpose cannot be used< ultimately< for that purpose< and so must be returned to the donors< ho"e&er lo!istically difficult that may be> 11>2( #a&in! re&ie"ed o&erseas de&elopments< "here se&eral 6urisdictions ha&e mo&ed to"ards a statutory basis for the doctrine and a broadenin! of the situations "here it may be applied< "e ha&e come to the &ie" that a similar approach should be adopted in #on! $on!> ,f the o&erseas models "e ha&e considered< "e find the le!islati&e approach implemented in 3n!land and Wales to be particularly useful>

Re $11e"%a#'$" 17 We re $11e"% #(e '"#r$%& #'$" '" H$"* K$"* $f -e*')-a#'$" a-$"* #(e -'"e) $f #(e E"*-')( )#a#&#$r0 1$%e- $f #(e c!"pr# %$ #r'"e G $1.r')e% '" .r$+')'$") $f #(e E"*-')( C(ar'#'e) A # 1;;/9 a) a1e"%e% '" 2006H9 )$ a) #$ .r$+'%e a )#a#&#$r0 :a)') f$r #(e %$ #r'"e '" H$"* K$"* a"% #$ :r$a%e" #(e ) $.e $f '#) a..-' a#'$"! I" -'"e ,'#( #(e E"*-')( 1$%e-9 ,e re $11e"% #(a# #(e c!" pr# %$ #r'"e )($&-% :e :r$a%e"e% '" H$"* K$"* )$ #(a# '# 1a0 a..-0 '" #(e f$--$,'"* )'#&a#'$") e+e" ,(ere '# ') "$# '1.$))':-e $r '1.ra #' a- #$ arr0 $&# #(e (ar'#a:-e .&r.$)e $f #(e (ar'#a:-e #r&)#C G1H ,(ere .r$.er#0 *'+e" f$r a ).e 'f' (ar'#a:-e .&r.$)e (a) fa'-e%9 a"% #(e %$"$r) are e'#(er &"2"$," $r (a+e %') -a'1e% #(e'r r'*(#) #$ (a+e #(e .r$.er#0 re#&r"e%I ,(ere .r$.er#0 ') *'+e" f$r a ).e 'f' .&r.$)e '" re).$")e #$ a )$-' '#a#'$"I ,(ere a (ar'#a:-e :$%0 (a) %'))$-+e%! (ar'#a:-e

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12>1 In this chapter< "e consider the need for settin! up a charity commission for the re!ulation of charitable or!anisations> We also e;amine in detail matters such as the &arious ob6ecti&es and characteristics of the future charity commission< its functions and po"ers< as "ell as an appropriate appeal mechanism a!ainst decisions of the charity commission>

Nee% f$r a B$"e-)#$. )($.BA
12>2 2s "e ha&e seen throu!hout this paper< there are a number of shortcomin!s in the e;istin! system of re!ulatin! charities> Fundamental to these is the absence of a sin!le re!ulatory authority administerin! a comprehensi&e< central re!ister of charities> The current monitorin! arran!ements for charities and their fundraisin! acti&ities appear to be fra!mented and cumbersome< in&ol&in! split responsibilities across different authorities< each applyin! different monitorin! mechanisms and standards> 12>3 We therefore consider that there is a need for< as far as possible< a 'one-stop shop' "hich can ser&e as a centralised body and ta:e o&er the functions of the &arious !o&ernment authorities responsible for monitorin! charitable or!anisations and their fundraisin! acti&ities> We note belo" the si!nificant ad&anta!es of this approach> A1B 5nhanced effectiveness of the charities9 monitorin system #a&in! a sole re!ulatory body "ould facilitate !reater effecti&eness in monitorin! and re!ulatin! charitable or!anisations> This "ould lead to !reater public trust and confidence in charities> A2B Centralised policy #a&in! a sole re!ulatory body "ith a centralised policy on charities "ould ensure !reater consistency in the practice of charitable or!anisations on matters such as fundraisin!> It "ould help to promote !reater accountability and transparency in relation to charitable acti&ities and "ould be an effecti&e

1%%

means of buildin! public confidence and trust in charitable or!anisations> A3B +reater accountability and accessibility to information #a&in! a sole re!ulatory body that is more accountable and accessible "ould benefit the public in !ainin! access to information about charitable or!anisations> Members of the public "ould then be better able to ma:e appropriate and informed decisions re!ardin! their donations> A+B 5nhanced efficiency 2 sole re!ulatory body "ould enhance efficiency in the processin! of applications relatin! to fundraisin! acti&ities> It "ould sa&e the time and effort of charitable or!anisations in ha&in! to !o to different 7o&ernment departments or authorities to obtain different types of licences or appro&als> A5B Lower administrative costs #a&in! a sole re!ulatory body to monitor charitable or!anisations "ould not only reduce the administrati&e costs for the 7o&ernment resultin! from o&erlappin! functions of different 7o&ernment departments and bodies< but "ould also lo"er the administrati&e costs of non-!o&ernment or!anisations> 12>+ 2s "e ha&e already indicated in this paper< "e propose that this re!ulatory body should ta:e the form of a charity commission alon! the lines of those no" established in se&eral other common la" 6urisdictions> ,ur recommendations on this are set out later in this chapter> 12>5 While charity or!anisations "ill be e;pected to abide by the re@uirements laid do"n by the future charity commission< "e consider it is important that the charity commission should adopt the role of a 'li!ht-touch' re!ulator and that the ne" re!ulatory re!ime should not si!nificantly add to the e;penditure of charitable or!anisations>

O+er)ea) e<.er'e" e
12>% 2 number of 6urisdictions ha&e a centralised re!ulatory body for charities performin! important functions< such as maintainin! a re!ister of charities< monitorin! charities' compliance "ith their le!al obli!ations< institutin! in@uiries and protectin! funds and property of charities in cases of misconduct or mismana!ement> 2 brief description of the functions of each of the charity commissions in 3n!land and Wales< Ireland and 4e" 5ealand is set out belo"> Further details of these< as "ell as other o&erseas charity re!ulatory authorities are set out in 2nne; * of this paper>

1%(

England and 0ale 12>( In 3n!land and Wales< the functions and duties of the 1harity 1ommission are set out in the 1harities 2ct 1**3< as amended in 2--%> 1 These functions and duties include: A1B to ensure that the mana!ement of charities< and the conduct of their &arious fundraisin! acti&ities are properly carried out by the charity trustees and all responsible personnel of the charitiesH to redress the problems arisin! mismana!ement of charitiesH and from misconduct and

A2B A3B

to ensure that charity funds ha&e been properly used>

12>) We note that in performin! its functions< the 1harity 1ommission is specifically re@uired by le!islation to adopt a moderate and sensiti&e approach so as not to discoura!e any inno&ation by or on behalf of charities> The 1ommission is under a !eneral duty "hilst in the performance of its functions to act in a "ay "hich is compatible "ith the encoura!ement of all forms of charitable !i&in! as "ell as &oluntary participation in charity "or:> *reland 12>* In Ireland< the 1harities 9e!ulatory 2uthority "as established under section 13 of the Irish 1harities 2ct 2--*> The ma6or functions of the 2uthority include: A1B A2B to increase public trust and confidence in the mana!ement and administration of charitable trusts and charitable or!anisationsH to promote compliance by charity trustees "ith their duties in the control and mana!ement of charitable trusts and charitable or!anisationsH to ensure the accountability of charitable or!anisations to donors and beneficiaries of charitable !ifts and to the publicH to promote understandin! of the re@uirement that charitable purposes confer a public benefitH to establish and maintain a re!ister of charitable or!anisationsH to ensure and monitor compliance by charitable or!anisations "ith the 1harities 2ct 2--*H

A3B A+B A5B A%B

1

It should be noted that a ne" 1harities Fill "as placed before the K$ 0arliament in March 2-11 "ith the ob6ect of consolidatin! the 1harities 2ct 1**3 and other enactments relatin! to charities>

1%)

A(B A)B

to carry out in&esti!ations in accordance "ith the 2ctH and to encoura!e and facilitate the better administration and mana!ement of charitable or!anisations by the pro&ision of information or ad&ice>

New ?ealand 12>1The 4e" 5ealand 1harities 1ommission "as established under section ) of the 4e" 5ealand 1harities 2ct 2--5> The main functions of the 1harities 1ommission include: A1B A2B A3B A+B A5B A%B A(B A)B to promote public trust and confidence in the charitable sectorH to encoura!e and promote the effecti&e use of charitable resourcesH to educate and assist charities in relation to matters of !ood !o&ernance and mana!ementH to recei&e< consider< and process applications for re!istration as charitable entitiesH to ensure that the re!ister of charitable entities is compiled and maintainedH to recei&e< consider< and process annual returns submitted by charitable entitiesH to supply information and documents in appropriate circumstances for the purposes of the Inland 9e&enue 2ctsH to monitor charitable entities and their acti&ities to ensure that entities that are re!istered as charitable entities continue to be @ualified for re!istration as charitable entitiesH to in@uire into charitable entities and persons "ho ha&e en!a!ed in or are en!a!in! in conduct that constitutes< or may constitute< a breach of the 2ct or serious "ron!doin! in connection "ith a charitable entityH and to monitor and promote compliance "ith the 2ct< includin!< by ta:in! prosecutions for offences a!ainst the 2ct in appropriate circumstances>

A*B

A1-B

1%*

O&r .r$.$)a-) f$r #(e e)#a:-')(1e"# $f a (ar'#0 $11'))'$"
The o&'ective of the future charit! commi ion

12>11 We consider that a charity commission should be established in #on! $on! to assume the role of re!ulator of charities> This commission should be< as far as possible< a 'one-stop shop' in relation to charities< and should ha&e the &arious ob6ecti&es "e recommend belo">

Re $11e"%a#'$" 18 We re $11e"% #(a# a (ar'#0 $11'))'$" )($&-% :e )e# &. a) a )$-e re*&-a#$r0 :$%0 f$r (ar'#'e)! T(e $:4e #'+e) $f #(e (ar'#0 $11'))'$" ,$&-% :eC G1H G2H G/H G3H #$ '" rea)e .&:-' #r&)# a"% $"f'%e" e '" (ar'#'e)I #$ e"(a" e #ra").are" 0 a"% a %$"$r) a"% :e"ef' 'ar'e)I $&"#a:'-'#0 #$

#$ .r$1$#e *$$% *$+er"a" e a"% *$$% 1a"a*e1e"# .ra #' e $" 1a##er) re-a#e% #$ (ar'#'e)I a"% #$ .r$1$#e *rea#er $1.-'a" e a1$"* (ar'#'e) ,'#( #(e'r -e*a- $:-'*a#'$")!

The interpla! &etween the role of the future charit! commi Secretar! for -u tice a protector of charitie

ion and the

12>12 In the course of our deliberations< "e ha&e considered the issue of the interplay bet"een the future charity commission and the Secretary for Dustice in his role as protector of charities in the li!ht of the e;perience in 3n!land and Wales> 12>13 Since 1 Duly 1**(< the ri!hts2 "hich "ere pre&iously en6oyed by #on! $on!'s then 2ttorney 7eneral3 in the courts of #on! $on! are no" e;ercisable by the Secretary for Dustice> The Secretary for Dustice< li:e his counterpart in 3n!land and Wales< has many po"ers and duties< includin! his role as parens patriae in charity matters> 12>1+ In 3n!land< "hile the 1harity 1ommission plays an important statutory role in the super&ision and control o&er charities< the 2ttorney 7eneral also contributes to this frame"or: in his duty to protect the interests
2

3

3;cept for those ri!hts "hich are inconsistent "ith the Fasic 8a": see section 5< 8e!al ,fficers ,rdinance A1ap )(B> Fy &irtue of section 5 of the 8e!al ,fficers ,rdinance A1ap )(B Ano" repealedB< these ri!hts "ere similar to the ri!hts en6oyed by the 2ttorney 7eneral of 3n!land>

1(-

of charity !enerally< as the 2ttorney 7eneral represents the beneficial interest< or 'ob6ects'< of the charity> The 2ttorney 7eneral< "ho may appear either in person or by counsel< is !enerally a necessary party to all claims relatin! to charities< other than those commenced by the 1harity 1ommission> + 12>15 In relation to the po"er to act for the protection of charities< in 3n!land< the 1harity 1ommission may e;ercise the same po"ers as the 2ttorney 7eneral "ith respect to the ta:in! of le!al proceedin!s "ith reference to charities< or the property or affairs of charities< as are e;ercisable by the 2ttorney 7eneral actin! e4 officio. The only e;ception to these po"ers is that the 1harity 1ommission cannot present a petition for the "indin! up of a charitable company>5 The practice and procedure for proceedin!s ta:en out by the 1harity 1ommission are the same as those ta:en out by the 2ttorney 7eneral actin! e; officio< in particular as re!ards costs> #o"e&er< these po"ers are e;ercisable by the 1ommission only "ith the a!reement of the 2ttorney 7eneral>% 12>1% #a&in! considered the e;ample in 3n!land and Wales< the Subcommittee considers that the Secretary for Dustice should continue to contribute to the frame"or: of super&ision and control o&er charities "hich "ill be implemented by the future charity commission> Furthermore< the Secretary for Dustice "ill continue to be a necessary party to all claims relatin! to charities in order to represent the beneficial interest or ob6ects of the charity> It is noted that the future charity commission< in the course of e;ercisin! the po"ers and functions recommended in the paper< "ould not be &ested "ith the po"er to ta:e le!al proceedin!s in relation to charity cases> Instead< as pre&iously discussed and recommended in 1hapter )< the future charity commission should ha&e the po"er to refer possible ci&il actions to the Secretary for Dustice in relation to enforcement and remedies in cases of noncompliance by charities "ith their le!al obli!ations> The general characteri tic of the future charit! commi ion

12>1( Ta:in! into account the o&erseas e;perience "ith respect to charity re!ulatory bodies< "e consider that the future charity commission should ha&e the !eneral characteristics set out belo"> .!1 Proportionate power

12>1) Since the future charity commission "ill ha&e a duty to ensure that charitable or!anisations comply "ith their le!al obli!ations< a &ariety of po"ers "ill be &ested in the commission> These proposed po"ers are set out later in this chapter> 12>1* We emphasise that these po"ers of the future charity commission should be e;ercised in a fair< reasonable and proportionate
+ 5 %

#alsbury's 8a"s of 3n!land< Mol ) A2-1- 5th edB< at para 5)3 and 5**> Section %3A1B< 1harities 2ct 1**3: see same as abo&e< at para 23+> #alsbury's 8a"s of 3n!land< Mol ) A2-1- 5th edB< at para 553> In cases "here it appears to the 1harity 1ommission that it is desirable for le!al proceedin!s in relation to a charity to be ta:en by the 2ttorney 7eneral< the 1ommission "ould send the 2ttorney 7eneral the rele&ant statements and particulars to e;plain the matter: at para 5*3>

1(1

manner> In line "ith the approach ta:en in 3n!land and Wales< "e consider that the commission should adopt a 'li!ht touch'< moderate and sensiti&e approach in the e;ercise of its statutory po"ers< so as not to discoura!e inno&ation in the charity sector or &oluntary participation in charity "or:> .#1 %ccountability

12>2We consider that< in line "ith other statutory commissions in #on! $on!< such as the 3@ual ,pportunities 1ommission and Securities and Future 1ommission< there should be a proper appeal mechanism for any person or or!anisation a!!rie&ed by the decision of the charity commission> We propose that such an appeal could be made to the 1ourt of First Instance> This proposal is discussed further later in this chapter> .)1 Transparency

12>21 In settin! up an effecti&e system of re!ulation and monitorin! of charities< the future charity commission should publish clear and transparent !uidelines to enable charitable or!anisations to ha&e a clear understandin! of the procedures and re@uirements relatin! to charity matters< such as re!istration and fundraisin!> This "ould also help to build public trust and confidence in charitable or!anisations and the ne" re!ulatory re!ime> The function and power of the future charit! commi ion

12>22 2s "e ha&e recommended abo&e< "e consider that the future charity commission should ha&e the role of a re!ulator and should be responsible for promotin! !ood !o&ernance and !ood practice mana!ement on matters related to charities> 12>23 In order to achie&e its ob6ecti&es< "e consider that the future charity commission should be e@uipped "ith the functions and po"ers set out belo"> .!1 Eaintainin and administerin the re ister of charities

12>2+ We propose that one of the ma6or functions of the future charity commission "ill be to determine the charitable status of or!anisations and to maintain a re!ister of all charitable or!anisations operatin! in #on! $on!> This re!ister should be open for inspection by members of the public> We further propose that the future charity commission should determine< on a case by case basis< matters related to allo"in! or disallo"in! the use of particular names of charitable bodies> .etails of these proposed po"ers are discussed in 1hapter (>

1(2

12>25 2s discussed in 1hapter 1-< charitable or!anisations "hich ha&e their charitable status appro&ed and re!istered by the charity commission may apply to the Inland 9e&enue .epartment for ta; e;emption> 12>2% In the course of considerin! the po"ers of the future charity commission to re!ister charities< "e ha&e considered also "hether there should be a residual po"er to enable the future charity commission to refuse to re!ister or!anisations as charities in certain cases< e&en "here they appear to meet the charity test> This mi!ht apply< for e;ample< in rare cases "here there is reasonable e&idence to su!!est that< e&en thou!h the application on its face complies "ith the charity test< those applyin! to establish the charity ha&e an underlyin! intention to ma:e use of it for other non-charitable purposes> 12>2( In Scotland< the ,ffice of the Scottish 1harity 9e!ulator A,S19B must not refuse to re!ister an applicant "hich meets the charity test unless certain conditions apply>( These conditions are that the ,S19 considers that the applicant for re!istration has an 'ob6ectionable name' ) or the application falls "ithin the scope of re!ulations made under the 2ct for this purpose> * In 3n!land and Wales< the role of the 1harity 1ommission in re!isterin! charities does not appear to be e;pressed in similar mandatory terms> Instead< the 1ommission's role in <FdGeterminin whether institutions are or are not charities< is set out as the first '!eneral function' of the 1harity 1ommission included under section 11 of the 1harities 2ct 1**3< "hile the 1ommission's role in maintainin! <an accurate and up-to-date re ister of charities< 1- is stated to be "ithin the scope of its fifth !eneral function> 11 The 1harity 1ommission is also stated to ha&e an incidental po"er to deal "ith matters relatin! to the performance of its functions and !eneral duties> 12 #o"e&er< "hether this incidental po"er may be e;ercised< for e;ample< to refuse charity re!istration in any particular case< is unclear> 12>2) The Sub-committee considers that one of the ad&anta!es of the future charity commission ha&in! a residual po"er to refuse the !rantin! of an application for re!istration is that it "ould allo" fle;ibility in dealin! "ith applications> Such a residual po"er "ould need to be clearly defined Afor e;ample< in statutory re!ulations "hich "ould limit the circumstances in "hich
( ) * See section 5< 1harities and Trustee In&estment AScotlandB 2ct 2--5>

111 12

For the purposes of section 1-< 1harities and Trustee In&estment AScotlandB 2ct 2--5> See section %< 1harities and Trustee In&estment AScotlandB 2ct 2--5< "hich states: <.!1 the Scottish Einisters may by re ulations ma6e such further provision in relation to the procedure for applyin and determinin applications for entry in the Re isterN as they thin6 fit. .#1 such re ulations may in particular ma6e provision aboutA .a1 information and documents which must be specified in or accompany an application, .b1 the form and manner in which applications must be made, .c1 the period within which the :SCR must ma6e a decision on an application and .d1 circumstances in which :SCR must refuse to enter a body in the re ister.< To-date< it appears that no re!ulations ha&e been made under this section> Section 11A2B< 1harities 2ct 1**3> Section 11A3B< 1harities 2ct 1**3> Knder section 13A1B of the 1harities 2ct 1**3< the 1ommission is !i&en po"er to deal "ith matters relatin! to the performance of its functions and !eneral duties "hich are set out in section 11 and 1. of the 1**3 2ct> Section 13A1B states: <The Commission has power to do anythin which is calculated to facilitate, or is conducive or incidental to, the performance of any of its functions or eneral duties.<

1(3

the po"er may be e;ercisedB> 2 safe!uard a!ainst the abuse of such a po"er is that it is proposed else"here in this chapter that applicants a!!rie&ed by a decision of the future charity commission may appeal to the 1ourt of First Instance a!ainst the decision> 12>2* 2 disad&anta!e of the future charity commission ha&in! such a residual po"er to refuse re!istration e&en "here the charity test appears to ha&e been satisfied< is that it may create uncertainty in the la" and raises the possibility of a lac: of transparency in the functionin! of the future charity commission> It may also be re!arded as unnecessary< as it is proposed else"here in this paper that the future charity commission "ill ha&e the po"er to de-re!ister charities in< for e;ample< cases of impropriety> 12>3,n balance< ho"e&er< "e consider that the future charity commission should ha&e a clearly defined residual po"er to refuse an application for re!istration in appropriate cases> .#1 Eonitorin compliance by charities with their le al obli ations

12>31 We propose that the future charity commission "ill be the re!ulator responsible for monitorin! charitable or!anisations to ensure their compliance "ith their le!al obli!ations> This "ill include the need for charities to comply "ith certain filin! re@uirements imposed by the future charity commission< as set out earlier in 9ecommendation ( in 1hapter )> 12>32 The future charity commission should be under a duty to ensure that re!istered charitable or!anisations continue to comply "ith their charitable ob6ects in order to maintain re!istration "ith the commission< and< as proposed in 9ecommendation 5 in 1hapter )< that charities file returns "ith the commission on any chan!e of charitable ob6ects> 12>33 2s "e ha&e noted earlier< "hile charitable or!anisations need to abide by the re@uirements laid do"n by the charity commission< "e consider that the ne" re!ime should not add to the e;penditure of charitable or!anisations and that the commission should adopt a 'li!ht-touch' approach in re!ulatin! the charities sector> .)1 Iettin applications in relation to fundraisin activities

12>3+ 2s set out in the recommendations in 1hapter *< the future charity commission should be the sole re!ulatory body to !rant all permits and licences necessary for charitable fundraisin!> In assumin! this role< the commission should ta:e up the monitorin! functions in relation to fundraisin! acti&ities "hich are currently performed by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority> 12>35 The future charity commission should ad&ise charities on their le!al obli!ations arisin! from fundraisin! acti&ities carried out by them> These obli!ations should be e;pressed in codes of practice or !uidelines to be issued by the commission in easily understood terms to facilitate proper

1(+

compliance> 12>3% The future charity commission should also ensure public access to information relatin! to fundraisin! acti&ities by charitable or!anisations and pro&ide an en@uiry ser&ice for the public> .21 Promotion of ood overnance and ood mana ement practice

12>3( 2s "e noted earlier in this paper< the future charity commission should be responsible for the macro !o&ernance of charities< and should set up statutory or non-statutory codes of practice on matters related to charities< such as internal controls< accountability and transparency< !ood !o&ernance< !ood practice< conflicts of interest and declarations of personal interest> .01 Investi ative powers relatin to misconduct and maladministration

12>3) 2s discussed in 1hapter )< "e consider that the ability of the future charity commission to in&esti!ate and chec: abuses is crucial to promotin! !ood !o&ernance amon! charities and buildin! and maintainin! public confidence> 2s a result< "e propose in 9ecommendation * in 1hapter ) that the commission should be &ested "ith the po"er to in&esti!ate any mismana!ement and misconduct by charitable or!anisations> 12>3* In any case "here a report is made to the charity commission concernin! mismana!ement or misconduct of a charitable or!anisation or its officers< or "here the commission itself ta:es the initiati&e to in&esti!ate< the commission should ha&e the po"er to conduct an in&esti!ation by itself or any persons< such as accountants and le!al practitioners< appointed by the commission> 12>+2s part of its po"ers to in&esti!ate mismana!ement or misconduct of charitable or!anisations< the future charity commission and its appointed in&esti!ators should be empo"ered to obtain information on acti&ities and re@uest documents< records< boo:s and accounts or copies thereof from charities under in&esti!ation> 12>+1 In order to enable effecti&e e;ercise of the po"ers of the future charity commission and the appointed in&esti!ators< "e consider that any person "ho intentionally or rec:lessly pro&ides false or misleadin! information< or fails to pro&ide the information for the purpose of in&esti!ation< or alters< conceals or destroys any document re@uired to be produced for the purpose of in&esti!ation< "ill be !uilty of an offence> ."1 5nforcement and remedies

12>+2 We propose that the future charity commission should be &ested "ith po"ers of enforcement< and that there should be remedies a&ailable to ensure compliance by charities "ith their le!al obli!ations and obli!ations of proper performance in accordance their charitable ob6ecti&es> ,ur detailed proposals on these matters are set out in 1hapter )>

1(5

.31

%pplication of the cy-pr?s doctrine

12>+3 In 1hapter 11< "e propose that le!islation should be introduced to broaden the application of the cy-pr?s doctrine in #on! $on!> We consider that the future charity commission should be empo"ered to apply this broadened scope of the doctrine to property held in a charitable trust under the circumstances set out in 9ecommendation 1( in 1hapter 11>

Re $11e"%a#'$" 1; We re $11e"% #(a# #(e f&#&re (ar'#0 $11'))'$" )($&-% (a+e #(e f$--$,'"* f&" #'$") a"% .$,er)C G1H G2H T$ %e#er1'"e ,(e#(er $r*a"')a#'$") are $r are "$# (ar'#'e)I T$ 1a'"#a'" a"% a%1'"')#er #(e re*')#er $f (ar'#'e)9 '" -&%'"* a .$,er #$ ref&)e re*')#ra#'$" '" a..r$.r'a#e a)e)I T$ 1$"'#$r $1.-'a" e :0 $:-'*a#'$")I (ar'#'e) ,'#( #(e'r -e*a-

G/H G3H G5H G6H

T$ +e# a..-' a#'$") f$r re>&')'#e a..r$+a- '" re-a#'$" #$ f&"%ra')'"* a #'+'#'e)I T$ .r$1$#e *$$% *$+er"a" e a"% *$$% .ra #' e a1$"* (ar'#'e)I T$ '"+e)#'*a#e9 e'#(er :0 '#)e-f $r :0 a..$'"#e% '"+e)#'*a#$r)9 '"#$ 1') $"%& # $r 1a-a%1'"')#ra#'$" :0 (ar'#a:-e $r*a"')a#'$") $r #(e'r $ff' er)I T$ e"f$r e %e ')'$") a"% #$ *ra"# re1e%'e)I a"% T$ a..-0 #(e 0-.r=) %$ #r'"e!

G7H G8H

3ppeal mechani m 12>++ To balance the &estin! of these po"ers in the future charity commission and to ensure fairness< "e consider that an appeal mechanism should be in place to enable charitable or!anisations or a!!rie&ed persons to appeal a!ainst certain decisions of the future charity commission> We consider that this ri!ht of appeal should apply to the e;ercise of the commission's &arious po"ers relatin! to enforcement and remedies due to non-compliance of charities "ith their le!al obli!ations and the application of the cy-pr?s doctrine> We also consider that the ri!ht of appeal should e;tend

1(%

to a decision of the commission to refuse to re!ister an or!anisation as a charitable or!anisation> We consider that appeals in such cases should be made to the 1ourt of First Instance>

Re $11e"%a#'$" 20 We re $11e"% #(a# a (ar'#a:-e $r*a"')a#'$" $r .er)$" a**r'e+e% :0 #(e %e ')'$" $f #(e f&#&re (ar'#0 $11'))'$"9 e'#(erC G1H G2H '" '#) ref&)a- #$ re*')#er a" $r*a"')a#'$" a) a (ar'#a:-e $r*a"')a#'$"I '" #(e e<er ')e $f '#) .$,er) re-a#'"* #$ e"f$r e1e"# a"% re1e%'e) %&e #$ "$"$1.-'a" e $f (ar'#'e) ,'#( #(e'r -e*a$:-'*a#'$")I $r '" #(e a..-' a#'$" $f #(e c!"pr# %$ #r'"eD

G/H

)(a-- (a+e #(e r'*(# #$ a..ea- #$ #(e C$&r# $f F'r)# I")#a" e!

12>+5 In respect of appeals relatin! to applications for fundraisin! permits and licences< "e consider that such appeals should be handled by the 2dministrati&e 2ppeals Foard or by a ne" administrati&e appeal system set up for the purpose>

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I"+'#a#'$" #$ $11e"#
============================

This consultation paper has been issued by the 8a" 9eform 1ommission's 1harities Sub-committee to elicit &ie"s and comment from the public on the recommendations for chan!e that it contains> While all e;pressions of &ie"s on the paper "ould be "elcome< the Subcommittee "ould particularly appreciate recei&in! your responses to the follo"in! @uestions< includin , in each case if possible, the reasons for your answers: .,efinition of charit! : Chapter =/ N1! .o you thin: that there should be a clear statutory definition of "hat constitutes a charitable purpose ASee 9ecommendation 1 1>B If you ha&e ans"ered /yes/ to Wuestion 1< please also ans"er the follo"in! @uestions: AaB .o you thin: that the statutory definition of "hat constitutes a charitable purpose that is e;clusi&ely charitable should include all of the heads of charitable purpose set out in 9ecommendation 22 If not< "hich head or heads do you thin: should be deleted from the list Which should be amended< and ho" 2re there any other heads "hich you thin: should be added to the list of heads of charitable purpose .o you thin: that charities fallin! under any of the heads of charitable purpose must be also for the public benefit ASee 9ecommendation 2>B .o you thin: that <The advancement of human ri hts, conflict resolution or reconciliation" should be included in the statutory list of heads of charitable purpose ASee 9ecommendation 2>B

N2!

AbB

AcB

AdB

1 2

2t para 5>+2> 2t para 5>12)>

1()

.2egal tructure of charitie : Chapter B/ N/! .o you thin: that the &arious e;istin! le!al forms for charities should be reformed ASee 9ecommendation 33>B If you ha&e ans"ered /yes/ to Wuestion 3< please also ans"er the follo"in! @uestions: AaB .o you thin: that the current system of allo"in! a &ariety of le!al forms of charitable or!anisations to e;ist should continue< and if so< "hat modifications< if any< should be made to it ASee 9ecommendation 3>B 2lternati&ely< do you thin: that a unitary approach of imposin! one uniform model of charitable or!anisation structure should be adopted< and if so< "hat form should that model ta:e ASee 9ecommendation 3>B

N3!

AbB

.+egi tration of charitie : Chapter E/ N5! .o you a!ree that all charitable or!anisations "hich: AaB AbB ma:e any charitable appeal to the publicH andCor see: ta; e;emption ASee 9ecommendation + +>B

should be re@uired to re!ister N6!

If you a!ree that charitable or!anisations should be re!istered< but do not a!ree "ith the pre-conditions for re!istration set out in Wuestion 5AaB and AbB< please ans"er the follo"in! @uestions: AaB "hich pre-conditionAsB do you thin: should not be re@uired< and "hy 2re there other pre-conditions "hich you thin: should be included< and "hy ASee 9ecommendation +>B .o you a!ree that the list of re!istered charitable or!anisations should be established and maintained by the future charity commission ASee 9ecommendation +>B .o you a!ree that this list should be a&ailable for public inspection ASee 9ecommendation +>B .o you a!ree that the application process for re!istration should not be sub6ect to public notification ASee 9ecommendation +>B

AbB

AcB AdB

3 +

2t para %>+1> 2t para (>3(>

1(*

AeB

.o you a!ree that "hether the use of particular names of charitable bodies is allo"ed or disallo"ed should be left to the future charity commission to determine< on a case by case basis ASee 9ecommendation +>B

.Aramework for governance1 accounting and reporting &! charitie : Chapter F/ N7! .o you thin: that re!istered charitable or!anisations should be re@uired to file an annual acti&ity report to the future charity commission< and if so< should the report be pro&ided in a standard form and should it co&er the list of matters set out in 9ecommendation 55 2re there any matters "hich you thin: should be deleted from the list 2re there any matters "hich should be added .o you thin: that charity trustees or directors of a re!istered charity should be under a duty to declare any conflicts of interest and personal interests ASee 9ecommendation % %>B 9ecommendation (( proposes that: <.!1 Re istered charitable or anisations with an annual income e4ceedin H0$$,$$$ should be re8uired to file an auditors9 report and financial statements with the future charity commission. ,ithout pre;udice to the statutory re8uirements under the Companies :rdinance .Cap )#1, re istered charitable or anisations with an annual income not e4ceedin H0$$,$$$ should be re8uired to file financial statements certified by the Board of these charitable or anisations with the future charity commission. The auditor9s report and financial statements submitted by charitable or anisations to the future charity commission should be accessible to the public.<

N8!

N;!

.#1

.)1

.o you a!ree "ith the re@uirements set out in 9ecommendation ( If not< "hich re@uirements do you thin: should be deleted 2re there other re@uirements "hich you thin: should be added

5 % (

2t para )>2-> 2t para )>2+> 2t para )>2*>

1)-

N10!

.o you thin: that for e&ery charity re!istered "ith the future charity commission< an acti&ities report and financial statements should be filed "ith the future charity commission on an annual basis< and if so< "hat should be the contents included in the annual report of acti&ities ASee 9ecommendation (>B .o you thin: that charity trustees or directors of a re!istered charity should be under a statutory duty to :eep proper accountin! records of the charity "hich are sufficient to sho" and e;plain all transactions of the charity< and if so< should such records be retained for at least se&en years ASee 9ecommendation ) )>B .o you a!ree that the future charity commission should be &ested "ith the po"er to in&esti!ate any alle!ed mismana!ement and misconduct of charitable or!anisations "ith re!ard to its charitable ob6ects ASee 9ecommendation **>B If you ha&e ans"ered /yes/ to Wuestion 12< do you a!ree that in the e;ercise of this po"er to in&esti!ate alle!ed mismana!ement and misconduct of a charitable or!anisation< the future charity commission should ha&e po"er< in respect of a particular charity under in&esti!ation< to in&esti!ate the charity's fundin!< property and acti&ities and to obtain rele&ant information< includin! documents< records< boo:s and accounts from the charity ASee 9ecommendation *>B .o you a!ree that durin! the course of in&esti!ations of the type set out in Wuestion 13< there should be appropriate safe!uards to ensure confidentiality ASee 9ecommendation *>B .o you a!ree that any person "ho intentionally or rec:lessly pro&ides false or misleadin! information to the future charity commission or its appointed in&esti!ators< or fails to pro&ide the information re@uired for the purpose of in&esti!ation< or alters< conceals or destroys any document re@uired for production for the purpose of an in&esti!ation< should be !uilty of a criminal offence ASee 9ecommendation 1-1->B .o you a!ree that the future charity commission should be &ested "ith po"ers relatin! to enforcement and remedies in cases of noncompliance by charities "ith their le!al obli!ations ASee 9ecommendation 1111>B

N11!

N12!

N1/!

N13!

N15!

N16!

) * 111

2t para )>33> 2t para )>+2> 2t para )>++> 2t para )>5->

1)1

N17!

If you ha&e ans"ered /yes/ to Wuestion 1%< do you a!ree that these po"ers should include< but not be limited to: <.!1 .#1 .)1 .21 de-re istration of a charity from the re ister of charitiesP referrin criminal offences to appropriate law enforcement a enciesP referrin and possible civil actions to the Secretary for >usticeP

powers for the purpose of protection of property of charities<

as listed in 9ecommendation 11 If not< "hich po"ers should not be included Which additional po"ers relatin! to enforcement and remedies< if any< should be !i&en to the future charity commission N18! .o you thin: that the future charity commission should be &ested "ith the po"er to protect charities' property in cases of misconduct or mismana!ement in their administration ASee 9ecommendation 1212>B If you ha&e ans"ered /yes/ to Wuestion 1)< do you a!ree that this po"er should include< but not be limited to< the po"ers to: <.!1 .#1 .)1 .21 appoint additional trustees or directors of the charityP suspend or remove trustees, directors or officers of the charityP vest property of charities in an official custodianP and re8uire persons holdin property on behalf of the charity not to part with the property without the approval of the future charity commission<

N1;!

as listed in 9ecommendation 12 If not< "hich po"ers should not be included Which additional po"ers to protect property of charities< if any< should be !i&en to the future charity commission .+egulation of fundrai ing activitie : Chapter G/ N20! .o you thin: that there should be a sole re!ulatory body Aa <onestop shop<B to process and !rant all permits and licences necessary for charitable fundraisin!< and to monitor the use of funds raised by such acti&ities ASee 9ecommendation 13A1B13>B If you ha&e ans"ered /yes/ to Wuestion 2-< please also ans"er the
2t para )>51> 2t para *>++>

N21!
12 13

1)2

follo"in! @uestions: AaB .o you thin: that this <one-stop shop< ser&ice should be pro&ided by the future charity commission< and that the commission should be &ested "ith the po"ers and duties currently e;ercised by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icencin! 2uthority in relation to authorisin! charity fundraisin! acti&ities in public places and those in&ol&in! lotteries ASee 9ecommendation 13A2B>B .o you thin: that the future charity commission should be responsible for enablin! public access to information on fundraisin! acti&ities and for pro&idin! an en@uiry response ser&ice to the public ASee 9ecommendation 13A3B>B

AbB

N22!

#o"< and to "hat e;tent< do you thin: solicitation of donations &ia the internet should be re!ulated in order to minimise the ris: of abuse< "hile at the same time not unduly inhibitin! the "or: of bona fide charities ASee para!raph *>+)>B .o you a!ree that for all forms of charitable fundraisin! acti&ities< the re!istration number of any charitable or!anisation in&ol&ed in those acti&ities should be prominently displayed on any related documents< or displayed on any means throu!h "hich appeals for charitable donations are made Asuch as solicitation leafletsB ASee 9ecommendation 1+1+>B .o you a!ree that the future charity commission should carry out the initiati&es listed in 9ecommendation 15 15 to promote !ood practice by professional fundraisers and< if not< "hich initiati&es should not be included 2re there other initiati&es "hich you thin: should be added to the list .o you thin: that there should be an e;press po"er !i&en to the future charity commission to sanction or!anisations for noncompliance "ith the terms laid do"n in codes of conduct issued by the commission ASee para!raph *>5(>B

N2/!

N23!

N25!

1+ 15

2t para *>+)> 2t para *>51>

1)3

.Charitie and ta( : Chapter 9H/ N26! .o you a!ree that e;istin! po"ers of ta; e;emption and functions of periodic re&ie" of charities for ta;ation purposes should remain "ith the Inland 9e&enue .epartment ASee 9ecommendation 1%A1B 1%>B .o you a!ree that ta; e;emption should be !ranted to a charity by the Inland 9e&enue .epartment only "hen the charity has been re!istered "ith the future charity commission and< sub6ect to this< there should be no chan!e to the e;istin! la" on the ta;ation of charities in #on! $on! ASee 9ecommendation 1%A2B and A3B>B .o you thin: that the future charity commission should collaborate "ith the Inland 9e&enue .epartment as far as possible< particularly by the pro&ision of rele&ant charities' accounts information< to facilitate the Inland 9e&enue .epartment's functions in assessin! charities for ta; "here appropriate ASee 9ecommendation 1%A+B>B .o you a!ree that the 2dministration should ensure that sufficient resources are allocated to the Inland 9e&enue .epartment to carry out the function of re&ie"in! annual accounts submitted by charities to the future charity commission ASee 9ecommendation 1%A5B>B .The c!"pr# doctrine : Chapter 99/ N/0! .o you thin: that le!islation should be introduced in #on! $on! alon! the lines of the 3n!lish statutory model of the cy-pr?s doctrine Acomprised in pro&isions of the 3n!lish 1harities 2ct 1**3< as amended in 2--%B< so as to pro&ide a statutory basis for the cy-pr?s doctrine in #on! $on! and to broaden the scope of its application ASee 9ecommendation 1(1(>B If you ha&e ans"ered /yes/ to Wuestion 3-< do you a!ree that in line "ith the 3n!lish model< the cy-pr?s doctrine should be broadened in #on! $on! so that it may apply in the situations listed in 9ecommendation 1(< e&en "here it is not impossible or impractical to carry out the charitable purpose of the charitable trust ASee 9ecommendation 1(>B .o you a!ree that the future charity commission should be empo"ered by statute to administer the application of the cy-pr?s doctrine in particular cases ASee 9ecommendation 1(>B

N27!

N28!

N2;!

N/1!

N/2!

1% 1(

2t para 1->+2> 2t para 11>2(>

1)+

.E ta&li hment of a charit! commi Chapter 9;/ N//!

ion for $ong %ong :

.o you thin: that a charity commission should be set up as a sole re!ulatory body for charities in #on! $on! ASee 9ecommendation 1)1)>B If you ha&e ans"ered /yes/ to Wuestion 33< do you a!ree to the ob6ecti&es of the future charity commission set out in 9ecommendation 1) If not< "hat ob6ecti&es do you thin: should not be included in the list 2re there other ob6ecti&es "hich you thin: should be added to the list .o you a!ree that the future charity commission should ha&e the functions and po"ers set out at 9ecommendation 1* 1* If not< "hich functions and po"ers should not be included in the list Which additional functions and po"ers< if any< should be !i&en to the future charity commission .o you a!ree that a charitable or!anisation or person a!!rie&ed by a decision of the future charity commission< either: <.!1 .#1 in its refusal to re ister an or anisation as a charitable or anisationP in the e4ercise of its powers relatin to enforcement and remedies due to non-compliance of charities with their le al obli ationsP or in the application of the cy-pr?s doctrine< ASee

N/3!

N/5!

N/6!

.)1

should ha&e the ri!ht to appeal to the 1ourt of First Instance 9ecommendation 2-2->B N/7!

.o you thin: that appeals relatin! to applications for fundraisin! permits and licences should be handled by the 2dministrati&e 2ppeals Foard or by a ne" administrati&e appeal system set up for the purpose ASee para!raph 12>+5>B

S&11ar0 $f re $11e"%a#'$")
=======================================
1) 1* 2-

2t para 12>11> 2t para 12>+3> 2t para 12>++>

1)5

GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 5 $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" #(e %ef'"'#'$" $f (ar'#0H Re $11e"%a#'$" 1 .Pros and cons of havin a statutory definition1 We recommend that there should be a clear statutory definition of "hat constitutes a charitable purpose> Apara 5>+2B Re $11e"%a#'$" 2 .Cate ories of charitable purpose - our proposals1 We recommend that the statutory definition of "hat constitutes a charitable purpose that is e;clusi&ely charitable should include the follo"in! heads: A1B A2B A3B A+B A5B A%B A(B A)B A*B A1-B A11B A12B A13B
1 2

The pre&ention or relief of po&ertyH1 The ad&ancement of educationH The ad&ancement of reli!ionH2 The ad&ancement of healthH The sa&in! of li&esH The ad&ancement of citiNenship or community de&elopmentH The ad&ancement of arts< culture< herita!e or scienceH The promotion of reli!ious or racial harmonyH The promotion of e@uality and di&ersityH The ad&ancement of en&ironmental protection or impro&ementH The relief of those in need by reason of youth< a!e< ill-health< disability< financial hardship or other disad&anta!eH The ad&ancement of animal "elfareH 2ny other purpose that is of benefit to the community>
Sub6ect to further refinements su!!ested in para!raph 5>%*> Sub6ect to further refinements su!!ested in para!raph 5>(%>

1)%

We further recommend that< "hiche&er head of charitable purpose the particular purpose falls under< it must be also for the public benefit> 3 In relation to <The advancement of human ri hts, conflict resolution or reconciliation<9 ,e "elcome the public's &ie"s as to "hether these purposes should be included in the list of charitable purposes> .para =.BB"=.9;F/ GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 6 $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" #(e -e*a)#r& #&re) $f (ar'#'e)H Re $11e"%a#'$" / .Conclusions1 We in&ite &ie"s from the public on "hether< and to "hat e;tent< the &arious e;istin! le!al forms for charities should be reformed> In particular< "e in&ite comments on: A1B "hether the current system of allo"in! a &ariety of le!al forms of charitable or!anisations to e;ist should continue< and if so< "hat modifications< if any< should be made to itH and "hether< in the alternati&e< a unitary approach of imposin! one uniform model of charitable or!anisation structure should be adopted< and if so< "hat form that model should ta:e> Aparas %>3*-%>+1B

A2B

GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 7 $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" re*')#ra#'$" $f (ar'#'e)H Re $11e"%a#'$" 3 .:ur proposal1 We recommend that all charitable or!anisations "hich: A1B A2B ma:e any charitable appeal to the publicH andCor see: ta; e;emption

3

We note that this "ould ha&e the effect of remo&in! the present common la" presumption that purposes for the relief of po&erty< the ad&ancement of education and the ad&ancement of reli!ion are prima facie charitable and for the public benefit>

1)(

should be sub6ect to the re@uirement of re!istration> We recommend that the list of re!istered charitable or!anisations should be established and maintained by the future charity commission and that this list should be a&ailable for public inspection> We recommend that the application process for re!istration should not be sub6ect to public notification> We recommend that the matter relatin! to allo"in! or disallo"in! the use of particular names of charitable bodies should be left to the future charity commission to determine< on a case by case basis> Apara (>3(B GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 8 $f #(') $")&-#a#'$" .a.er $" Pr$.$)e% fra1e,$r2 f$r *$+er"a" e9 a $&"#'"* a"% re.$r#'"* :0 (ar'#'e)H Re $11e"%a#'$" 5 .Cotification of chan e of particulars1 We recommend that re!istered charitable or!anisations should be re@uired to file an annual acti&ity report to the future charity commission> Such a report should be pro&ided in a standard form and matters co&ered should include X A1B A2B A3B A+B chan!e of charitable ob6ectsH main acti&ities carried out to fulfil the charitable ob6ectsH chan!e of directorsH chan!e of re!istered office address> Aparas )>1%-)>2-B

Re $11e"%a#'$" 6 .=isclosure of interests and matters relatin to overnance1 We recommend that charity trustees or directors of a re!istered charity should be under a duty to declare any conflicts of interest and personal interests> Aparas )>21-)>2+B Re $11e"%a#'$" 7 .'ilin accounts and statements1 We recommend that:

1))

A1B

9e!istered charitable or!anisations "ith an annual income e;ceedin! ?5--<--- should be re@uired to file an auditors' report and financial statements "ith the future charity commission> Without pre6udice to the statutory re@uirements under the 1ompanies ,rdinance A1ap 32B< re!istered charitable or!anisations "ith an annual income not e;ceedin! ?5--<--should be re@uired to file financial statements certified by the Foard of these charitable or!anisations "ith the future charity commission> The auditor's report and financial statements submitted by charitable or!anisations to the future charity commission should be accessible to the public>

A2B

A3B

We also in&ite &ie"s from the public on X A1B "hether< for e&ery charity re!istered "ith the future charity commission< an acti&ities report and financial statements should be filed "ith the future charity commission on an annual basisH and if so the contents to be included in the annual report of acti&ities> Aparas )>25-)>2*B

A2B

Re $11e"%a#'$" 8 .Eaintainin accountin records1 We recommend that charity trustees or directors of a re!istered charity should be under a statutory duty to :eep proper accountin! records of the charity "hich are sufficient to sho" and e;plain all transactions of a charity> Such records should be retained for at least se&en years> Aparas )>3--)>33B Re $11e"%a#'$" ; .Powers of investi ation1 We recommend that the future charity commission should be &ested "ith the po"er to in&esti!ate any alle!ed mismana!ement and misconduct of charitable or!anisations "ith re!ard to its charitable ob6ects> In the e;ercise of this po"er to in&esti!ate alle!ed mismana!ement and misconduct of a charitable or!anisation< the future charity commission should ha&e po"er< in respect of a particular charity under in&esti!ation< to in&esti!ate the charity's fundin!< property and acti&ities and to obtain rele&ant information< includin! documents< records< boo:s and accounts from the charity> .urin! the course of such in&esti!ations< there should be appropriate safe!uards to ensure confidentiality> Aparas )>3+-)>+2B

1)*

Re $11e"%a#'$" 10 .Providin false or misleadin information to be an offence1 We recommend that any person "ho intentionally or rec:lessly pro&ides false or misleadin! information to the future charity commission or its appointed in&esti!ators< or fails to pro&ide the information re@uired for the purpose of in&esti!ation< or alters< conceals or destroys any document re@uired for production for the purpose of an in&esti!ation< "ill be !uilty of an offence> Apara )>++B Re $11e"%a#'$" 11 .Protection of the property of a charity1 We recommend that the future charity commission should be &ested "ith po"ers relatin! to enforcement and remedies in the case of non-compliance by charities "ith their le!al obli!ations> These po"ers should include< but not be limited to: A1B A2B A3B A+B de-re!istration of a charity from the re!ister of charitiesH referrin! criminal offences to appropriate la" enforcement a!enciesH referrin! possible ci&il actions to the Secretary for DusticeH and po"ers for the purpose of protection of property of charities> Aparas )>+*-)>5-B

Re $11e"%a#'$" 12 .Protection of the property of a charity1 We recommend that the future charity commission should be &ested "ith the po"er to protect property of charities in cases of misconduct or mismana!ement in the administration of charities< and that this po"er should include< but not be limited to< the po"ers to: A1B A2B A3B A+B appoint additional trustees or directors of the charityH suspend or remo&e trustees< directors or officers of the charityH &est property of charities in an official custodianH and re@uire persons holdin! property on behalf of the charity not to part "ith the property "ithout the appro&al of the future charity

1*-

commission> Apara )>51B GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er ; $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" #(e re*&-a#'$" $f f&"%ra')'"* a #'+'#'e)H Re $11e"%a#'$" 1/ .Re ulatory measures on fundraisin activities in public places and lotteries1 We recommend that: A1B there should be a sole re!ulatory body Aa <one-stop shop<B to process and !rant all permits and licences necessary for charitable fundraisin!< and to monitor the use of funds raised by such acti&itiesH this <one-stop shop< ser&ice should be pro&ided by the future charity commission "hich should be &ested "ith the po"ers and duties currently e;ercised by the Social Welfare .epartment< the Food and 3n&ironmental #y!iene .epartment and the Tele&ision and 3ntertainment 8icensin! 2uthority in relation to authorisin! charity fundraisin! acti&ities in public places and those in&ol&in! lotteriesH and the future charity commission should be responsible for enablin! public access to information relatin! to fundraisin! acti&ities and for pro&idin! an en@uiry response ser&ice to the public> Aparas *>+3-*>++B

A2B

A3B

Re $11e"%a#'$" 13 .:ther types of fundraisin activity1 We recommend that< for all forms of charitable fundraisin! acti&ities< the re!istration number of any charitable or!anisation in&ol&ed in the acti&ities should be prominently displayed on any related documents< or displayed on any means throu!h "hich appeals for charitable donations are made Asuch as solicitation leafletsB> Aparas *>+5-*>+)B Re $11e"%a#'$" 15 .Professional fundraisers1 In relation to professional fundraisers< "e recommend that:

1*1

A1B

the future charity commission should de&elop and issue nonstatutory codes of !ood practice to re!ulate the acti&ities of professional fundraisersH the future charity commission should consider the feasibility of re@uirin! professional fundraisers to re!ister "ith itH the future charity commission should encoura!e as a matter of !ood practice amon! professional fundraisers or commercial participators Aincludin!< but not limited toB AaB the ma:in! of solicitation statements Asuch as those used under the system in 3n!land and WalesB by professional fundraisersH disclosure of their remuneration to the future charity commission and the publicH disclosure to the future charity commission of any prior "ritten a!reement bet"een them and charitiesH and

A2B A3B

AbB AcB A+B

the future charity commission should re&ie" the position and issue !uidelines concernin! the hirin! of elderly persons to solicit donations on the street> Aparas *>+*-*>51B

GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 10 $f #(') $")&-#a#'$" .a.er $" C(ar'#'e) a"% #a<H Re $11e"%a#'$" 16 .:ur conclusions and proposals on the ta4ation of charities in (on -on 1 We recommend: A1B that e;istin! po"ers of ta; e;emption and functions of periodic re&ie" of charities for ta;ation purposes should remain "ith the Inland 9e&enue .epartmentH ta; e;emption may be !ranted to a charity by the Inland 9e&enue .epartment only "hen the charity has been re!istered "ith the future charity commissionH sub6ect to A2B abo&e< no chan!e to the e;istin! la" on the ta;ation of charities in #on! $on!H that the future charity commission should collaborate "ith the Inland 9e&enue .epartment as far as possible< particularly by the pro&ision of rele&ant charities' accounts information< to facilitate the .epartment's functions in assessin! charities for

A2B

A3B A+B

1*2

ta; "here appropriateH and A5B that the 2dministration should ensure that sufficient resources are allocated to the Inland 9e&enue .epartment to carry out the function of re&ie"in! annual accounts submitted by charities to the future charity commission> Aparas 1->3*-1->+2B

GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 11 $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" #(e 0-.r=) %$ #r'"eB Re $11e"%a#'$" 17 .:ur conclusions and proposals on variation of charities in (on -on 1 We recommend the introduction in #on! $on! of le!islation alon! the lines of the 3n!lish statutory model of the cy-pr?s doctrine Acomprised in pro&isions of the 3n!lish 1harities 2ct 1**3< as amended in 2--%B< so as to pro&ide a statutory basis for the doctrine in #on! $on! and to broaden the scope of its application> In line "ith the 3n!lish model< "e recommend that the cy-pr?s doctrine should be broadened in #on! $on! so that it may apply in the follo"in! situations e&en "here it is not impossible or impractical to carry out the charitable purpose of the charitable trust: A1B "here property !i&en for a specific charitable purpose has failed< and the donors are either un:no"n or ha&e disclaimed their ri!hts to ha&e the property returnedH "here property is !i&en for a specific charitable purpose in response to a solicitationH "here a charitable body has dissol&ed>

A2B A3B

We also recommend that the future charity commission should be empo"ered by statute to administer the application of the cy-pr?s doctrine in particular cases> Aparas 11>2%-11>2(B GT(e re $11e"%a#'$") :e-$, are #$ :e f$&"% '" C(a.#er 12 $f #(') $")&-#a#'$" .a.er $" C$" -&)'$") a"% .r$.$)a-) $" #(e e)#a:-')(1e"# $f a (ar'#0 $11'))'$" f$r H$"* K$"*H Re $11e"%a#'$" 18 .The ob;ectives of the future charity commission1

1*3

We recommend that a charity commission should be set up as a sole re!ulatory body for charities> The ob6ecti&es of the charity commission "ould be: A1B A2B A3B A+B to increase public trust and confidence in charitiesH to enhance transparency and accountability to donors and beneficiariesH to promote !ood !o&ernance and !ood mana!ement practice on matters related to charitiesH and to promote !reater compliance amon! charities "ith their le!al obli!ations> Apara 12>11B

Re $11e"%a#'$" 1; .The functions and powers of the future charity commission1 We recommend that the future charity commission should ha&e the follo"in! functions and po"ers: A1B A2B A3B A+B A5B A%B To determine "hether or!anisations are or are not charitiesH To maintain and administer the re!ister of charities< includin! a po"er to refuse re!istration in appropriate casesH To monitor compliance by charities "ith their le!al obli!ationsH To &et applications for re@uisite appro&al in relation to fundraisin! acti&itiesH To promote !ood !o&ernance and !ood practice amon! charitiesH To in&esti!ate< either by itself or by appointed in&esti!ators< into misconduct or maladministration by charitable or!anisations or their officersH To enforce decisions and to !rant remediesH and To apply the cy-prRs doctrine> Aparas 12>22-12>+3B

A(B A)B

Re $11e"%a#'$" 20 .%ppeal mechanism1

1*+

We recommend that a charitable or!anisation or person a!!rie&ed by the decision of the future charity commission< either: A1B A2B in its refusal to re!ister an or!anisation as a charitable or!anisationH in the e;ercise of its po"ers relatin! to enforcement and remedies due to non-compliance of charities "ith their le!al obli!ationsH or in the application of the cy-pr?s doctrineP

A3B

shall ha&e the ri!ht to appeal to the 1ourt of First Instance> Apara 12>++B

1*5

A""e< 1

T(e -a, '" $#(er 4&r')%' #'$") $" #(e %ef'"'#'$" $f (ar'#0
1

A&)#ra-'a
3u tralian Commonwealth 1> states that: Section 3 of the 3;tension of 1haritable 0urpose 2ct 2--+

<charity means a charitable institution, a charitable fund or any other 6ind of charitable body.< 2> This 2ct comprises perhaps the most si!nificant charity la" reform introduced in 2ustralia in recent years> The conse@uence of this le!islation "as an e;tension of certain aspects of the definition of charitable purposes> Section +A1B pro&ides that< "ithout limitin! "hat constitutes a charitable purpose< charitable purpose includes <the provision of child care services on a non-profit basis>< 3> In relation to <public benefit<< section 5A1B of the 2ct e;plains that an institution has a purpose that is <for the public benefit< to the e;tent that it is: <.a1 .b1 an open and non-discriminatory self-help roup NP or a closed or contemplative reli ious order that re ularly underta6es prayerful intervention at the re8uest of members of the public.<

+> Section 5A2B pro&ides that an institution is an <open and nondiscriminatory self-help roup< if: <.a1 .b1 it is an association of individuals that has an open and non-discriminatory membershipP and it is established for the purpose of assistin affected by& .i1 .ii1 individuals

a particular disadvanta e or discriminationP or a need, arisin out of a particular disadvanta e or discrimination, that is not bein metP and

1

0lease note that the discussion of the la" on the purpose of charity in the 6urisdictions of 3n!land and Wales and Scotland is set out in 1hapter 5 of this paper>

.c1 .d1 .e1

it is made up of, and controlled by, individuals who are affected by the disadvanta e or discriminationP and all of its criteria for membership relate to its purposeP and its membership is open to any individual who satisfies the criteria.<

Cew South ,ales 5> Section +A1B of the 1haritable Fundraisin! 2ct 1**1 defines charitable purpose as includin! <any benevolent, philanthropic or patriotic purpose.< Xueensland %> 1haritable purpose is defined under section 2 of the 1haritable Funds 2ct 1*5) as meanin!: <N every purpose which in accordance with the law of 5n land is a charitable purpose, and, without limitin or otherwise affectin the afore oin , includes all or any of the followin A .a1 the supply of help, aid, relief, assistance, or support howsoever to any persons in distress .includin , but without limitin the enerality thereof, the supply of the physical wants of any such persons1P the education or instruction .spiritual, mental, physical, technical, or social1 and the reformation, employment, or care of any personsP any public purpose .whether of any of the purposes before enumerated or not1 bein a purpose in which the eneral interest of the community or a substantial section of the community .at lar e or in a particular locality1, as opposed to the particular interest of individuals, is directly and vitally concernedP the construction, carryin out, maintenance, or repair of buildin s, wor6s, and places for any of the purposes aforementionedP any benevolent or philanthropic purpose .whether of the purposes before enumerated or not1P any analo ous purpose declared either enerally or in the particular case for the purposes of this %ct by the +overnor in Council by order in council published in the a@ette to be a charitable purpose.<

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Iictoria (> In Mictoria< section ) of the 1harities 2ct 1*() defines charity as< <any institution which is established for purposes which accordin to the law of Iictoria are charitable.< Canada )> The federal Income Ta; 2ct contains no definition of <charity< and the courts apply the Pemsel cate!orisations in determinin! "hether an or!anisation is charitable> %lberta *> In 2lberta< ho"e&er< the 1haritable Fund-raisin! 2ct 2---2 has defined both <charitable or anisation< and <charitable purpose<> 1-> means: <.i1 .ii1 Section 1A1BAbB of the 2ct pro&ides that <charitable or anisation< any incorporated or unincorporated or ani@ation that is formed for a charitable purpose, or a person who ma6es solicitations for contributions to be used for a charitable purpose and who is not connected to any incorporated or unincorporated or ani@ation that is formed for the charitable purpose for which the solicitation is made<.

11> Knder the 2ct< <contribution< means money< !oods or ser&ices or a promise or pled!e to !i&e money< !oods or ser&ices> 3 12> Section 1A1BAcB states that <charitable purpose< includes: <a philanthropic, benevolent, educational, health, humane, reli ious, cultural, artistic or recreational purpose, so lon as the purpose is not part of a business<. *reland 13> Section 2A1B of the Irish 1harities 2ct 2--* defines <charitable or anisation< to mean: <.a1 .b1 the trustees of a charitable trust, or a body corporate or an unincorporated body of persons A

2 3

1hapter 1-* 9S2 2---> Section 1A1BAdB of the 1haritable Fund-raisin! 2ct 2---< 1hapter 1-* 9S2 2--->

.i1 .ii1

that promotes a charitable purpose only, that, under its constitution, is re8uired to apply all of its property .both real and personal1 in furtherance of that purpose, e4cept for moneys e4pended A .I1 in the operation and maintenance of the body, includin moneys paid in remuneration and superannuation of members of the staff of the body, and in the case of a reli ious or anisation or community, on accommodation and care of members of the or anisation or community,

.II1

and .iii1 none of the property of which is payable to the members of the body other than in accordance with section /*, but shall not include an e4cluded body.<2

1+> Section 3A2B pro&ides that a charitable purpose must be <of public benefit< and section 3A1B lists the follo"in! charitable purposes: <.a1 .b1 .c1 .d1 15> unless: <.a1 the prevention or relief of poverty or economic hardshipP the advancement of educationP the advancement of reli ionP any other purpose that is of benefit to the community.< Section 3A3B pro&ides that a !ift shall not be / of public benefit/ it is intended to benefit the public or a section of the public, and in a case where it confers a benefit on a person other than in his or her capacity as a member of the public or a section of the public, any such benefit is reasonable in all

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+

Section 2A1B of the Irish 2--* 2ct e;plains that< <e4cluded body< means AaB a political party< or a body that promotes a political party or candidate< AbB a body that promotes a political cause< unless the promotion of that cause relates directly to the ad&ancement of the charitable purposes of the body< AcB an appro&ed body of persons "ithin the meanin! of section 235 of the Ta;es 1onsolidation 2ct 1**(< AdB a trade union or a representati&e body of employers< AeB a chamber of commerce< or AfB a body that promotes purposes that are AiB unla"ful< AiiB contrary to public morality< AiiiB contrary to public policy< Ai&B in support of terrorism or terrorist acti&ities< "hether in the State or outside the State< or A&B for the benefit of an or!anisation< membership of "hich is la"ful>

of the circumstances, and is ancillary to, and necessary, for the furtherance of the public benefit.< 1%> Section 3A+B introduces a rebuttable presumption that <a ift for the advancement of reli ion is of public benefit< and further pro&isions in relation to reli!ion are found at sections 3A5B< A%B< A*B and A1-B> These include: <.01 The %uthority shall not ma6e a determination that a ift for the advancement of reli ion is not of public benefit without the consent of the %ttorney +eneral. % charitable ift for the purpose of the advancement of reli ion shall have effect, and the terms upon which it is iven shall be construed, in accordance with the laws, canons, ordinances and tenets of the reli ion concerned. There shall be no appeal to the Tribunal from a determination of the %uthority to which subsection .01 applies. 'or the purposes of this section, a ift is not a ift for the advancement of reli ion if it is made to or for the benefit of an or anisation or cult U .a1 .b1 the principal ob;ect of which is the ma6in of profit, or that employs manipulation U .i1 .ii1 oppressive psycholo ical

."1

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of its followers, or for the purpose of ainin new followers.<

1(> In determinin! "hether a !ift is of public benefit or not< section 3A(B re@uires account to be ta:en of: <.a1 any limitation imposed by the donor of the ift on the class of persons who may benefit from the ift and whether or not such limitation is ;ustified and reasonable, havin re ard to the nature of the purpose of the ift, and the amount of any char e payable for any service provided in furtherance of the purpose for which the ift is iven and whether it is li6ely to limit the number of persons or classes of person who will benefit from the ift.< Fy &irtue of section 3A)B< a limitation referred to in subsection A(B

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1)>

shall not be 6ustified and reasonable if all of the intended beneficiaries of the !ift or a si!nificant number of them ha&e a personal connection "ith the donor of the !ift> 1*> Section 3A11B offers some !uidance as to "hat amounts to a <purpose that is of benefit to the community< for the purposes of section 3A1B AdB< and considerably e;tends the scope of <charitable purpose< beyond the ad&ancement of education and reli!ion and the pre&ention or relief of po&erty or economic hardship set out in section 3A1B> Section 3A11B pro&ides that a <purpose of benefit to the community< includes: <.a1 the advancement of community welfare includin the relief of those in need by reason of youth, a e, ill-health, or disability, the advancement of community development, includin rural or urban re eneration, the promotion of civic responsibility or voluntary wor6, the promotion of health, includin the prevention or relief of sic6ness, disease or human sufferin , the advancement of conflict resolution or reconciliation, the promotion of reli ious or racial harmony and harmonious community relations, the protection of the natural environment, the advancement of environmental sustainability, the advancement of the efficient and effective use of the property of charitable or anisations, the prevention or relief of sufferin of animals, the advancement of the arts, culture, herita e or sciences, and the inte ration of those who are disadvanta ed, and the promotion of their full participation, in society.<

.b1 .c1 .d1 .e1 .f1 . 1 .h1 .i1 .;1 .61 .l1

New ?ealand 2-> Section +A1B of the 4e" 5ealand's 1harities 2ct 2--5 defines charity to mean <a society, an institution, or the trustees of a trust that is or are re istered as a charitable entity under this %ct.< Section 5A1B pro&ides that< unless the conte;t other"ise re@uires< <charitable purpose< includes:

<every charitable purpose, whether it relates to the relief of poverty, the advancement of education or reli ion, or any other matter beneficial to the community.< Further< section 5A3B pro&ides that: <N if the purposes of a trust, society, or an institution include a non-charitable purpose .for e4ample, advocacy1 that is merely ancillary to a charitable purpose of the trust, society, or institution, the presence of that non-charitable purpose does not prevent the trustees of the trust, the society, or the institution from 8ualifyin for re istration as a charitable entity.< Singapore 21> Section 2A1B of Sin!apore's 1harities 2ct A1ap 3(B defines a charity as <any institution, corporate or not, which is established for charitable purposes and is sub;ect to the control of the (i h Court in e4ercise of the Court9s ;urisdiction with respect to charities.< It also pro&ides that <charitable purposes< means< <purposes which are e4clusively charitable accordin to the law of Sin apore< and <charitable company< means, <a charity which is a company or other body corporate< > While this definition does not define <charitable purposes< in a concrete fashion< the follo"in! cate!ories ha&e been reco!nised as charitable purposes in practice in Sin!apore: 5 AaB AbB AcB AdB the relief of po&ertyH the ad&ancement of educationH the ad&ancement of reli!ionH and other purposes beneficial to the community< "hich include:       the ad&ancement of healthH the ad&ancement of citiNenship or community de&elopmentH the ad&ancement of arts< herita!e or scienceH the ad&ancement impro&ementH of en&ironmental protection or

the relief of those in need by reason of youth< a!e< ill-health< disability< financial hardship or other disad&anta!esH the ad&ancement of animal "elfareH and

5

Sin!apore 1ommissioner of 1harities< 1ommissioner of 1harities 2nnual 9eport for the Oear 3ndin! 31 .ecember 2--%< at para 12>



the ad&ancement of sport< "here the sport ad&ances health throu!h physical s:ill and e;ertion>

South 3frica 22> To be eli!ible for ta; e;emption under the South 2frica Income Ta; 2ct 1*%2< a public benefit or!anisation has to carry out public benefit acti&ities> Section 3-A1B defines <public benefit activity< as: <.a1 .b1 any activity listed in Part I of the Cinth Schedule Fto the %ctGP and any other activity determined by the Einister from time to time by notice in the +a@ette to be of a benevolent nature, havin re ard to the needs, interests and well bein of the eneral public<.

The acti&ities referred to in 0art I of the 4inth Schedule are in respect of the follo"in! areas: AaB AbB AcB AdB AeB AfB A!B AhB AiB A6B A:B "elfare and humanitarianH health careH land and housin!H education and de&elopmentH reli!ion< belief or philosophyH culturalH conser&ation< en&ironmental and animal "elfareH research and consumer ri!htsH sportH pro&ision of funds< assets or other resourcesH and miscellaneous>

23> The same section defines a <public benefit or anisation< as any or!anisation: <.a1 which is A .i1 a company formed and incorporated under section #! of the Companies %ct, !*3) .%ct Co. "! of !*3)1, or a trust or an association of persons that

has been incorporated, formed or established in the RepublicP or .ii1 any branch within the Republic of any company, association or trust incorporated, formed or established in terms of the laws of any country other than the Republic that is e4empt from ta4 on income in that other countryP

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of which the sole or principal ob;ect is carryin on one or more public benefit activities, where A .i1 all such activities are carried on in a non - profit manner and with an altruistic or philanthropic intentP no such activity is intended to directly or indirectly promote the economic self - interest of any fiduciary or employee of the or anisation, otherwise than by way of reasonable remuneration payable to that fiduciary or employeeP and

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where A .i1 each such activity carried on by that or anisation is for the benefit of, or is widely accessible to, the eneral public at lar e, includin any sector thereof .other than small and e4clusive roups1P N<

A""e< 2

T(e -a, '" $#(er 4&r')%' #'$") $" #(e -e*a- )#r& #&re) $f (ar'#'e) A&)#ra-'a
1> Foth state and federal charity la" in 2ustralia closely follo"s the 3n!lish definition of charity based on the 0reamble to the 3liNabethan Statute of 1haritable Kses in 1%-1< and the common la" imposes no specific restrictions on the structure that a charity may ta:e> Further< althou!h state 2ttorneys 7eneral are theoretically responsible for super&isin! charitable trusts< the 2ustralian Ta;ation ,ffice< in practice< ser&es as a national re!ulator> 2> 2t the 1ommon"ealth le&el< the 3;tension of 1haritable 0urpose 2ct 2--+ defines a charity as a charitable institution< a charitable fund or any other :ind of charitable body> Knder the 2ct< the "ord <entity< has the same meanin! as in the Income Ta; 2ssessment 2ct 1**( A1thB< "hich refers to an entity as includin!: AaB AbB AcB AdB AeB AfB A!B AhB an indi&idualH a body corporateH a body politicH a partnershipH any other unincorporated association or body of personsH a trustH a superannuation fundH and an appro&ed deposit fund>%

3> In 2--3< ma6or reform of 2ustralian charity la" "as attempted "ith the introduction of the 1harities Fill> This sou!ht to introduce a le!islati&e definition of both charity and charitable purpose and "as intended to apply to all 1ommon"ealth le!islation to replace the pre&ious common la" interpretation> In particular< the definition "as intended to apply in ta;ation la"< pro&idin! a clear frame"or: "ithin "hich to assess the eli!ibility of entities for certain ta; concessions> The core definition in the Fill identified a charity< a charitable institution or any other :ind of charitable body< and re@uired that the entity be not-for profit< "ith a dominant charitable purpose that "as< "ith some e;ceptions< for the public benefit> There "as some restriction proposed under the Fill on the type of entity that "ould be considered a charityH for e;ample< indi&iduals< partnerships< political parties< superannuation funds and
%

Sections *%--1--< Income Ta; 2ssessment 2ct 1**( A1thB>

!o&ernment bodies "ould not meet the definition> 3ntities that could meet the definition included< "ithout restriction< a body corporate< a corporation sole< an association or body of persons "hether incorporated or not and a trust> ( 2fter consultation on the "or:ability of the le!islati&e definition of a charity< primarily "ith or!anisations intended to fall "ithin the ne" definition< ho"e&er< the 1harities Fill 2--3 "as not implemented>)

Ca"a%a
+> 2s "ith the position in 2ustralia< under the 1anadian constitution< super&ision of charities is "ithin the 6urisdiction of the pro&inces< ho"e&er in practice< it is the federal ta;in! authority< the 1anada 9e&enue 2!ency< "hich is seen as the primary re!ulator of charities> 5> This situation has arisen because the ma6or benefits a&ailable to charities< the e;emption from the payment of ta; on income and the ability to offer ta; credits to donors< are pro&isions contained in the federal Income Ta; 2ct> ,r!anisations apply to the 1anada 9e&enue 2!ency for re!istration as charities and< if appro&ed< are then sub6ect to audit and enforcement acti&ity by the 1anada 9e&enue 2!ency's 1harities .irectorate> * %> defined as: Knder the federal Income Ta; 2ct< a <charitable or anisation< is

<an or anisation, whether or not incorporated, .a1 .b1 all the resources of which are devoted to charitable activities carried on by the or anisation itself, no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settler thereof, more than 0$O of the directors, trustees, officers or li6e officials of which deal with each other and with each of

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(

)

*

D Staples< /47,s out in the 1old: #o"ard !o&ernment policy to"ards 47,s/ I2--(J K4SW89S )> There "ere three dominant issues arisin! from the consultation> First< the main concern "as that the draft definition appeared to limit the amount of ad&ocacy a charity could underta:e and still retain charitable status> The 'dis@ualifyin! purpose' clause "as re!arded "idely as more restricti&e than the common la"> Secondly< many respondents< particularly those representin! some of the lar!e reli!ious or!anisations< "ere concerned that the draft definition did not pro&ide clarity about the many different entities formed to more efficiently further the charitable purposes of or!anisations> Thirdly< "hat "as proposed in the Fill "as that charitable bodies "ere at ris: of losin! their charitable status if they en!a!ed in< or had en!a!ed in< conduct that amounted to a serious offence< e&en if there "as no con&iction> This pro&ision did not reflect the common la" and there "as "ide support for its remo&al> See: Foard of Ta;ation< Consultation on the =efinition of a Charity< % Report to the Treasurer A.ec 2--3B> F Wyatt< :verview from Canada< presented at the Eodernisin Charity Law Conference held in Frisbane< from 1% to 1) 2pril 2--*>

the other directors, trustees, officers or officials at arm9s len th, and .d1 where it has been desi nated as a private foundation or public foundation pursuant to subsection .".)1 of this section or subsection !!$./.!1 or ./.#1 of the Income Ta4 %ct, chapter !2/ of the Revised Statutes of Canada, !*0#, or has applied after 'ebruary !0, !*/2 for re istration under para raph !!$./1.c1 of that %ct or under the definition 9re istered charity9 in subsection #2/.!1, not more than 0$O of the capital of which has been contributed or otherwise paid into the or anisation by one person or members of a roup of persons who do not deal with each other at arm9s len th and, for the purpose of this para raph, a reference to any person or to members of a roup does not include a reference to (er Ea;esty in ri ht of Canada or a province, a municipality, another re istered charity that is not a private foundation, or any club, society or association described in para raph !2*.!1.l1.<

E"*-a"% a"% Wa-e)
(> The ma6ority of charities in 3n!land and Wales e;ist in the form of charitable trusts> From the late nineteenth century on"ards< and after the 1ompanies 2ct 1)%2< more charities adopted a limited liability structure> 4o"< a lar!e number of charities are re!istered in the form of a company limited by !uarantee> The third common form of le!al structure used by charities in 3n!land and Wales is an unincorporated association> In addition to the three structures of common application< charities may also e;ist as friendly societies< industrial and pro&ident societies< or as corporations< includin! eleemosynary corporations< and substantial charities ha&in! a clear public purpose may be established as charitable corporations by statute< 1hurch Measure or 9oyal 1harter>1)> The ne" concept of the <Charitable Incorporated :r anisation< A1I,B "as created under section %*2 in 0art MIII2 of the 1**3 2ct Aas inserted by section 3+ of the 1harities 2ct 2--%B and has not yet been implemented> It "as intended that this ne" type of le!al structure "ould be better suited to !i&e effect to charitable purposes< "ould streamline !o&ernance< "ould reduce the personal liability of trustees and simplify the re!ulatory burden> 0rior to the creation of this ne" le!al form< charities could be set up "ith a corporate structure brin!in! them under the re@uirements of company la" as "ell as charity la"> In particular< they "ould ha&e to re!ister both "ith the 1harity 1ommission and the 9e!istrar of 1ompanies and pro&ide accounts and returns to both> 2s the company frame"or: "as desi!ned primarily for commercial or!anisations< this meant that it "as not al"ays a suitable &ehicle for charities> The 1I, "as intended to combine the ad&anta!es of a
1-

Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 131>

corporate structure< such as reduced ris: of personal liability< "ithout the burden of dual re!ulation> *> Section %*2 of the 1**3 2ct pro&ides that the 1I, has to be a body corporate< that it should ha&e a constitution< and:  it should ha&e a principal office< "hich should be in 3n!land or in WalesH  it should ha&e one or more membersH  the members may be either not liable to contribute to the assets of the 1I, if it is "ound up< or liable to do so up to a ma;imum amount eachH  a 1I,'s constitution should state its name< its purpose< "hether its principal office in 3n!land or in Wales< and "hether or not its members are liable to contribute to its assets if it is "ound up< and Aif they areB up to "hat amountH  a 1I,'s constitution should ma:e pro&ision about "ho is eli!ible for membership and ho" a person becomes a memberH about the appointment of one or more persons "ho are to be charity trustees of the 1I, and about any conditions of eli!ibility for such appointmentH and containin! directions about the application of property of the 1I, on its dissolutionH and  a 1I,'s constitution should be in the form specified in re!ulations made by the 1harity 1ommission< or as near to that form as the circumstances permit> 1-> Section %*W of the 1**3 2ct Aas inserted by section 3+ of the 1harities 2ct 2--%B pro&ides that the Minister may< by re!ulations< ma:e further pro&ision about applications for re!istration of 1I,s< as "ell as the con&ersion of e;istin! charitable companies< re!istered societies and community interest companies into 1I,s< the amal!amation of 1I,s< and other matters relatin! to 1I,s !enerally> 11> When this ne" form of charitable or!anisation "as introduced< it "as en&isa!ed by the 1harities 1ommission in 3n!land and Wales that it "ould ha&e the follo"in! ad&anta!es o&er a company structure: AaB a sin!le re!istration> 2 charitable company has to re!ister "ith the 9e!istrar of 1ompanies and the 1harity 1ommission> 2 1I, "ill only need to re!ister "ith the 1ommissionH less onerous re@uirements for preparin! accounts> The !eneral re!ime in the 1harities 2ct 1**3 "ill apply< so small 1I,s "ill be able to prepare receipts and payments accounts< "hilst lar!er charities "ill prepare accrual accountsH

AbB

AcB

less onerous reportin! re@uirements> 1I,s "ill only prepare an annual report under the 1harities 2ct 1**3> Knder company la"< companies ha&e to prepare a directors' report as "ellH one annual return> 1haritable companies ha&e to prepare an annual return under company la" and< normally< a separate return under charity la"H less onerous filin! re@uirements> 1I,s "ill only ha&e to send accounts< reports and returns to the 1ommission> 1haritable companies ha&e to send these to the 1ommission and the 9e!istrar of 1ompaniesH less onerous re@uirements relatin! to reportin! of constitutional and !o&ernance chan!es> 1I,s "ill be sub6ect to a less e;tensi&e ran!e of reportin! re@uirements than charitable companies and "ill only ha&e to report to the 1harities 1ommissionH lo"er costs for charities> The 1ommission ma:es no char!es for re!istration and filin! of information> Simpler constitutional form X the 1ommission "ill produce model forms of constitution "hich "ill include fe"er fi;ed !o&ernance pro&isions than is the case "ith companiesH more strai!htfor"ard arran!ements for mer!er and reconstruction> The 1harities 2ct 2--% contains a number of pro&isions desi!ned to facilitate mer!er and reconstruction "hich are not a&ailable to charitable companiesH an enforcement re!ime "hich does not penalise the charity for the conduct of its directorsH and codified duties for directors and members "hich reflect the charitable nature of the 1I,>11

AdB

AeB

AfB

A!B

AhB

AiB A6B

Ire-a"%
12> The Irish 8a" 9eform 1ommission published a Report on Charitable Trusts and Le al Structures for Charities in ,ctober 2--%> 0ara!raph 2>11 of the report stated: <FIGn Ireland, 22O of the ",3$$ charities ranted ta4-e4empt status by the Revenue Commissioners are currently constituted as companies limited by uarantee. By contrast of the !3$,$$$ charities re istered with the Charity Commission for 5n land and ,ales only !0O are constituted as companies. The principal reason why charities opt for incorporation is to avail of
11

http:CC""">charity-commission>!o&>u:C8ibraryCabout=usCccne"s2%>pdf>

the protection afforded by limited liability and also because certain rants are only available to incorporated or anisations. The FIrishG Commission considers that many charities are forced to incorporate as companies simply because there is currently no other option available to them if they wish to avail of the benefits of limited liability for their members or to avail of certain rants. The Commission therefore recommends that the eneral reform of charity re ulation should include the issue of the le al structure of charities.<!# 13> 1ommentin! on charity reform proposals "hich had then recently been put for"ard by the Irish !o&ernment< the 8a" 9eform 1ommission stated: <#.$3 The +eneral Scheme for the Charities Re ulation Bill #$$" does not ma6e any provision for a new le al form for charities. The press release which accompanied the publication of the draft Bill contained the followin comment on the issue& 9Charities have the choice of a number of different le al forms, e. ., unincorporated, such as a trust or an unincorporated association, or incorporated, such as a company .usually limited by uarantee, rather than shares1. The 8uestion of whether there could be a new le al form, especially for charities, has been raised by bodies such as the Law Society and the Law Reform Commission. Substantive consideration by the charities sector as to how any new le al form should be different from the current company limited by uarantee has yet to ta6e place. Co charities-specific comments were received in response to the public consultation on the proposals of the Company Law Review +roup for reform of company law. It is not intended to hold up pro ress in introducin le islation to re ulate the charities sector for the first time in Ireland, as promised by the +overnment, pendin consideration of separate, lon er-term 8uestions such as this. (owever, in con;unction with relevant +overnment =epartments and other bodies, the =epartment of Community, Rural and +aeltacht %ffairs will continue to monitor developments, includin the outcome of the review foreseen in the S- within five years of the proposed introduction of a new form of incorporation for

12

The 8a" 9eform 1ommission of Ireland< Report& Charitable trusts and le al structures for charities A2--%< 891 )--2--%B< at para 2>11>

charities, .CI:1.139

the

Charitable

Incorporated

:r anisation

#.$/ This passa e appears to su est that the =epartment was mindful to postpone consideration of this issue but it also su ests that the primary ob;ective was to ensure that it would not hold up the eneral reform process.< 1+ 1+> The Irish 8a" 9eform 1ommission obser&ed that the de&elopment of a le!al structure for charities should be seen as an inte!ral part of the reform process> 2 separate ne" le!al structure "ould pro&ide an opportunity to streamline the re!istration and re!ulation of charities so that all charities re!ardless of their le!al status "ould be sub6ect to the same form of re!ulation>15 15> The Irish 1harities 2ct 2--* pro&ides for the re!ulation of charitable or!anisations and the establishment of the 1harities 9e!ulatory 2uthority> The 2uthority is re@uired under the 2ct to establish and maintain a re!ister of charitable or!anisations after consultation "ith the 9e&enue 1ommissioners> <Charitable or anisation< is defined under section 2 of the 2ct to mean the trustees of a charitable trust< or a body corporate or an unincorporated body of persons X <.i1 .ii1 that promotes a charitable purpose only, that, under its constitution, is re8uired to apply all of its property .both real and personal1 in furtherance of that purpose, e4cept for moneys e4pended A .I1 in the operation and maintenance of the body, includin moneys paid in remuneration and superannuation of members of the staff of the body, and in the case of reli ious or anisation or community, on accommodation and care of members of the or anisation or community, and

.II1

.iii1

none of the property of which is payable to the members of the body other than in accordance with section /*,

but shall not include an e4cluded body.< Knder section 2< <e4cluded body< means X <.a1 a political party, or a body that promotes a political party or candidate,
http:CC""">pobail>ieCenC1harities9e!ulationC0ress9eleasesSpeechesCfile<%)*1<en>pdf> The 8a" 9eform 1ommission of Ireland< abo&e< at paras 2>-( to 2>-)> The 8a" 9eform 1ommission of Ireland< abo&e< at para 2>1->

13 1+ 15

.b1

a body that promotes a political cause, unless the promotion of that cause relates directly to the advancement of the charitable purposes of the body, an approved body of persons within the meanin section #)0 of the Ta4es Consolidation %ct !**3, a trade union or a representative body of employers, a chamber of commerce, or a body that promotes purposes that are A .i1 .ii1 .iii1 .iv1 .v1 unlawful, contrary to public morality, contrary to public policy, in support of terrorism or terrorist activities, whether in the State or outside the State, or for the benefit of an or anisation, membership of which is unlawful.< of

.c1 .d1 .e1 .f1

Ne, Eea-a"%
1%> The principal le!islation on charities in 4e" 5ealand is the 1harities 2ct 2--5> Section 13 of the 2ct sets out the re@uirements "hich must be satisfied to @ualify for re!istration: <.a1 in the case of the trustees of a trust, the trust is of a 6ind in relation to which an amount of income is derived by the trustees in trust for charitable purposesP and in the case of a society or an institution, the society or institution .i1 .ii1 is established and maintained e4clusively for charitable purposesP and is not carried on for the private pecuniary profit of any individualP and

.b1

.c1
1%

the entity has a name that complies with section !0P !" and

Section 15 of the 4e" 5ealand 1harities 2ct <The name of an entity complies with this section if A .a1 the entity is incorporated under that name under the Incorporated Societies %ct !*$/P or

.d1

all of the officers of the entity are 8ualified to be officers of a charitable entity under section !".< !3

1(> It is &oluntary for charitable or!anisations to re!ister "ith the 1harities 1ommission> 2 charity that chooses not to re!ister "ith the 1ommission "ill still be able to call itself a charity and solicit funds from the public> #o"e&er< a charity that chooses not to re!ister "ill no lon!er @ualify for ta; e;empt status< and it "ill not be able to call itself a <re istered charitable entity<> Knder section 1( of the 2ct< a charitable entity must submit its application to the 1ommission in the prescribed form and accompanied by the prescribed documents> Knder section +- of the 2ct< e&ery charitable entity must ensure that it sends or deli&ers to the 1ommission notice of any of chan!es relatin! to matters such as the name of the charitable entity or the address for ser&ice of the charitable entity>

S $#-a"%
1)> Scottish charities can be constituted in a &ariety of le!al forms< includin! industrial and pro&ident societies and statutory corporations< but most are constituted either as trusts< unincorporated associations or companies limited by !uarantee> 1haritable companies are sub6ect to dual re!ulation and ha&e to report to both the 9e!istrar of 1ompanies and the ,ffice of the Scottish 1harity 9e!ulator A,S19B> 1*> The ,S19 "as established under section 1 of the 1harities and Trustee In&estment AScotlandB 2ct 2--5> The !eneral functions of the
.b1 .c1 .d1 .e1
1(

<.!1 .#1

the entity is incorporated under that name under the Charitable Trusts %ct !*03P or the entity is incorporated under that name under the Companies %ct !**)P or the entity is established, or constituted, by an %ct under that nameP or in any other case, in the opinion of the Commission, the name is not A .i1 offensiveP or .ii1 liable to mislead the public.< Section 1% of the 4e" 5ealand 1harities 2ct % person who is not dis8ualified by this section is 8ualified to be an officer of a charitable entity. The followin persons are dis8ualified from bein officers of charitable entities& .a1 an individual who is an undischar ed ban6ruptP .b1 an individual who is under the a e of !" yearsP .c1 an individual who, or a body corporate that, has been convicted of a crime involvin dishonesty .within the meanin of section #.!1 of the Crimes %ct !*"!1 and has been sentenced for that crime within the last 3 yearsP .d1 an individual who is prohibited from bein a director or promoter of, or bein concerned or ta6in part in the mana ement of, an incorporated or unincorporated body under the Companies %ct !**), the Securities %ct !*3/, the Securities Ear6ets %ct !*//, or the Ta6eovers %ct !**)P .e1 an individual who, or a body corporate that, is dis8ualified from bein an officer of a charitable entity under section )!.21P .f1 an individual who is sub;ect to a property order made under the Protection of Personal and Property Ri hts %ct !*//, or whose property is mana ed by a trustee corporation under section )# of that %ctP . 1 a body corporate that is bein wound up, is in li8uidation or receivership, or is sub;ect to statutory mana ement under the Corporations .Investi ation and Eana ement1 %ct !*/*P .h1 in relation to any particular entity, an individual who, or a body corporate that, does not comply with any 8ualifications for officers contained in the rules of that entity. N<

9e!ulator are to determine charitable status< :eep a public re!ister of charities< encoura!e< facilitate and monitor compliance "ith charity le!islation< in&esti!ate misconduct and ta:e remedial or protecti&e action if necessary and to ad&ise or ma:e proposals to the Scottish Ministers on matters relatin! to its functions> The 9e!ulator is also empo"ered under the 2ct to conduct in@uiries about charities and to ta:e necessary action relatin! to the misconduct of charities follo"in! in@uiries> 2-> Follo"in! a fundamental re&ie" of company le!islation in 2--1< the independent 1ompany 8a" 9e&ie" Steerin! 7roup concluded that there should be a ne" &ehicle for incorporatin! charities and that this &ehicle should be e;clusi&ely for charities< offerin! all benefits of incorporation< includin! limited liability< "ithout the need for dual re!ulation> The Scottish 1harity 8a" 9e&ie" 1ommission endorsed the proposals of the 1ompany 8a" 9e&ie" and recommended that a ne" incorporation &ehicle should be made a&ailable to Scottish charities> 2s a <body corporate<< a Scottish charitable incorporated or!anisation AS1I,B "ould be a le!al person< distinct from its members and charity trustees< !i&in! it the capacity to employ its o"n staff< to contract in its o"n ri!ht< the ability to o"n its o"n property and to sue and be sued> 2s the S1I, "ould be liable for its o"n debts< this "ould offer protection to members from personal financial liability but "ith less onerous re!ulatory and reportin! re@uirements than are currently imposed on charitiable companies> The S1I, "ould en6oy the benefits of sin!le< and therefore more streamlined< re!istration and reportin! re@uirements< sub6ect to the monitorin! and filin! re@uirements imposed by ,S19> 21> Knder section 5% of the 2ct< a charity e;istin! as a company or a re!istered society "ithin the meanin! of the Industrial and 0ro&ident Societies 2ct 1*%5 may apply to the 9e!ulator to be con&erted into a S1I,>

S'"*a.$re
22> The e;istin! la" on charities in Sin!apore is contained in the 1harities 2ct A1ap 3(B< as si!nificantly amended by the 1harities A2mendmentB 2ct 2--(> 2ny or!anisation established for e;clusi&ely charitable purposes and "hich carries out acti&ities to achie&e these purposes must apply for re!istration "ith the 1ommissioner of 1harities "ithin three months of its set-up> 23> The 1ommissioner of 1harities is appointed under section 3 of the 2ct> The 1ommissioner is empo"ered under section + to promote the effecti&e use of charitable resources by encoura!in! the de&elopment of better methods of administration< by !i&in! charity trustees information on any matter affectin! the charity and by in&esti!atin! and chec:in! abuses> 2+> 1harities in Sin!apore can re!ister "ith the 1ommissioner in either one of the follo"in! three types of le!al forms< namely< a company

limited by !uarantee< a society 1) and a charitable trust> Knder section 2 of the 2ct: < 9charity9 means any institution, corporate or not, which is established for charitable purposes and is sub;ect to the control of the (i h Court in e4ercise of the Court9s ;urisdiction with respect to charities ... 9charitable company9 means a charity which is a company or other body corporate N 9Institution9 includes any trust or underta6in <.

S$&#( Afr' a
25> In South 2frica< the le!al frame"or: for not-for-profit and non!o&ernmental or!anisations consists of four primary tiers> ,nly the third le!islati&e tier enables a non-profit or!anisation to apply for the status of a <public benefit or anisation<> These are entitled to a broad ran!e of fiscal benefits< includin! partial income ta; e;emption< e;emption from donations ta;< and e;emption on transfer duty on immo&able property> The fourth le!islati&e tier allo"s a public benefit or!anisation to apply for the ri!ht to recei&e ta;-deductible donations> 2%> 2part from satisfyin! the &arious other re@uirements contained in section 3- of the Income Ta; 2ct of South 2frica< an or!anisation must satisfy certain re@uirements in terms of le!al structure in order to @ualify as a public benefit or!anisation> The or!anisation must be a <section #! company<,1* a charitable trust< a &oluntary association< or <any a ency or
1)

1*

Societies are re!istered "ith the 9e!istrar of Societies and are !o&erned by the Sin!apore Societies 2ct> 2 <society< under the Societies 2ct includes <any club, company, partnership or association of ten or more persons, whatever its nature or ob;ect, but does not include A .a1 any company re istered under any written law relatin to companies for the time bein in force in Sin aporeP .b1 any company or association constituted under any written lawP .ba1 any limited liability partnership re istered under the Limited Liability Partnerships %ct #$$0P .c1 any trade union re istered or re8uired to be re istered under any written law relatin to trade unions for the time bein in force in Sin aporeP .d1 any co-operate society re istered as such under any written lawP .e1 any mutual benefit or anisation re istered as such under my written law relatin to mutual benefit or anisations for the time bein in force in Sin aporeP .f1 any company, association or partnership, consistin of not more than #$ persons, formed for the sole purpose of carryin on any lawful business that has for its ob;ect the ac8uisition of ain by the company, association or partnership, or the individual members thereofP .fa1 any class, society or association of forei n insurers carryin on insurance business in Sin apore under any forei n insurer scheme established under Part II% of the Insurance %ct .Cap !2#1P or . 1 any school or mana ement committee of a school constituted under any law re ulatin schools for the time bein in force in Sin apore.< Section 21A1B of the 1ompanies 2ct 1*(3 of South 2frica refers to incorporation of associations not for !ain and pro&ides that X <.!1 %ny association A .a1 formed or to be formed for any lawful purposeP

branch within the Republic of any company, association, or trust incorporated, formed, or established in terms of the laws of any country other than the Republic that is e4empt from ta4 on income in that other country.<

.b1 .c1 .d1 .e1

havin the main ob;ect of promotin reli ion, arts, sciences, education, charity, recreation, or any other cultural or social activity or communal or roup interestsP which intends to apply its profits .if any1 or other income in promotin its said main ob;ectP which prohibits the payment of any dividend to its membersP and which complies with the re8uirements of this section in respect to its formation and re istration, may be incorporated as a company limited by uarantee.<

A""e< /

T(e -a, '" $#(er 4&r')%' #'$") $" re*')#ra#'$" $f (ar'#'e) A&)#ra-'a
1> There is no sin!le piece of le!islation !o&ernin! the re!istration of charitable or!anisations in 2ustralia> 2s in #on! $on!< the most substantial listin! of charitable or!anisations relates to those see:in! of ta;e;empt status> 2t the 1ommon"ealth le&el< <charitable institutions< and <charitable funds< in 2ustralia may be e;empt from income ta; under the Income Ta; 2ssessment 2ct 1**( if they are endorsed by the 2ustralian Ta;ation ,ffice as bein! income ta; e;empt charities> 2 re!ister of income ta; e;empt charities has been compiled by the 2ustralian Ta;ation office since the year 2---> 2> Knder the Income Ta; 2ssessment 2ct 1**( A1thB< a charitable institution is an institution that is established and run to ad&ance or promote a charitable purpose> 2 charitable fund is a fund established under an instrument of trust or a "ill for a charitable purpose> 2 charitable institution "ill carry on charitable acti&ities "hile a charitable fund mainly mana!es< andCor holds trust property to ma:e distributions to other entities or people> If the trustee itself mainly carries on acti&ities that are charitable< the fund "ill be treated as a charitable institution and not as a charitable fund> 3> The 2ustralian Ta;ation ,ffice may re&o:e a ta; e;empt charity's endorsement if it is not entitled to be endorsed or it has not pro&ided information or documents "ithin the specified time after a re@uest has been made by the 2ustralian Ta;ation ,ffice> 2-

Ca"a%a
+> The 1anada 9e&enue 2!ency is the primary re!ulator of charities in 1anada> Knder the 1anadian federal Income Ta; 2ct< or!anisations apply to the 1anada 9e&enue 2!ency for re!istration as charities and< if appro&ed< are then sub6ect to audit and enforcement acti&ity by the 1anada 9e&enue 2!ency's 1harities .irectorate> 5> 2 charitable entity must ha&e the status of a <re istered charity< in order to be entitled to the pri&ile!es offered to charities under the 1anadian federal Income Ta; 2ct> In decidin! "hether an or!anisation is entitled to re!istered status< the 1anada 9e&enue 2!ency relies on a reasonably traditional interpretation of the common la" tests< as "ell as the pro&isions of the 2ct itself>

2-

2ustralian Ta;ation ,ffice< Income Ta4 +uide for Con-profit :r anisations AMar 2--(B< at %3>

21(

%> <Re istered charity< is defined under the federal Income Ta; 2ct as <a charitable or anisation, private foundation or public foundation< Aor <a branch, section, con re ation, parish, or other division< of any of theseB< that is resident in 1anada< that "as established or created in 1anada< and that is re!istered "ith the Minister of 4ational 9e&enue> 3ach of the three subdi&isions of re!istered charity< namely <charitable or anisation<< <private foundation<< and <public foundation< are separately defined and re!ulated under the federal Income Ta; 2ct>21 (> Knder section 1%) of the 2ct< the Minister may re&o:e the re!istration of a re!istered charity in certain circumstances< such as "here an application is made by the re!istered charity to the Minister in "ritin! for re&ocation of its re!istration< cessation of the re!istered charity to comply "ith the re@uirements of the 2ct and failure to file an information return as and "hen re@uired under the 2ct or a re!ulation>

E"*-a"% a"% Wa-e)
)> The 1harities 2ct 2--% pro&ides for the establishment and functions of the 1harity 1ommission for 3n!land and Wales and the 1harity Tribunal and ma:es other amendments to the la" concernin! charities> *> 2 re!ister of charities is :ept by the 3n!lish 1harity 1ommission> The re!ister contains the name of e&ery charity re!istered and other particulars as "ell as information relatin! to each such charity as the 1ommission thin:s fit> The 1ommission is empo"ered to remo&e from the re!ister any institution "hich is no lon!er considered as a charity< and any charity "hich has ceased to e;ist or does not operate> The re!ister Aincludin! the entries cancelled "hen institutions are remo&ed from the re!isterB is open to public inspection at all reasonable times> 1opies or particulars of the trusts of any re!istered charity "hich are :ept by the 1ommission are also open to public inspection at all reasonable times> 1-> Knder section 32 of the 1harities 2ct 1**3< e&ery charity must be re!istered in the re!ister of charities unless they fall "ithin the follo"in! cate!ories X AaB e4empt charity The 1harities 2ct 1**3 confers e;empt status on educational bodies< includin! hi!her education corporations< further education corporations< and foundation and &oluntary schools> These charities are essentially outside the scope of re!istration because they are re!arded as ade@uately super&ised by other re!ulators> For e;ample< charitable industrial and pro&ident societies are e;empt because they are re!istered "ith the Financial Ser&ices 2uthority> Se&eral national museums are e;empt because they are already super&ised to some e;tent by
21

F Wyatt< :verview from Canada< presented at the Modernisin! 1harity 8a" 1onference held in Frisbane< from 1% to 1) 2pril 2--*>

21)

the !o&ernment> In 2--2< the Strate!y Knit commissioned by the 0rime Minister proposed Aamon!st other proposals to modernise charity la"B chan!es to the e;empt charity re!ime> It recommended that:


the re!ulators of e;empt charities should monitor compliance "ith charity la"H the 1harity 1ommission should ha&e "ider 6urisdiction o&er e;empt charitiesH and e;empt charities "ithout a main re!ulator should be re!istered "ith the 1ommission>22





2s a result of these recommendations< some charities lost their e;empt status entirely< althou!h the bul: of them< at least initially< continue to be e;empt from re!istration as e;cepted charities> Where charities remain e;empt< they still ha&e a 'principal re!ulator'< "ith responsibility for monitorin! compliance "ith charity la"< and the 1harity 1ommission's po"ers to inter&ene in their acti&ities are si!nificantly e;panded> AbB 54cepted charity> 2 charity "hich< for the time bein!< X AiB AiiB is permanently or temporarily e;cepted by order of the 1harity 1ommission< and complies "ith any conditions of the e;ception<

and "hose !ross income does not e;ceed Y1--<---> 1ertain cate!ories of charity are <e4cepted< from the re@uirement to re!ister "ith the 1harity 1ommission> Thou!h they are sub6ect to the 6urisdiction of the 1harity 1ommission in many other respects< they are not re@uired to re!ister> They are< in most cases< not re@uired to file annual reports and returns "ith the 1harity 1ommission> The rationale for e;cludin! them from these re@uirements is that they are already re!istered "ith their o"n umbrella or support !roups> The main cate!ories of e;cepted charities are certain &oluntary schools< Foy Scout and 7irl 7uide charities< certain charities for the ad&ancement of reli!ion< certain charities for the promotion of efficiency in the armed forces and uni&ersities "hich are not e;empt charities> 23 AcB 2 charity "hich for the time bein! X AiB is< or is of a description< permanently or temporarily e;cepted by re!ulations made by the Secretary of State<

22

23

1abinet ,ffice< Strate!y Knit< 0ri&ate 2ction< 0ublic Fenefit< 2 9e&ie" of 1harities and the Wider 4ot-For 0rofit Section< September 2--2< at paras (>*3 to (>*%> Dean Warburton< Tudor on Charities AS"eet E Ma;"ell 2--3< *th edB< at 25>

21*

and AiiB complies "ith any conditions of the e;ception<

and "hose !ross income does not e;ceed Y1--<---H and AdB 2 charity "hose !ross income does not e;ceed Y5<--->

Small charities do not need to re!ister until their income reaches the Y5<--- threshold< but are still re@uired to re!ister "ith #M 9e&enue and 1ustoms in order to claim ta; relief> #o"e&er< they may choose to re!ister &oluntarily> If they do re!ister &oluntarily< they may subse@uently demand to be remo&ed "hile they remain belo" the threshold>

Ire-a"%
11> The 1harities 9e!ulatory 2uthority "as established under section 13 of the Irish 1harities 2ct 2--*> ,ne of the ma6or functions of the 1harities 9e!ulatory 2uthority is to establish and maintain a re!ister of charitable or!anisations and monitor and ensure compliance of charitable or!anisations "ith the Irish 1harities 2ct 2--*> Knder section 3* of the 2ct< the 1harities 9e!ulatory 2uthority shall< after consultation "ith the 9e&enue 1ommissioners< establish and maintain a re!ister of charitable or!anisations in such form as it considers appropriate Aincludin! in electronic formB> 12> 2 charitable or!anisation that intends to operate or carry on acti&ities in Ireland needs to apply to the 1harities 9e!ulatory 2uthority to be re!istered< and it is the duty of the charity trustees of the charitable or!anisation concerned to ma:e the application on behalf of the charitable or!anisation> 13> It is an offence under section +1 of the 2ct for an unre!istered or not deemed to be re!istered charitable or!anisation to carry on charitable acti&ities> Knder section 3*A%B of the 2ct< the 1harities 9e!ulatory 2uthority may e;empt an applicant for re!istration as it considers appropriate "here it is of the opinion that compliance by the applicant "ith those re@uirements "ould be unduly onerous ha&in! re!ard to its circumstances> 1+> In terms of transitional pro&isions< under section +- of the 2ct< a charitable or!anisation "hich "as entitled< immediately before the commencement of section 3* of the 2ct< to a ta; e;emption under section 2-( or 2-) of the Ta;es 1onsolidation 2ct 1**(< and "as issued by the 9e&enue 1ommissioners a number commonly referred to as a <C(K number< for the purposes of such e;emption< is deemed to be re!istered in the re!ister for so lon! as it is entitled to such e;emption> 15> Knder section +3 of the 2ct< the 1harities 9e!ulatory 2uthority is obli!ed to remo&e from the re!ister all of the information entered in relation to

22-

a body< and that body "ill cease to be re!istered if< after consultation "ith the 7arda S[och\na AIrish term for their 0oliceB< it is of the opinion that a body re!istered in the re!ister is< or has become< an <e4cluded body< by &irtue of its promotin! purposes that are X AaB AbB AcB AdB AeB unla"ful< contrary to public morality< contrary to pubic policy< in support of terrorism or terrorist acti&ities< or for the benefit of an or!anisation< membership of "hich is unla"ful>

1%> The 1harities 9e!ulatory 2uthority is also empo"ered to remo&e a charitable or!anisation from the re!ister for other reasons< such as the name of the charitable or!anisation has been chan!ed< the charitable or!anisation "hich is a body corporate has con&icted an offence on indictment< or the 1harities 9e!ulatory 2uthority is of the opinion that the re!istered body is not a charitable or!anisation>

Ne, Eea-a"%
1(> The 4e" 5ealand 1harities 1ommission "as established under section ) of the 4e" 5ealand 1harities 2ct 2--5> It is responsible for re!isterin! and monitorin! charitable or!anisations in 4e" 5ealand< as "ell as pro&idin! support and education to the charitable sector on !ood !o&ernance and mana!ement> 1)> Knder section 21 of the 2ct< a re!ister called <the re ister of charitable entities< is established> It can be an electronic re!ister or :ept in any other manner that the 4e" 5ealand 1harities 1ommission thin:s fit> 2 person is able to conduct a search of the re!ister by reference to the name of the charitable entity< its re!istration number< the name of its officer or any other prescribed criteria> The 1ommission is empo"ered to refuse access to the re!ister or other"ise suspend the operation of the re!ister< in "hole or in part< if the 1ommission considers that it is not practical to pro&ide access to it> 1*> 9e!istration by charitable or!anisations is &oluntary> #o"e&er only charities re!istered "ith the 1harities 1ommission are eli!ible for ta; e;emption status> Knder section 22 of the 2ct< the purposes of the re!ister are to enable members of the public to determine "hether an entity is re!istered as a charitable entity under the 2ct< obtain information concernin! the nature< acti&ities< and purposes of charitable entities< and information as to ho" to contact a charitable entity> 2-> 2ll charitable entities are re@uired to complete an annual return

221

in relation to the entity and to send or deli&er this to the 1ommission "ithin si; months after each balance date of the entity> 21> re!ister if X AaB AbB AcB The 1ommission is empo"ered to remo&e an entity from the the entity is not< or is no lon!er< @ualified for re!istration as a charitable entityH there has been a si!nificant or persistent failure by the entity to meet its obli!ations under the 2ct or any other enactmentH there has been a si!nificant or persistent failure by any one or more of the officers of the entity to meet their obli!ations under the 2ctH there has been a si!nificant or persistent failure by any one or more collectors "ho act on behalf of the entity to meet their obli!ations under the 2ctH the entity has en!a!ed in serious "ron!doin! or any person has en!a!ed in serious "ron!doin! in connection "ith the entityH or the entity has sent or deli&ered to the 1ommission a re@uest to be remo&ed from the re!ister>

AdB

AeB AfB

22> Knless an entity is a re!istered charitable entity or a person acts on behalf of a charitable entity< it is an offence under section 3) of the 2ct for a person to use a style or title includin! the "ords <re istered charitable entity<H or state or imply< or permit a statement or implication< that the person is re!istered as a charitable entity under the 2ct< or that the person acts on behalf of is re!istered as a charitable entity under the 2ct>

S $#-a"%
23> The 1harities and Trustee In&estment AScotlandB 2ct 2--5 established the ,ffice of the Scottish 1harity 9e!ulator A,S19B> Some of the functions of the ,S19 set out in the 2ct are to determine "hether certain bodies are charities< to maintain a public re!ister of charities< and to encoura!e< facilitate and monitor compliance by charities "ith the pro&isions of the 2ct> 2+> Knder section 3 of the 2ct< the ,S19 must :eep a re!ister of charities< to be :no"n as the <Scottish Charity Re ister<> The re!ister contains a separate entry for each charity entered in it and information about the charity such as its name< its principal office or< "here it does not ha&e such an office< the name and address of one of its charity trustees and the purposes of the charity> The Scottish 1harity 9e!ister is a&ailable for public inspection at all reasonable times at its principal office< or at such other places

222

as the ,S19 thin:s fit> 25> ,ne :ey principle of the 2ct is that all si!nificant operations by charities "ithin Scotland should be re!ulated by the ,S19< re!ardless of "here that charity "as first re!istered> This is intended to pro&ide a le&el playin! field for all charities operatin! in Scotland< and to ensure fairness and consistency> 2ny or!anisation that "ishes to refer to itself as <a charity<< <charitable body<< <re istered charity< or a <charity re istered in Scotland< must apply to the ,S19 for re!istration< since a body "hich refers to itself in any of these "ays is to be treated as representin! itself as a body entered in the re!ister> This includes a charity re!istered Aor e;cepted or e;empt from re!istrationB "ith the 1harity 1ommission in 3n!land and Wales Aor another forei!n charityB> Such a charity is re@uired to re!ister "ith the ,S19 if it "ishes to call itself a charity and if it o"ns or occupies land or premises in Scotland< or if it carries out acti&ities in an office< shop or similar premises in Scotland> 2%> 2n or!anisation that is not currently a Scottish charity< ho"e&er< and does not occupy land or premises in Scotland or carry out acti&ities in any shop< office or similar premises in Scotland< could refer to itself as a charity if it is entitled to refer to itself as a charity in the country under "hose la" it "as established< but only if< in ma:in! that reference< it also refers to it bein! established under the la" of that country> For e;ample< a charity re!istered Aor e;cepted for re!istrationB in 3n!land and Wales< that does not occupy premises in Scotland could< in Scotland< refer to itself as <a charity re istered .or e4cepted or e4empt from re istration1 in 5n land and ,ales< > Such a charity does not need to re!ister "ith the ,S19> 2+ 2(> Knder section 3- of the 2ct< the ,S19 is obli!ed to remo&e a charity from the Scottish 1harity 9e!ister if< as a result of in@uiries made about the charity< it is found that the charity no lon!er meets the charity test> 25

S'"*a.$re
2)> The 1ommissioner of 1harities in Sin!apore "as established under the Sin!apore 1harities 2ct A1ap 3(B> Some of the !eneral functions of the 1ommissioner of 1harities include the determination of "hether or not institutions are charities< and to encoura!e and facilitate the better administration of charities> 2*> Knder section 5 of the 2ct< a re!ister of charities is :ept by the 1ommissioner of 1harities> The re!ister of charities is open to public inspection at all reasonable times> 2% The 1ommissioner has the po"er to
2+

25

2%

The ,ffice of the Scottish 1harity 9e!ulator< Eeetin the Charity Test< at paras 11>1>1-11>1>3> Knder section 5 of the 1harities and Trustee In&estment AScotlandB 2ct< the ,S19 may enter an applicant in the Scottish 1harity 9e!ister only if it considers that the applicant meets the charity test of the 2ct> 2 body meets the charity test if X AaB its purposes consist of one or more of the charitable purposes< and AbB it pro&ides Aor< in the case of an applicant< pro&ides or intends to pro&ideB public benefit in Scotland or else"here> Section 5< Sin!apore 1harities 2ct A1ap 3(B>

223

refuse to re!ister an institution as a charity X AaB AbB if it appears to the 1ommissioner that the re!istration of the institution "ill be contrary to the public interestH or on such other !round as the Minister may prescribe>

3-> It is the duty of the charity trustees of any charity "hich is neither re!istered nor e;cepted from re!istration to apply for it to be re!istered> The charity is re@uired to submit rele&ant documents and information to the 1ommissioner "ithin three months after its establishment or such lon!er period as the 1ommissioner may allo" at his discretion> 2ny person "ho fails to carry out any of the duties imposed under the 2ct is !uilty of an offence> 31> 2ny person affected by the re!istration of an institution as a charity may< on the !round that it is not a charity< ob6ect to its bein! entered by the 1ommissioner in the re!ister< or apply to the 1ommissioner for it to be remo&ed from the re!ister>2( The 1ommissioner is also empo"ered to remo&e an institution from the re!ister if it appears to him that the continued re!istration of the institution as a charity is contrary to the public interest or on such other !round as the Minister may prescribe> 32> The follo"in! re!istration under the 2ct AaB AbB charitable institutions are e;empted from

any uni&ersity or educational institution< hospital or reli!ious body established by an 2ct of the Sin!apore 0arliamentH and any other institution "hich the Minister by order declares to be an e;empt charity for the purposes of the Sin!apore 1harities 2ct>

33> 2ny charity "hich is e;cepted by re!ulations made under the 2ct is also not re@uired to be re!istered> 2)

S$&#( Afr' a
3+> Knder section + of the 4onprofit ,r!anisations 2ct of South 2frica< a .irectorate for 4onprofit ,r!anisations is established "ithin the national department by the Minister> Some of the main functions of the .irectorate include de&elopin! and implementin! policy and determinin! and implementin! pro!rams> 35> 2ny non-profit or!anisation that is not an or!an of state may apply to the .irector of 4onprofit ,r!anisations for re!istration> The .irector is tas:ed to maintain a re!ister in the prescribed form of all non-profit or!anisations that ha&e been re!istered< those "hose re!istrations ha&e been cancelled< and all non-profit or!anisations that ha&e &oluntarily dere!istered
2( 2)

Same as abo&e< section %> Same as abo&e< section 5A5B and the Schedule>

22+

or ha&e been "ound up or dissol&ed>2* It is an offence under section 2* of the 2ct for any or!anisations to represent themsel&es as bein! &alidly re!istered under the 2ct unless they are so re!istered> 3%> 2 re!istered non-profit or!anisation is under the duty to pro&ide reports and information to the .irector of 4onprofit ,r!anisations "ithin nine months after the end of its financial year< such as a narrati&e report of its acti&ities in the prescribed manner< its financial statements and the accountin! officer's report< and the names and physical business and residential addresses of its office> 3(> The Minster may prescribe benefits or allo"ances applicable to re!istered non-profit or!anisations< after consultation "ith the committees of the t"o #ouses of 0arliament responsible for "elfare< and "ith the concurrence of e&ery Minister "hose department is affected by a particular benefit or allo"ance> 3)> 2 non-profit or!anisation must obtain appro&al from the 1ommissioner under section 3- of the Income Ta; 2ct of South 2frica in order to be an appro&ed <public benefit or anisation<> ,nly a non-profit or!anisation "ith the status of a public benefit or!anisation is entitled to a broad ran!e of fiscal benefits> 3*> In the case of non-compliance "ith the constitution and obli!ations by a re!istered non-profit or!anisation< the .irector of 4onprofit ,r!anisations "ill send a compliance notice in the prescribed form to the or!anisation> If it fails to comply promptly "ith the notice< or ma:es material false representations in any document submitted to the .irector< the .irector "ill cancel its certificate of re!istration and its re!istration>

2*

Section 2+< 4onprofit ,r!anisations 2ct< 4o> (1 of 1**(>

225

A""e< 3

T(e -a, '" $#(er 4&r')%' #'$") $" *$+er"a" e9 a $&"#'"* a"% re.$r#'"* :0 (ar'#'e) A&)#ra-'a
1> 1haritable institutions and charitable funds may be e;empt from income ta; under the Income Ta; 2ssessment 2ct 1**( if they are endorsed by the 2ustralian Ta;ation ,ffice as income ta; e;empt charities> The 2ustralian Ta;ation ,ffice "ill carry out re!ular re&ie"s of endorsed income ta; e;empt charities in order to help establish "hether these charitable or!anisations are in fact entitled to endorsement> The 2ustralian Ta;ation ,ffice may re@uest these or!anisations to pro&ide information and documents that are rele&ant to their entitlement to endorsement and they "ill be !i&en at least 2) days to pro&ide the re@uired information and documents> Failure to comply "ith such a re@uest can lead to the endorsement bein! re&o:ed< and to prosecution> 2> The 2ustralian Fusiness 9e!ister displays on its "ebsite details about charities that ha&e been endorsed to en6oy charity ta; concessions> These details include the type of charity Afor e;ample< charitable fund< charitable institution< public bene&olent institution or health promotion charityB< the type of charity ta; the or!anisation has been endorsed to access Afor e;ample< income ta; e;emption and 7oods and Ser&ices Ta; concessionsB and the date of effect of each endorsement> If a charity does not "ant this information publicly displayed< it "ill need to "ai&e its entitlement to the related concessions> ,ther information< such as office bearer information is not disclosed on the 2ustralian Fusiness 9e!ister> 33> There is no statutory re@uirement at the 1ommon"ealth le&el for charitable or!anisations to file reports or audited accounts to !o&ernment authorities>

Ca"a%a
+> The 1anada 9e&enue 2!ency is seen as the primary re!ulator of charities> ,r!anisations apply to the 1anada 9e&enue 2!ency for re!istration as charities and< if appro&ed< are then sub6ect to audit and enforcement acti&ity by the 1anada 9e&enue 2!ency's 1harities .irectorate> 31 ,nce an or!anisation is re!istered as a charity< it must file an annual form< :no"n as <Re istered Charity Information Return<, to!ether "ith its financial statements "ithin si; months of the charity's fiscal period< and it must continue to meet the other re@uirements of the 1anadian federal Income Ta; 2ct>
3-

at %2>
31

2ustralian Ta;ation ,ffice< Income ta4 uide for non-profit or anisations AMar 2--(B< Charity Law

F Wyatt< <:verview from Canada<< presented at the Eodernisin Conference< held in Frisbane< from 1% to 1) 2pril 2--*>

22%

Knder section 1))>1A%B< any re!istered charity that fails to file information returns for a ta;ation year is liable to a penalty> 5> 2 re!istered charity is under a duty to maintain ade@uate boo:s and records and ma:e them a&ailable for audit upon re@uest> The charity is also obli!ed to :eep the 1harities .irectorate updated on chan!es to the or!anisation> These include chan!es to its address< directors< le!al or operatin! name< purposes< acti&ities and structure> %> 2 &ariety of different types of information about re!istered charities is a&ailable to the public> This includes a re!istered charity's !o&ernin! document< most of the application form< the public portions of the annual return< and the financial statements filed "ith the 1harities .irectorate> (> If a re!istered charity does not meet its obli!ations under the 2ct< it may be sub6ect to a penalty andCor lose its re!istration> If a charity's re!istration is re&o:ed< it "ill no lon!er be e;empt from ta; unless it @ualifies as a non-profit or!anisation> It cannot issue official donation receipts and must transfer its property to an eli!ible donee or be sub6ect to a re&ocation ta; "hich is e@ui&alent to the full &alue of its remainin! assets> 32

E"*-a"% a"% Wa-e)
)> The 1harities 2ct 1**3 pro&ides a frame"or: for reportin! and accountin! by charities>33 The 1harity 1ommission may re@uire re!istered charities shortly after the end of their financial year to complete< dependin! on their income< either an annual update form or an annual return> 1harities "ith a total income e;ceedin! £25<--- are re@uired to complete and submit their annual reports to the 1ommission under section +5 of the 1**3 2ct> Trustees are under a le!al duty to complete and submit an annual report to the 1ommission> The annual return contains basic financial details< and details of the charity's contacts< trustees< acti&ities and its classification> *> Knder section +1 of the 2ct< the trustees of a charity "hich is not a company must :eep accountin! records "hich are sufficient to sho" and e;plain all the charity's transactions> These records Afor e;ample< cash boo:s< in&oices and receiptsB must be retained for at least si; years> These accountin! records should be made a&ailable to the public on re@uest> It is open to trustees to char!e a reasonable amount to co&er the costs of complyin! "ith public re@uests< such as photocopyin! and posta!e> The annual report should also be a&ailable to the public on re@uest "here one is re@uired to be prepared>3+
32 33

3+

1anada 9e&enue 2!ency< 9e!isterin! a 1harity for Income Ta; 0urposes< 9e& 2--)> It should be noted that a ne" 1harities Fill "as placed before the K$ 0arliament in March 2-11 "ith the ob6ect of consolidatin! the 1harities 2ct 1**3 and other enactments relatin! to charities> 2s part of the consolidation< the Fill has included pro&isions from the 9ecreational 1harities 2ct 1*5)< the 1harities 2ct 1**3 and the 1harities 2ct 2--%< leadin! to the repeal of the former t"o 2cts and some sections Asections 1 to * and 11 to ++B and some Schedules of the 1harities 2ct 2--%> The 1harity 1ommission for 3n!land and Wales< Charity Reportin and %ccountin the 5ssentials A2pril 2--*B>

22(

1-> Knder section +2 of the 2ct< the charity trustees are re@uired to prepare a statement of accounts in respect of each financial year> #o"e&er< they may elect to prepare a receipts and payments account and statement of assets and liabilities instead of a statement of accounts if the charity's !ross income in any financial year does not e;ceed £25-<---> 11> Knder section +3 of the 2ct< e;cept for 4ational #ealth Ser&ice 1harities< the accounts of charities should be audited if they ha&e a !ross income in that year "hich e;ceeds £5--<---< or "here the charity's !ross income e;ceeds £1--<--- and at the end of that year the a!!re!ate &alue of its assets Abefore deduction of liabilitiesB e;ceeds £3>2% million> These accounts must be :ept for at least si; years from the end of the financial year to "hich the statement relates> Where it appears to the 1ommission that this obli!ation has not been complied "ith< the 1ommission may by order re@uire the accounts of the charity for that year to be audited> The e;penses of any audit carried out by an auditor appointed by the 1ommission "ill be reco&erable by the 1ommission from the charity trustees of the charity concerned> These charity trustees are personally< 6ointly and se&erally liable for those e;penses> 12> Where the !ross income of a charity does not e;ceed £25-<---< an independent e;amination can pro&ide an e;ternal chec: on the accounts and can be carried out by any person "ith the rele&ant ability and e;perience> The purpose is to allo" trustees of smaller charities to opt for this simpler form of e;ternal scrutiny in place of an audit> The auditor has a '"histleblo"in!' duty "here the auditor< in the course of his audit< identifies a matter "hich relates to the acti&ities or affairs of the charity and "hich the auditor has reasonable cause to belie&e is li:ely to be of material si!nificance for the purposes of the e;ercise of the 1harity 1ommission of its functions> Knder re!ulations made under the 2ct< an auditor or an independent e;aminer is conferred "ith a ri!ht of access "ith respect to boo:s< documents and other records "hich relate to the charity concerned< and is entited to re@uire information and e;planations from past or present charity trustees or trustees for the charity< or from past or present officers or employees of the charity> 13> The 1harity 1ommission has a po"er to institute in@uiries "ith re!ard to charities either !enerally or for particular purposes under section ) of the 2ct> The 1ommission may direct any person to furnish information< such as accounts and statements "ith respect to any matter in @uestion and copies of documents in his custody or under his control> 1+> Knder section 1) of the 2ct< the 1ommission is empo"ered to act for the protection of charities> Where an in@uiry is instituted "ith respect to any charity< and the 1omission is satisfied that there is or has been any misconduct or mismana!ement in the administration of the charity< or that it is necessary or desirable to act for the purpose of protectin! the property of the charity< the 1ommission may do one or more of the follo"in! thin!s X

22)

AiB

suspend any trustee< charity trustee< officer< a!ent or employee of the charity from the e;ercise of his office or employment pendin! consideration bein! !i&en to his remo&alH appoint additional charity trustees necessary for the proper administration of the charityH &est any property held by or in trust for the charity in the official custodian< or re@uire the persons in "hom any such property is &ested to transfer it to him< or appoint any person to transfer any such property to himH order any person "ho holds any property on behalf of the charity< or of any trustee< not to part "ith the property "ithout the appro&al of the 1ommissionH order any debtor of the charity not to ma:e any payment in or to"ards the dischar!e of his liability to the charity "ithout the appro&al of the 1ommissionH restrict the transactions "hich may be entered into< or the nature or amount of payments "hich may be made< in the administration of the charity "ithout the appro&al of the 1ommissionH appoint an interim mana!er< "ho shall act as recei&er and mana!er in respect of the property and affairs of the charity>

AiiB AiiiB

Ai&B

A&B

A&iB

A&iiB

The 1ommission is also empo"ered to remo&e any trustee< charity trustee< officer< a!ent or employee of the charity "ho has been responsible for or pri&y to the misconduct or mismana!ement and to establish a scheme for the administration of the charity>

Ire-a"%
15> Knder section +( of the Irish 1harities 2ct 2--*< the charity trustees of a charitable or!anisation must :eep proper boo:s of account> They are also re@uired under section +) in respect of each financial year to prepare a statement of accounts in a prescribed form containin! prescribed information> Where the !ross income or e;penditure of a charitable or!anisation in a financial year does not e;ceed €1--<---< the charity trustees may< instead of preparin! an annual statement of accounts in respect of that year< prepare an income and e;penditure account and a statement of the assets and liabilities of the charitable or!anisation> The 9e!istrar of 1ompanies is under a duty to !i&e a copy of the annual return and copies of all documents anne;ed to the annual return of a company to the 1harities 9e!ulatory 2uthority as soon as practicable after recei&in! them from the

22*

company in respect of "hich it has recei&ed a notification under section 3*A1(B that the charity has been established .35 1%> The accounts of a charitable or!anisation in respect of a financial year need to be audited not later than nine months after the end of the rele&ant financial year by a @ualified person if the !ross income or total e;penditure of the charitable or!anisation e;ceeds a prescribed amount not !reater than €5--<---> The re@uirement for preparin! an annual statement of accounts< income and e;penditure account 3% or annual audited accounts under sections +) and 5- does not apply to the follo"in! AaB AbB AcB a charitable or!anisation that is a company< an education body< a charitable or!anisation in respect of a financial year in "hich its !ross income or total e;penditure is less than X AiB ]1-<---< or AiiB such !reater amount not e;ceedin! ]5-<---< in relation to a centre for education desi!nated by the Minister under section 1-A+B of the 1harities 2ct 1**)>

AdB

1(> Knder section 52 of the 1harities 2ct 2--*< the charity trustees of a charitable or!anisation are re@uired to prepare and submit to the 2uthority a report in respect of its acti&ities in that financial year not later than ten months after the end of each financial year> Knder section 53 of the 2ct< the 2uthority may direct a charitable or!anisation in "ritin! to pro&ide the 2uthority "ith such information as it may reasonably re@uire to enable it to perform its functions> The 2uthority "ill ma:e a&ailable for inspection by members of the public all annual reports and documents :ept by the 2uthority at all reasonable times and at such place or places as it determines> This re@uirement< ho"e&er< does not apply to the annual reports and documents of pri&ate charitable trusts> 1)> Knder section 55 of the 2ct< a person "ill cease to be @ualified for the position of charity trustee of a charitable or!anisation if that person X AaB AbB AcB is ad6udicated ban:rupt< ma:es a composition or arran!ement "ith creditors< is a company that is in the course of bein! "ound up<

35

3%

Knder section 3*A1(B of the Irish 1harities 2ct 2--*< the 1harities 9e!ulatory 2uthority "ill notify the 9e!istrar of 1ompanies in "ritin! as soon as a company is re!istered as a charitable or!anisation> Section +) of the Irish 1harities 2ct 2--* X <N .)1.a1 ,here the ross income or e4penditure of a charitable or anisation in a financial year does not e4ceed Y!$$,$$$, the charity trustees may, instead of preparin an annual statement of accounts in respect of that year, prepare an income and e4penditure account in respect of, and a statement of the assets and liabilities of, the charitable or anisation. N<

23-

AdB AeB AfB

is con&icted on indictment of an offence< is sentenced to a term of imprisonment by a court of competent 6urisdiction< is the sub6ect of an order under section 1%- of the 1ompanies 2ct 1**-3( or is prohibited< remo&ed or suspended from bein! a trustee of a scheme under the 0ensions 2cts 1**- to 2--)< has been remo&ed from the position of charity trustee of a charitable or!anisation by an order of the #i!h 1ourt under section (+>

A!B

1*> Knder section 55A+B of the 2ct< the 2uthority establishes and maintains a re!ister of all persons "ho ha&e ceased to hold the position of charity trustee of a charitable or!anisation> Such re!ister is made a&ailable for inspection by members of the public at all reasonable times at the principal office of the 2uthority> 2 person "ho is actin! as a charitable trustee in respect of a charitable or!anisation "hile dis@ualified is personally liable for the debts of the charitable or!anisation incurred as a result of his act in purported performance of the functions of charity trustee of the charitable or!anisation "hen he "as not @ualified to hold such position> 2-> 0art + of the 2ct deals "ith the protection of charitable or!anisations> The 2uthority may appoint an inspector to in&esti!ate the affairs of a charitable or!anisation> Knder section %5 of the 2ct< a charity trustee or a!ent of a charitable or!anisation< "hen re@uired to do so by an inspector< is re@uired to X AaB produce to the inspector all boo:s< documents< ban: accounts and other records of or relatin! to the charitable or!anisation that are in his possession< under his control or "ithin his procurement< attend before the inspector< and !i&e to the inspector all assistance in connection "ith the in&esti!ation "hich he is reasonably capable of !i&in!>

AbB AcB

21> Knder section %% of the 2ct< an inspector appointed may ma:e interim reports to the 2uthority and on the conclusion of the in&esti!ation< "ill ma:e a final report to the 2uthority> The 2uthority may furnish a copy of a
3(

Section 1%- of the 1ompanies 2ct 1**- X <.!1 ,here a person is convicted on indictment of any indictable offence in relation to a company, or involvin fraud or dishonesty, then durin the period of five years from the date of conviction or such other period as the court, on the application of the prosecutor and havin re ard to all the circumstances of the case, may order U .a1 he shall not be appointed or act as an auditor, director or other officer, receiver, li8uidator or e4aminer or be in any way, whether directly or indirectly, concerned or ta6e part in the promotion, formation or mana ement of any company or any society re istered under the Industrial and Provident Societies %cts, !/*) to !*3/P .b1 he shall be deemed, for the purposes of this %ct, to be sub;ect to a dis8ualification order for that period. N<

231

report of an inspector to the charitable or!anisation that is the sub6ect of the report on re@uest and sub6ect to payment of a prescribed fee> It may also furnish such a report to persons specified in the 2ct< "hich includes the charity trustee of the charitable or!anisation that is the sub6ect of the report< any person "hose conduct is referred to in the report< the auditors of that charitable or!anisation< any other person "hose financial interests appear to the 2uthority to be affected by the matters dealt "ith in the report< the 1entral Fan:< the 9e&enue 1ommissioners< or the .irector of 0ublic 0rosecutions> 22> The 2uthority is empo"ered under section %) of the 2ct to re@uire a charitable or!anisation or the charity trustees of a charitable or!anisation to produce boo:s< documents or other records if the 2uthority is of opinion that X AaB it is necessary to e;amine them for the purpose of determinin! "hether an inspector should be appointed to conduct an in&esti!ation into the affairs of the charitable or!anisationH the affairs of the body are bein! or ha&e been conducted "ith intent to defraud any personH any act or omission committed by or on behalf of the charitable or!anisation is< or "ould be unla"ful if committed< or the body "as formed for any fraudulent or other unla"ful purpose>

AbB AcB AdB

23> Knder section %* of the 2ct< upon the application of an inspector appointed by the 2uthority< a 6ud!e of the .istrict 1ourt may issue a "arrant authorisin! a named inspector or a named person< accompanied by officers or members of staff of the 2uthority or members of the 7arda S[och\na AIrish term for their 0oliceB to enter the premises Aif necessary< by the use of reasonable forceB and to search the premises and inspect and ta:e possession of all boo:s< documents or records that are the sub6ect of a re@uirement under section %) of the 2ct>

Ne, Eea-a"%
2+> Knder section +1 of the 4e" 5ealand 1harities 2ct 2--5< e&ery charitable entity must ensure that "ithin si; months after each balance date of the entity< an annual return is submitted to the 4e" 5ealand 1harities 1ommission> The form of the return and particulars contained in the returns and directions to be complied "ith are prescribed by the Minister> The re@uired particulars include a copy of its financial accounts< either audited or unaudited< "hich "ill be publicly a&ailable at the homepa!e of the 1ommission>3)

3)

http:CC""">charities>!o&t>nNC#omeCtabidC*2C.efaultCasp;

232

25> Knder section 5- of the 2ct< the 1ommission is empo"ered to in@uire into any charitable entity and any person "ho "as en!a!ed in conduct that is in breach of the 2ct< or serious "ron!doin! in connection "ith a charitable entity> This po"er includes the po"er to e;amine and in@uire into the follo"in! matters in connection "ith the charitable entity or person AaB AbB AcB AdB AeB the acti&ities and proposed acti&ities of the charitable entity or personH the nature< ob6ects< and purposes of the charitable entityH the mana!ement and administration of the charitable entityH the results and outcomes achie&ed by the charitable entity or personH and the &alue< condition< mana!ement< and application of the property and income belon!in! to the charitable entity or person>

2%> The 1ommission is also empo"ered under sections 51 and 53 of the 2ct to re@uire any person to supply to the 1ommission any information for the purposes of assistin! anyone in the e;ercise of his po"ers under the 2ct or detectin! and prosecutin! offences under any other 2ct> 2(> The 1ommission may !i&e a "arnin! notice to a charitable entity or a person in connection "ith a charitable entity that has en!a!ed in a breach of the 2ct< includin! a breach of sections 3( 3* Apassin! itself off as a re!istered charitable entityB or serious "ron!doin!< or a charitable entity is no lon!er @ualified to be re!istered as a charitable entity> Kpon prior notice to the charitable or!anisations concerned< the 1ommission may publish a notice that contains information or statements about the name of the charitable entity or person and a statement to the effect that the 1ommission considers that the charitable entity or person has committed breaches> The notice may also contain a statement of the action that the 1ommission has ta:en< or is considerin! ta:in!< in relation to those matters and a summary of the !rounds for the 1ommission's opinion> 2)> The 1ommission may de-re!ister a re!istered charitable entity under section 31 of the 2ct and the !rounds for dere!istration are X AaB
3*

the entity is not< or is no lon!er< @ualified for re!istration as a
Section 3( of the 4e" 5ealand 1harities 2ct X % person must not A .a1 use a style or title includin the words 9re istered charitable entity9P or .b1 state or imply, or permit a statement or implication, that A .i1 the person is re istered as a charitable entity under this %ctP or .ii1 an entity that the person acts on behalf of is re istered as a charitable entity under this %ct. Subsection .!1 does not apply to A .a1 a charitable entityP or .b1 a person who acts on behalf of a charitable entity. % person must not state or imply, or permit a statement or implication, that the person acts on behalf of a charitable entity if the person does not act on behalf of that charitable entity.<

<.!1

.#1 .)1

233

charitable entityH or AbB AcB there has been a si!nificant or persistent failure by the entity to meet its obli!ations under the 2ct or any other enactmentH or there has been a si!nificant or persistent failure by any one or more of the officers of the entity to meet their obli!ations under the 2ctH or there has been a si!nificant or persistent failure by any one or more collectors "ho act on behalf of the entity to meet their obli!ations under the 2ctH or the entity has en!a!ed in serious "ron!doin! or any person has en!a!ed in serious "ron!doin! in connection "ith the entityH or the entity has sent or deli&ered to the 1ommission a re@uest to be remo&ed from the re!ister>

AdB

AeB AfB

S $#-a"%
2*> Knder section ++ of the 1harities and Trustee In&estment AScotlandB 2ct 2--5< all charities are re@uired to :eep proper accountin! records> 1harities must also prepare an annual statement of account and report on their acti&ities< ha&e these audited or independently e;amined and pro&ide a copy of the statement to the ,ffice of the Scottish 1harity 9e!ulator> 1harities must :eep accountin! records for at least si; years> There are re!ulations on accountin! "hich set out different re@uirements for different classes or types of charities> For instance< reli!ious bodies may be allo"ed to prepare accounts in a sli!htly different format< as lon! as they meet e@ui&alent standards to other charities> 9e!ulations also set out the thresholds by "hich different siNes of charity must prepare different le&els of detail in their accounts and under!o different le&els of audit or e;amination> +3-> Section +5 of the 2ct pro&ides that the ,ffice of the Scottish 1harity 9e!ulator may appoint someone to prepare a statement of accounts for a charity that fails to send a copy to the office "ithin the period prescribed in accountin! re!ulations> The appointed person has po"ers of entry to the charity's premises< access to financial documents and can demand information from charity trustees or employees> The costs in doin! so of the ,ffice of the Scottish 1harity 9e!ulator and the appointed persons may be char!ed to the charity trustees> Failure to comply "ith an appointed person's re@uirements is an offence "ith a liability for a fine of le&el 3 on the standard scale Acurrently Y1---B> 31> Section +% of the 2ct imposes a duty on persons "ho are appointed to carry out an independent audit or e;amination of a charity's statement of account to report in "ritin! immediately to the ,ffice of the
+-

3;planatory 4otes of 1harities and Trustee In&estment AScotlandB 2ct 2--5< para %->

23+

Scottish 1harity 9e!ulator any matter "hich they ha&e reasonable cause to belie&e is li:ely to be of a material si!nificance for the 9e!ulator's functions to ma:e in@uiries and ta:e re!ulatory action> 32> Section %% of the 2ct sets out the !eneral duty of care that charity trustees must follo"> 1harity trustees are re@uired to act in the interests of the charity and to ensure that the charity acts consistently "ith its purposes and that they act "ith a le&el of care and dili!ence that is reasonably e;pected of someone mana!in! another's affairs> 2 charity trustee has to a&oid a conflict of interest "hich may arise bet"een the charity and any person responsible for his appointment as a charity trustee> If such circumstances arise< the charity trustee must put the interests of the charity before those of the person appointin! him> Where another duty pre&ents the charity trustee from doin! that< he must disclose the conflictin! interest to the charity and not participate in any decision of the other charity trustees "ith respect to the matter in @uestion> 2 charity trustee has a duty to ensure that a charity complies "ith the re@uirements of the 2ct> 2 breach of the trustee's !eneral duties is to be treated as misconduct in the administration of a charity> 33> Knder section 2) of the 2ct< the ,ffice of the Scottish 1harity 9e!ulator is empo"ered to ma:e in@uiries about charities< other bodies or a person appearin! to represent themsel&es as a charity for either !eneral or particular purposes> Knder section 2* of the 2ct< the ,ffice of the Scottish 1harity 9e!ulator may re@uire any charity to pro&ide it "ith documents or information "hich it considers necessary for its in@uiries< unless the charity "ould be entitled to refuse on the !rounds of confidentiality in the 1ourt of Session> 3+> The ,ffice of the Scottish 1harity 9e!ulator "ill ta:e actions under section 3- of the 2ct if it appears to it that as a result of in@uiries< a charity no lon!er meets the charity test> It must either direct the charity to ta:e any necessary steps to meet the test or remo&e the charity from the re!ister> If the charity fails to comply "ith such direction< the 9e!ulator must remo&e it from the re!ister> The 9e!ulator is empo"ered under section 31 of the 2ct to suspend a charity trustee< a!ent or employee for the protection of a charity's property if it appears to it that there has been misconduct in the administration of a charity< or to ensure that the property is used for charitable purposes> 2nother "ay of protectin! the property of a charity is for the ,ffice of the Scottish 1harity 9e!ulator to !i&e a direction to restrict any transaction or payments that may be made in the administration of the body "ithout its consent> It may also direct a financial institution or person holdin! property for a charity not to part "ith the property "ithout the 9e!ulator's consent> Where it appears to the 9e!ulator follo"in! in@uiries that a body or person has been falsely representin! itself to be a charity< it may direct the body or person to stop representin! itself as a charity and to pay to the charity or body any assets that it has collected> It may also direct a ban: to pay sums collected for the charity or not to part "ith the property "ithout its consent> 35> Knder section 3+ of the 2ct< the ,ffice of the Scottish 1harity 9e!ulator may< follo"in! its in@uiries< apply to the 1ourt of Session for further actions to be ta:en to protect the property of the charity or to ensure that

235

property is used for the purposes of the charity>

S'"*a.$re
3%> It is the duty of charity trustees under section 12 of the Sin!apore 1harities 2ct to ensure that accountin! records are :ept in respect of the charity and these should be sufficient to sho" and e;plain all the transactions of the charity> This includes the re@uirement to disclose at any time< "ith reasonable accuracy< the financial position of the charity> The accountin! records should contain entries sho"in! from day to day all sums of money recei&ed and e;pended by the charity< and the matters in respect of "hich the receipt and e;penditure ta:e place and a record of the assets and liabilities of the charity> 3(> Knder section 13 of the 2ct< the charity trustees of a charity are re@uired to prepare in respect of each financial year of the charity< a statement of accounts complyin! "ith such re@uirements in prescribed form and contents> This re@uirement is applicable to charities if the !ross income of "hich in any financial year e;ceeds S?5-<---> For those "ith !ross income in any financial year not e;ceedin! S?5-<---< the charity trustees may< in respect of that year< elect to prepare receipts and payments account and a statement of assets and liabilities instead of a statement of accounts> The re@uirement is also not applicable to an e;empt charity or a charity "hich is a company> For a charity "ith !ross income or total e;penditure in the immediately precedin! year "hich e;ceeds S?25-<---< the accounts of the charity for that year "ill need to be audited by a public accountant> 3)> The charity trustees of a charity ha&e to prepare an annual report for each financial year of the charity "hich contains a report by the trustees on the acti&ities of the charity durin! that year and such other information relatin! to the charity or its trustees or officers> The annual report has to be submitted by the charity trustees to the 1ommissioner "ithin si; months from the end of that year> 2ny annual report or other document :ept by the 1ommissioner is open to public inspection at all reasonable times> 3*> Knder section ) of the 2ct< the 1ommissioner may from time to time institute in@uiries "ith re!ard to charities< or a particular charity< either !enerally or for particular purposes> The 1ommissioner or a person appointed by him to conduct the in@uiry may by order re@uire any person to furnish information Asuch as accounts and statements in "ritin!B "ith respect to any matter in @uestion at the in@uiry< copies of documents in his custody relatin! to matters in @uestion at the in@uiry< and to &erify such copies by statutory declaration> The 1ommissioner is also empo"ered under section 2% of the 2ct to appoint a recei&er and mana!er in respect of the property and affairs of a charity as he thin:s fit> +-> Knder section 2( of the 2ct< a person "ill be dis@ualified by the 1ommissioner for bein! a charity trustee or trustee of a charity if X

23%

AaB AbB AcB

he has been con&icted< "hether in Sin!apore or else"here< of any offence in&ol&in! dishonesty or deceptionH he has been ad6ud!ed ban:rupt< and has not been dischar!edH he has made a composition or arran!ement "ith< or !ranted a trust deed for his creditors and has not been dischar!ed in respect of itH he has been remo&ed from the office of charity trustee or trustee for a charity by an order made by the 1ommissioner or by the #i!h 1ourt on the !round of any misconduct or mismana!ement in the administration of the charity for "hich he "as responsibleH or he is sub6ect to a dis@ualification order under the 1ompanies 2ct A1ap 5-B>

AdB

AeB

S$&#( Afr' a
+1> Knder section 1( of the South 2frica 4onprofit ,r!anisations 2ct< e&ery re!istered nonprofit or!anisation must :eep accountin! records of its income< e;penditure< assets and liabilities in accordance "ith the standards of !enerally accepted accountin! practice> The or!anisation must "ithin si; months after the end of its financial year< dra" up financial statements "hich include at least a statement of income and e;penditure for that financial year< and a balance sheet sho"in! its assets< liabilities and financial position as at the end of that financial year> +2> Within nine months after the end of its financial year< e&ery re!istered nonprofit or!anisation must pro&ide information in "ritin! to the .irector of 4onprofit ,r!anisations< such as a narrati&e report of its acti&ities in the prescribed manner< to!ether "ith its financial statements and the accountin! officer's report> +3> If the accountin! officer of a re!istered nonprofit or!anisation becomes a"are of any instance in "hich the or!anisation has failed to comply "ith the financial pro&isions of the 2ct or its constitution< the accountin! officer must notify the .irector of the occurrence "ithin one month after becomin! a"are of it< and in "ritin! describe in detail the nature of the non-compliance> The duty imposed on an accountin! officer in doin! so supersedes the duty of confidentiality o"ed to the or!anisation by the accountin! officer>

23(

A""e< 5

S&11ar0 $f #(e -e*a- re>&'re1e"#) f$r f'-'"* $f a""&a- f'"a" 'a- re.$r#) ,'#( #(e C(ar'#'e) M$"'#$r'"* A&#($r'#'e) '" $+er)ea) 4&r')%' #'$")
Are (ar'#'e) re>&'re% #$ f'-e f'"a" 'a- re.$r#) #$ #(e re-e+a"# (ar'#'e) a&#($r'#0A A&)#ra-'a Ca"a%a O  9e!istered charities are sub6ect to audit and enforcement acti&ity by the 1anada 9e&enue 2!ency's 1harities .irectorate> They must file an annual form< :no"n as /Re istered Charity Information Return/, "ithin si; months of the end of the charity's fiscal period< and they must continue to meet the other re@uirements of the 1anadian federal Income Ta; 2ct> 9e!istered charities are re@uired to pro&ide a separate copy of the or!anisation's most recent financial statements as part of their filin! re@uirements for the annual information return> Financial statements must at least consist of both a statement of re&enue and e;penditure and a statement of assets and liabilities for a particular fiscal period> They should sho" the different sources of an or!anisation's income and ho" they spent their money> If the re!istered charity has income o&er 12.?25-<---< the 1harities .irectorate recommends that financial statements be professionally audited< other"ise< the treasurer for the charity should si!n them> 1harities "ith a total income e;ceedin! £25<--- are re@uired to complete and submit their annual reports to the 1harity 1ommission> The annual return contains basic financial details< and details of the charity's contacts< trustees< acti&ities and its classification> The annual reports should be accompanied by: the statement of accounts in any case "here

F'"a" 'a- re.$r#'"* re>&'re1e"#)9 '" -&%'"* #(e +ar'$&) #(re)($-%) G'f a..-' a:-eH

-

-

E"*-a"% a"% Wa-e)



-

AaB

23)

Are (ar'#'e) re>&'re% #$ f'-e f'"a" 'a- re.$r#) #$ #(e re-e+a"# (ar'#'e) a&#($r'#0A

F'"a" 'a- re.$r#'"* re>&'re1e"#)9 '" -&%'"* #(e +ar'$&) #(re)($-%) G'f a..-' a:-eH its !ross income in any financial year e;ceeds £25-<---H AbB if the charity's !ross income in any financial year does not e;ceed £25-<---< it may elect to prepare the follo"in! instead of a statement of accounts< namely X AiB a receipts and payments account< and AiiB a statement of assets and liabilities> 2 copy of the auditor's report should also be filed "here the accounts of the charity ha&e been audited under section +3 of the 1harities 2ct+1 or a copy of the report made by the person carryin! out the e;amination pursuant to section +3 of the 2ct>+2

-

Ire-a"%



2 charitable or!anisation is re@uired to prepare a statement of accounts in a prescribed form containin! the prescribed information> - Where the !ross income or e;penditure of a charitable or!anisation in a financial year does not e;ceed €1--<---< the charity trustees may< instead of preparin! an annual statement of accounts in respect of that year< prepare an income and e;penditure account and a statement of the assets and liabilities of the charitable or!anisation> - The charity trustees of a charitable or!anisation are re@uired to prepare and submit to the 1harities 9e!ulatory 2uthority a report in respect of its acti&ities in that financial year not later than ten months after the end of each financial year> The follo"in! is re@uired to be attached to the annual report ubmitted by a charitable or!anisation: AaB copy of the annual statement of accounts or

-

+1

+2

The re@uirement for auditin! applies if X the charity's !ross income in that year e;ceeds £5--<---H or the charity's !ross income in that year e;ceeds the accounts threshold of £1--<--- and at the end of the year the a!!re!ate &alue of its assets Abefore deduction of liabilitiesB e;ceeds £3.26 million. If the re@uirement for auditin! does not apply to a financial year of a charity but its !ross income in that year e;ceeds £25<---< the accounts of the charity for that year shall< at the election of the charity trustees< either X AaB be e;amined by an independent e;aminer< that is to say< an independent person "ho is reasonably belie&ed by the trustees to ha&e the re@uisite ability and practical e;perience to carry out a competent e;amination of the accountsH or AbB be audited> AaB AbB

23*

Are (ar'#'e) re>&'re% #$ f'-e f'"a" 'a- re.$r#) #$ #(e re-e+a"# (ar'#'e) a&#($r'#0A

F'"a" 'a- re.$r#'"* re>&'re1e"#)9 '" -&%'"* #(e +ar'$&) #(re)($-%) G'f a..-' a:-eH the income and e;penditure account and the statement of assets and liabilitiesH or AbB a copy of the auditor's reportH or AcB a copy of the independent person's report>

Ne, Eea-a"%



-

3&ery charitable entity must submit an annual return to!ether "ith a copy of the financial accounts of the charitable entity to the 4e" 5ealand 1harities 1ommission> 2ll charities are re@uired to prepare an annual statement of account and report on their acti&ities< ha&e these audited or independently e;amined and pro&ide a copy of the statement to the ,ffice of the Scottish 1harity 9e!ulator> 1harities "ith a !ross income "hich in any financial year e;ceeds S?5-<--- are re@uired to prepare in respect of each financial year of the charity a statement of accounts complyin! "ith such re@uirements in the prescribed form and contents> For those charities "ith a !ross income in any financial year not e;ceedin! S?5-<---< the charity trustees may< in respect of that year< elect to prepare receipts and payments account and a statement of assets and liabilities instead of a statement of accounts> The abo&e re@uirements are not applicable to an e;empt charity or a charity "hich is a company> For a charity "ith a !ross income or total e;penditure in the immediately precedin! year "hich e;ceeds S?25-<---< the accounts of the charity for that year "ill need to be audited by a public accountant> The charity trustees of a charity ha&e to prepare an annual report for each financial year of the charity "hich contains a report by the trustees on the acti&ities of the charity durin! that year and the statement of accounts prepared for the financial year and the accounts of the charity for that year "hich ha&e been audited or e;amined for

S $#-a"%



-

S'"*a.$re



-

-

-

-

-

2+-

Are (ar'#'e) re>&'re% #$ f'-e f'"a" 'a- re.$r#) #$ #(e re-e+a"# (ar'#'e) a&#($r'#0A

F'"a" 'a- re.$r#'"* re>&'re1e"#)9 '" -&%'"* #(e +ar'$&) #(re)($-%) G'f a..-' a:-eH that year>

S$&#( Afr' a



-

-

3&ery re!istered nonprofit or!anisation must pro&ide information in "ritin! to the .irector of 4onprofit ,r!anisations< such as a narrati&e report of its acti&ities in the prescribed manner< to!ether "ith its financial statements and the accountin! officer's report> The financial statements include at least a statement of income and e;penditure for that financial year< and a balance sheet sho"in! its assets< liabilities and financial position as at the end of that financial year>

2+1

A""e< 6

T(e -a, '" $#(er 4&r')%' #'$") $" #(e re*&-a#'$" $f f&"%ra')'"* a #'+'#'e) A&)#ra-'a
1> In 2ustralia< each state has its o"n separate le!islation on the re!ulation of charitable fundraisin!> 3u tralian Capital Territor! 2> Fundraisin! acti&ities in the 2ustralian 1apital Territory A21TB are controlled and re!ulated by the 1haritable 1ollections 2ct 2--3 and the 1haritable 1ollections 9e!ulation< both of "hich came into force in September 2--*> 3> Section (A1B of the 2--3 2ct defines a <collection< as< the solicitin! or recei&in! by a person of money or a benefit if< before or durin! the solicitin! or recei&in!< the person represents that the purpose of the solicitin! or recei&in! Aor of an acti&ity or enterprise of "hich it is a partB is or includes a charitable purpose> +> Knder section 1+ of the 2--3 2ct< it is an offence for a person to conduct a collection "ithout bein! authoriNed by a licence> Where a collection is carried out in person< section * stipulates that information "ith re!ard to the purpose of the collection< ho" and "here the net proceeds of the collection "ill be spent and a business telephone number for the licensee< must be pro&ided>+3 Similar re@uirements are imposed under section * in relation to collections carried out by telephone< collections carried out by "ritten re@uest< collections carried out from or throu!h "ebsites and collections carried out throu!h collection bins> New South 0ale 5> For the purposes of the 1haritable Fundraisin! 2ct 1**1< the solicitin! or recei&in! by a person of any money< property or other benefit constitutes a <fundraisin appeal< if< before or in the course of doin! so< the person represents that the purpose of the solicitin! or recei&in! Aor of an acti&ity or enterprise of "hich it is a partB is or includes a charitable purpose> ++ Section 1%A%B of the 1**1 2ct pro&ides that if the Minister has not disposed of an application for an authority to conduct a fundraisin! appeal "ithin %- days after the date of the receipt of notice for the application< the application is
+3 ++

Section *A1B< 1haritable 1ollections 2ct 2--3 A21TB> Section 5< 1haritable Fundraisin! 2ct 1**1 A4SWB> AThis is similar to the 21T definition of <collection< discussed abo&e>B Knder section + of the 4SW 2ct< <charitable purpose< is defined in terms "hich are broader than the !eneral la"< to include a bene&olent< philanthropic or patriotic purpose: see the discussion of these pro&isions in 7ino .al 0ont< Charity Law in %ustralia and Cew Dealand A2---< ,K0B< at 3*1>

2+2

ta:en to ha&e been appro&ed <sub;ect only to such conditions as may be prescribed by re ulations made for the purposes of this subsection >< 2 number of measures to control different fundraisin! acti&ities are pro&ided in the 1haritable Fundraisin! 9e!ulation 2--)> Schedule 1 to the 2--) 9e!ulation lists out the conditions to be complied "ith "here an authority for a fundraisin! appeal is ta:en to ha&e been !ranted under section 1%A%B of the 2ct> %> For fundraisin! acti&ities carried out throu!h direct mar:etin!< such as by telephone< facsimile or direct mailin!< the authorised fundraisers must ensure a number of matters< includin! that the content of all direct mar:etin! communications is not misleadin! or decepti&e or li:ely to mislead or decei&e> Where persons bein! solicited re@uest the source from "hich the authorised fundraiser obtained their names and other details< the person has to be informed> Where a person re@uests the remo&al of their name and other details from the source used in the fundraisin! appeal< the authorised fundraiser must ensure that this is done as soon as practicable> The 2--) 9e!ulation also stipulates that the name and other details of a person must not be pro&ided or sold to any other person or or!anisation "ithout the e;press consent of the person concerned> The authorised fundraiser also has to ensure that in each direct mar:etin! contract entered into for the purchase of !oods or ser&ices &alued at more than 2K.1--< the purchaser is !i&en the ri!ht to cancel the contract "ithin fi&e business days< and the purchaser should be notified of such a ri!ht at the time of enterin! into the contract> +5 (> The 2--) 9e!ulation pro&ides that collection bo;es or similar de&ices used to collect donations of money must be properly sealed< securely constructed< consecuti&ely numbered and clearly labelled "ith the name of the authorised fundraiser>+% Similar< and e&en more detailed< re@uirements are imposed for fundraisin! appeals "here !oods or materials donated are collected 6ointly "ith a trader< and the collection de&ices are bins or ba!s> +( )> Where a trader conducts a fundraisin! appeal in&ol&in! the supply of !oods or ser&ices< the 2--) 9e!ulation re@uires that records of the !oods and ser&ices supplied must be maintained by the trader< "hich Ain the case of !oods for saleB must include the date and number of units purchased or manufactured< to!ether "ith their cost< the date and number of units sold and the !ross income obtained>+) The 2--) 9e!ulation prohibits any fundraisin! appeal "hich in&ol&es stoppin! people in motor &ehicles "hile they are bein! dri&en on a road< includin! "hile &ehicles are stopped temporarily< for e;ample< at traffic li!hts> +* Iueen land *> The &arious types of charitable fundraisin! acti&ities in Wueensland are re!ulated and controlled by the 1ollections 2ct 1*%% and the 1ollections 9e!ulation 2--)> Section 11 of the 1*%% 2ct sets out the !eneral
+5 +% +( +) +*

1haritable Fundraisin! 9e!ulation 2--) A4SWB< at para 12 of Schedule 1> Same as abo&e< at para 13 of Schedule 1> Same as abo&e< at para 1% of Schedule 1> Same as abo&e< at para 1( of Schedule 1> Same as abo&e< at para 25 of Schedule 1>

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conditions "hich must be obser&ed <in connection with every appeal for support<> These conditions include that the appeal should be authorised in "ritin! by the !o&ernin! body of the charity or a person authorised by the !o&ernin! body< that the promoter of the appeal is named in the authority< that the name of the charity and the fact that it is re!istered under the 2ct shall be specified at all times durin! the appeal< and all pro&isions of the 2ct and other rele&ant conditions shall be complied "ith> 1-> For door-to-door appeals and street collections in Wueensland< both the 1*%% 2ct and the 2--) 9e!ulation pro&ide that an application< in the appro&ed form< must be made to the Minister to conduct either of these fundraisin! acti&ities> The !o&ernin! body of an association intendin! to conduct these acti&ities must issue to each collector a distincti&e armlet or bad!e of the association and an authority in the appro&ed form> The collector has to produce the authority if as:ed by anyone durin! the collection> The collector must "ear the armlet or bad!e prominently "hen collectin!< and must return it to the promoter "hen the collection has finished> 2t &arious points durin! the collection< the collector must return to the collection's promoter the collectin! bo; or the receipt boo: "hich has been issued to him "ith an amount e@uallin! the total contributions entered in the receipt boo:>511> Section 1(A2B of the 1*%% 2ct pro&ides that in addition to the !eneral conditions specified in section 11 of the 2ct< there are certain other conditions in Schedule 1 to the 2--) 9e!ulation that ha&e to be complied "ith by the promoters of collections throu!h door-to-door appeals or street collections> These additional conditions are set out belo" as an e;ample of detailed re@uirements of this type: <! %n authority must clearly state the period, of not more than # months, for which it is in force and indicate that U .a1 .b1 # the association is a charity re istered under the %ctP or the ob;ects of the association are a community purpose sanctioned under the %ct.

The collector must ive each person ivin an amount to the association, whether in e4chan e for articles or otherwise, a tic6et or receipt issued to the collector by the overnin body of the association, unless the amount is iven in e4chan e for a device, or a collectin bo4 is used. Receipts for all donations must be issued on the carbon copy or numbered butt principle. The overnin body of the association must ta6e reasonable steps to ensure all amounts collected are

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Section 1)< 1ollections 9e!ulation 2--) AW8.B>

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properly and promptly accounted for by the collector. 0 % child under !0 must not act as a collector without the previous written consent of ! of the child9s parents or uardians and, if the consent is iven, the child must be accompanied by an adult. % collector must not, for an appeal, visit any house before *.$$ a.m. or after 0.$$ p.m. on any day. % collector must not U .a1 .b1 by words or conduct, unreasonably annoy any person approached durin a collectionP or stay in, or at the door of, any place of residence or place of employment if as6ed to leave by any occupant of the place.

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% collector must not intimidate any person so as to cause the person to ma6e a donation or buy anythin the person otherwise may not have made or bou ht. 5ach collectin bo4 issued to a collector by the overnin body of an association must be U .a1 .b1 .c1 .d1 securely constructed to avoid tamperin P and sealed before its issue to a collectorP and clearly numbered for identificationP and clearly labelled with the association9s name.

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% seal on a collectin bo4 may only be bro6en by a person authorised by the overnin body of the association to brea6 the seal. The overnin body must supervise properly the issue and openin of collectin bo4es and accountin for the contents of collectin bo4es. % collectin bo4 left at a place of residence or employment must be collected or emptied at least once a month and the amount removed from the collectin bo4 must be accounted for. 5ach device offered for sale must U .a1 have the price clearly mar6ed on it or on a distinctive tab firmly attached to itP or

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if the Einister considers it is impracticable to have the price mar6ed in accordance with para raph .a1 U be offered for sale in a way that the Einister considers clearly indicates the price to a potential buyer.

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The overnin body of the association must 6eep a record of all devices ac8uired, distributed, sold or unsold. The overnin body of an association must ive the chief e4ecutive, within ! month after the day of the appeal, a statement of receipts and e4penditure of the appeal. % collector must not ta6e part in a collection commonly 6nown as a 9hi;ac69 collection, or wear a mas6 or use a toy firearm while collectin . The overnin body of an association must, at least once a month, collect and account for donations invited by association si ns at a wishin well or other similar thin .<

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South 3u tralia 12> In South 2ustralia< charitable fundraisin! acti&ities are re!ulated by the 1ollections for 1haritable 0urposes 2ct 1*3*> 2 1ode of 0ractice for the control of charitable collections "as also issued in 1**5 by the South 2ustralian 7o&ernment>51 This "as last re&ie"ed in .ecember 2--(> 13> For door-to-door collections< para!raph 2 of the 1ode stipulates that charitable or!anisations should ensure that their collectors are polite at all times and should be "ell-presented> It also states that there should not be any use of direct or implied pressure< harassment< intimidation or coercion in the course of collections> 1ollectors are to carry "ith them an authorised collection card and "ear a name ta! identifyin! the "earer and the or!anisation he is actin! for> 1+> In the case of door-to-door sales of !oods< para!raph 1- of the 1ode states that "here products are sold door-to-door by a commercial operator "ho offers to donate a portion of the sale proceeds for a charitable cause< the commercial nature of the acti&ity must be made clear by the seller at the point of sale and the proposed benefit to the charity must be defined> 1harities lendin! their name to a merchant or a commercial bin operator should see: to ensure that the standards "hich are recommended for charitable collections are applied also to the commercial acti&ities "hich in&ol&e the use of the charity's name> 15> 0ara!raph 3 of the 1ode re@uires that donors in door-to-door

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collections should be !i&en a numbered receipt for all donations of 2K.2>-or more> Tins and bo;es used in collections should be of secure construction and sealed before they are issued to collectors> 2ll seals should remain intact until the campai!n is completed< "hen the tins and bo;es should be opened only under the super&ision of a person authorised by the charitable or!anisation to o&ersee the reconciliation of donations "ith receipts issued> 1%> 0ara!raph % of the 1ode states< amon!st other re@uirements< that "here !oods and clothin! are donated and recei&ed throu!h collection bins< charitable or!anisations should ensure that the information on the bins is clear and unambi!uous> 1haritable or!anisations lendin! their name to an operator of commercial bins in return for royalties from the proceeds of the bins should ensure that the public is not misled by any misleadin! information or o&er-emphasis on the charity's in&ol&ement> 1harities also ha&e to ensure that the &alue of the donations made is not dissipated by e;cessi&e commission or payment to third party collection a!ents> 1(> Where telemar:etin! is used for charitable fundraisin!< para!raph ( of the 1ode stipulates that the callers should identify themsel&es clearly and the charitable a!ency they represent> Further< the callers' intention to sell andCor solicit should not be dis!uised by any preliminary remar:s< such as <we are conductin some research< or <we are conductin a survey.< Jictoria 1)> In Mictoria< fundraisin! acti&ities are !o&erned Fundraisin! 2ct 1**) and the Fundraisin! 9e!ulations 2--*> by the

1*> The re@uirements in relation to the identification bad!es to be "orn by collectors are set out in section * of the 1**) 2ct and section ( of the 2--* 9e!ulations< includin! re@uirements as to the prominent display of the name of the person conductin! the fundraisin! appeal and the name of the person to "hom the bad!e is issued> 2-> With re!ard to collection receptacles for collectin! donations< section 1- of the 1**) 2ct re@uires a fundraiser to ensure that the receptacles placed in a public place ha&e to be securely constructed< properly sealed and consecuti&ely numbered> The receptacles must be clearly labelled "ith the name of the appeal or the name of the person conductin! the appeal< and the causes on "hose behalf the appeal is bein! conducted> 21> 9e@uirements in relation to collections by telephone are pro&ided under section 1+ of the 1**) 2ct> Where the can&asser is participatin! in the appeal for money or some other financial re"ard< the person from "hom the donation is sou!ht< or to "hom thin!s are offered to be sold< must be told before the can&asser see:s the donation or offers anythin! for sale that the can&asser has been retained on a commercial basis> The name of the person employin! the can&asser must also be disclosed>

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22> Where a commercial fundraiser see:s donations< or offers to sell anythin! in a fundraisin! appeal by means of a document< section 15 of the 1**) 2ct pro&ides that the commercial fundraiser must state on the document that it has been sent or distributed by a commercial fundraiser< and that the commercial fundraiser has been retained on a commercial basis to send or distribute the document> 23> Where other means of communication are used< section 15 of the 1**) 2ct pro&ides that the commercial fundraiser must ensure that a donation is not sou!ht< and an offer to sell not made< unless the person from "hom the donation is sou!ht< or to "hom the offer is made< is informed of the fact that the communication has been made by a commercial fundraiser "ho has been retained on a commercial basis> 2+> The re@uirements in relation to fundraisin! by direct debit are included under section 152 of the 1*)) 2ct and re@uire a fundraiser to ensure that the form used to enable donations by a person throu!h direct debit facilities are easily le!ible and clearly e;pressed> AFor e;ample< "here the form is printed or typed< a minimum of 1- point font has to be used>B 0e tern 3u tralia 25> In Western 2ustralia< charitable fundraisin! acti&ities are re!ulated by the 1haritable 1ollections 2ct 1*+% and the 1haritable 1ollections 9e!ulations 1*+(> The control of street collections is pro&ided for in the Street 1ollections A9e!ulationB 2ct 1*+- and the Street 1ollections 9e!ulations 1***> 2%> Section 1+ of the 1*+( 9e!ulations pro&ides that telephone calls and house &isits by collectors ma:in! an appeal or sellin! !oods for a charitable purpose must not be made on Sundays or public holidays< or late at ni!ht or early in the mornin!< unless authorised in "ritin! by the Minister> 2(> For street collections< section 3 of the 1*+- 2ct prohibits collections in any public street "ithin the metropolitan area unless the collections are authorised by a permit in "ritin! from the Minister< and that the conditions< if any< that are attached to such a permit and the pro&isions of the re!ulations are all complied "ith by the fundraiser> The 1*** 9e!ulations stipulate a number of re@uirements that ha&e to be complied "ith in street collections< includin! those related to the "earin! of identification bad!es and the security and use of collection bo;es> For e;ample< section ) of the 1*** 9e!ulations pro&ides that "here a person indicates to a collector that he "ishes to contribute in a street collection< the collector must offer the person a collection bo; so as to enable the person to put the contribution into the bo;> #o"e&er< "here the contribution is !i&en by that person to a collector< the latter must immediately put the money into a collection bo;>

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Ca"a%a
2)> In 1anada< charitable fundraisin! acti&ities at pro&incial and territorial le&els are re!ulated and controlled by the Kniform 1haritable Fundraisin! 2ct> Throu!h this le!islation< uniform standards are imposed upon <charities< and <fundraisin businesses< in&ol&ed in charitable fundraisin! across the country>52 2*> Section 2A1B of the 2ct states: <9charity9 means an incorporated or unincorporated or ani@ation or a trust that is formed for a charitable purposeP N 9fundraisin business9 means, N a person or other entity that .a1 .b1 is not a charity, ma6es solicitations on behalf of a charity, directly or indirectly, or mana es, facilitates or is responsible for solicitations made by or on behalf of a charity, provides the services described in clause .b1 for remuneration, and in the case of an individual, is not actin as an employee of the charityP N < The "ord /solicitation/ is defined in section 2A1B as: <.a1 a direct or indirect re8uest for a contribution in which it is stated or implied that the contribution will be used by a charity or for a charitable purpose, or a re8uest for a contribution throu h a direct or indirect offer to sell oods or services in which it is stated or implied that all or a portion of the purchase price will be used by a charity or for a charitable purposeP .9solicitation91<.

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31> Knder section % of the 2ct< solicitation by telephone< in person at someone's home or by fa; can only be carried out "ithin certain times of the day> Section ( pro&ides that a person ma:in! a solicitation has to< before acceptin! a contribution< pro&ide the follo"in! information to the person to "hom the solicitation is made:


the name of the charity for "hich the solicitation is made

52

http:CC""">ulcc>caCenCpoam2CKniform=1haritable=Fundraisin!=2ct=F4=3n>pdf< at 1>

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the name of the person ma:in! the solicitation< if it is made by telephone or in person the name of the fundraisin! business and details of the remuneration it recei&es< if applicable details about the rele&ant coolin!-off period< and instructions for obtainin! a refund under that section>



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32> Section ) of the 2ct pro&ides for a <coolin off< period "ithin "hich a contributor can chan!e his mind and demand a full refund< and sets out ho" this is to be processed in different circumstances> Section * of the 2ct pro&ides that a receipt has to be !i&en to a person "ho has made a monetary contribution of 12.1- or more! 33> Section 35A1B of the 2ct pro&ides that a charity cannot en!a!e a fundraisin! business to ma:e solicitations on its behalf< or to mana!e< solicitations made on its behalf unless the charity and the fundraisin! business ha&e entered into a fundraisin! a!reement made in compliance "ith section 3% of the 2ct> Section 3% sets out the re@uirements of a fundraisin! a!reement: <% fundraisin a reement shall be in writin and shall, .a1 set out everythin a reed to by the parties respectin the proposed fundraisin , includin all the ri hts and duties of both partiesP state the estimated amounts of, .i1 contributions to be received, and .ii1 e4pensesP establish the fundraisin business9s remuneration and specify how it is to be calculatedP specify the methods of solicitation to be usedP if the solicitations will involve sellin oods or services, describe the oods or services and specify the price for which they will be soldP identify the account of the charity into which monetary contributions are to be deposited N.<

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3+> There are situations "here businesses represent that part of their sale proceeds "ill !o to charity> Knder the 2ct< businesses in this situation are re!arded as <retail incentive donors<> Where such a representation has been made< section 3( of the 2ct pro&ides that the retail

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incenti&e donor has to abide by the terms of the representation and has to donate to the charity< accordin! to the terms of the representation< all or a portion of the purchase price for the rele&ant !oods or ser&ices< or to use all or a portion of the purchase price for the charitable purpose stated in the representation> 35> Section 3* of the 2ct prohibits retail incenti&e donors from representin! that they are raisin! funds for charities< or that part of the sale proceeds "ill !o to charities< unless there is a "ritten consent from the charity>

E"*-a"% a"% Wa-e)
3%> In 3n!land and Wales< the statutory re@uirements !o&ernin! public fundraisin! collections are pro&ided in the #ouse-to-#ouse 1ollections 2ct 1*3* and the 0olice< Factories etc AMiscellaneous 0ro&isionsB 2ct 1*1%> In addition< the 1harity 1ommission has issued t"o sets of !uidance notes in relation to the fundraisin! acti&ities of charities> 11) A Internal Financial 1ontrols for 1harities53 pro&ides ad&ice to trustees of charities on internal financial controls o&er a "ide ran!e of financial acti&ities> 112- X 1harities and Fundraisin! pro&ides !uidance to charities on fundraisin! from the public for the benefit of charities and their beneficiaries> It also includes information on charity la" as it applies to fundraisin! and the !eneral principles that charities should follo" "hen de&elopin! a fundraisin! strate!y>5+ 3(> For fundraisin! acti&ities carried out by telephone< 112- states that charities should ensure that they do not ma:e unsolicited calls to numbers re!istered on the Telephone 0reference System AT0SB> AT0S is the official central opt-out re!ister in the K$ on "hich customers can record their preference not to recei&e unsolicited sales or mar:etin! calls> 55B 1harities may ho"e&er continue to call donors on the T0S "ho they ha&e an on!oin! relationship "ith and "ho ha&e a!reed to be contacted by the charity> 2ll fundraisin! acti&ity in&ol&in! recordin! or ta:in! do"n personal details is sub6ect to data protection la"s> 1harities that use face-to-face fundraisin!< online fundraisin!< direct mail< e&ents< broadcast or telephone fundraisin! and "hich handle personal details such as names< contact details and credit or debit details should be a"are of and comply "ith the .ata 0rotection 2ct 1**)>5% 3)> For charity funds sent to charities by post< charity trustees are ad&ised in 11)5( that charities should open the incomin! post at the earliest opportunity and in the presence of t"o unrelated persons> 1he@ues and cash that come in by post ha&e to be immediately recorded and ban:ed> It is also su!!ested in 11) that the post-openin! staff should be rotated and security of unopened mail should be ensured> Furthermore< the charity trustees should

53 5+ 55 5% 5(

http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 21> http:CC""">mpsonline>or!>u:CtpsC> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3+> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 11>

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consider the need to implement other controls< such as comparison of donations "ith past periods or receipts from pre&ious appeals> 5) 3*> Where fundraisin! is conducted by means of public collections< 5* 11) ad&ises that trustees ha&e to ensure that these collections are carried out in accordance "ith the statutory re@uirements !o&ernin! public collections> These are set out in the #ouse-to-#ouse 1ollections 2ct 1*3* and the 0olice< Factories etc AMiscellaneous 0ro&isionsB 2ct 1*1%> In 112-< the 1ommission notes%- that a permit or licence from the rele&ant authorities is re@uired for raisin! money or sellin! !oods for charity in streets or public places> The rele&ant authorities should therefore be consulted before charities embar: on fundraisin! acti&ities in public places> 2 licence or an e;emption is needed for house-to-house collections and &isits to public houses< offices and factories to appeal for money< property< or to sell thin!s for charity> These acti&ities are !o&erned by pro&isions in the #ouse-to#ouse 1ollections 2ct 1*3* and the #ouse-to-#ouse 1ollections 9e!ulations 1*+( and 1*%3>%1 The 1harity 1ommission in 11) also ad&ises that in the course of public collections< collection bo;es must be sealed< indi&idually numbered and documented> Static collection bo;es should be opened re!ularly and contents counted in the presence of the collectors and a numbered receipt !i&en to them> 1ash collected should be ban:ed by the charity as soon as possible "ithout deduction of e;penses> %2 +-> With re!ard to fundraisin! and sponsored e&ents< the 1ommission states in 11)%3 that charity trustees holdin! these e&ents should ensure that the charities are in control of the funds raised on their behalf< so that they can recei&e all the money they are entitled to from these e&ents> The 1ommission also ad&ises that records containin! the !ross receipt and all costs incurred in fundraisin! e&ents ha&e to be :eptH that tic:ets to be sold in fundraisin! e&ents must be pre-numberedH there must be a record of all persons "ho ha&e been issued "ith tic:ets to sellH and the tic:et numbers allocated to each of these persons ha&e to be recorded> +1> For society lotteries< 112- states %+ that "here the sale of lottery tic:ets e;ceeds Y2-<--- in &alue< or e;ceeds Y25-<--- "hen ta:en to!ether "ith sales from pre&ious lotteries in the same year< it "ill be necessary to re!ister "ith the 7amblin! 1ommission> Sale of lotteries belo" these thresholds "ould only re@uire re!istration "ith the local authority> +2> Where a charity en!a!es the ser&ices of a <professional fund-

5) 5* %%1 %2 %3 %+

http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 11> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 12> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3%> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3%> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 12> http:CC""">charity-commission>!o&>u:CpublicationsCcc)>asp;< at section 12> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 35>

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raiser< or a <commercial participator<%5 in a fundraisin! acti&ity< 112pro&ides%% that the <solicitation statement< made by these professionals has to pro&ide certain information to the public> It is set out in section 3( that a paid fundraiser< includin! a professional fundraiser and a commercial participator< must state: "․ the proportions in which the charities will benefit .if they are fundraisin for more than one charity1 or how the proceeds of the appeal will be distributed to different charities .if they are fundraisin for charitable purposes1P whether they are an officer or employee of a charity or connected company or trustee of such an institution and are actin as a collector in that capacityP and that they are paid for actin as an officer, employee or trustee, or for actin as a collector.<

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Where the ser&ices of a commercial participator are re@uired< the commercial participator must indicate:%( <․ ․ which charity or charities will benefit from the promotional ventureP if there is more than one charity that will benefit from the venture, in what proportions the charities will respectively benefitP and what proportion of the proceeds of the oods, services or promotional venture sold will be iven to the charity or charities, or the total amount of the donation iven to the charity as a result of sale of oods, services or runnin the promotional venture.<

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%5

%% %(

The terms <professional fundraiser< and <commercial participator< are defined in section 2+ of 112- at http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;> The definitions are as follo"s: <% professional fundraiser is anyone who carries on a commercial fundraisin business, wholly or mainly fundraisin for charitable purposesP or any other person who is paid to solicit money or other property for charity. This does not include& • a charity or a 9connected company9P • any officer or employee of the charity or connected companyP • a trustee of the charity, actin as trusteeP • any public charitable collector, other than promotersP • people who solicit funds on TI or radioP • any commercial participatorP or • anyone who is paid no more than V!,$$$ for a particular appeal, or no more than V!$ per day or V!,$$$ per year where there is no specific appeal. % commercial participator is not a fundraisin business but a commercial enterprise that ta6es part in a promotional venture, such as an advertisin or sales campai n, where the public are informed that contributions will be iven to or applied for the benefit of a charity. % commercial participator may be sub;ect to the same re ulatory re8uirements as professional fundraisers if all of its activities are for 9charitable purposes9.< http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3(> http:CC""">charity-commission>!o&>u:CpublicationsCcc2->asp;< at section 3(>

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Ire-a"%
+3> Kntil 2--*< charitable fundraisin! acti&ities in Ireland "ere solely re!ulated by the 1harities 2cts 1*%1 and 1*(3< and the Street and #ouse to #ouse 1ollections 2ct 1*%2> In February 2--*< the 1harities 2ct 2--* "as enacted and this no" co-e;ists "ith the earlier controllin! le!islation> The pro&isions of the 2--* 2ct "ill come into force in sta!es> 2 !uide issued by the .epartment of 1ommunity< 9ural and 7aeltacht 2ffairs in Dune 2-1-< entitled <Principal 'eatures of the Charities %ct #$$*< %), stated that: <The Charities %ct #$$*, to ether with the Charities %cts !*"! and !*3), and the Street and (ouse to (ouse Collections %ct !*"#, will provide for a composite re ulatory framewor6 for charities throu h a combination of new le islative provisions and retention of e4istin charities le islation, with updatin , where appropriate.<"* ++> 2 number of the pro&isions in the 1*%2 2ct ha&e sur&i&ed the amendments made to it> Knder section 5 of the 1*%2 2ct< anyone "ho proposes to hold a collection in a particular locality has to apply for a collection permit from the 1hief Superintendent of that locality> Knder section )< conditions may be attached to a collection permit issued by a 1hief Superintendent< includin! conditions prohibitin! the holdin! of the collection in particular areas or at particular times< limitin! the number of collectors "ho may be en!a!ed in the collection< prohibitin! the "earin! of fancy dress< mas:s or dis!uises by the collectors en!a!ed in the collection< and prohibitin! the ma:in! of the collection by collectors in &ehicles> 2 collection permit may be re&o:ed by the 1hief Superintendent under section 12 of the 1*%2 2ct> Section 1( of the 1*%2 2ct pro&ides that a collector actin! in a collection has to carry "ith him a collector's authorisation< "hich must be produced for inspection by a member of the 7arda S[och\na Athe Irish 0oliceB on demand> +5> With respect to the 2--* 2ct< its purpose< as stated by the .epartment in its !uide to the 2ct< is <to enact a reform of the law relatin to charities in order to ensure accountability and to protect a ainst abuse of charitable status and fraud. It will also enhance public trust and confidence in charities and increase transparency in the sector.< (- The 7uide sets out the reasons for initiatin! the reforms< and the methods "hich "ill be adopted in the reforms to modernise charity la"< as follo"s: <'undraisin is comple4 because of the wide ran e of methods it encompasses and the variety of or anisations within the sector involved. It has evolved considerably since the passin of
%) %*

(-

http:CC""">pobail>ieCenC1harities9e!ulationC09I4L2-F32TT#31#29ITI3S21T-*>pdf> http:CC""">pobail>ieCenC1harities9e!ulationC09I4 L2-F32TT#31#29ITI3S21T-*>pdf< at 1< para 1> http:CC""">pobail>ieCenC1harities9e!ulationC09I4 L2-F32TT#31#29ITI3S21T-*>pdf< at 1< para 1>

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the primary le islation on collections, the Street and (ouse to (ouse Collections %ct !*"#. The approach proposed in the %ct is to develop a three-pron ed approach throu h: .a1 modernisin aspects of the !*"# provisions to reflect chan es in methods of collection, revisin the definition of 9collection9 itself and, in particular, introducin a permit re ime for recently developed fundraisin methods such as collection by way of direct debit or other 9promises of money9P conferrin the re8uisite powers on the Charities Re ulator to re8uire charities to provide information concernin their fundraisin activities, e. . in their applications for re istration, as well as in their annual accounts and annual returnsP and implementin a reed Codes of +ood Practice in relation to the actual fundraisin operations, while retainin reserve powers for the Einister, after consultation with the %uthority, to ma6e statutory re ulations on the manner and conduct of fundraisin if such an approach proves ineffective.

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,or6 on the a reed Codes of +ood Practice has already advanced si nificantly, in partnership with the charities sector.< 3! +%> The main areas of impact of the 2--* 2ct on the pre&ious system of fundraisin! controls appears to be that: (2 <Both cash and non-cash .i.e. direct debits, standin orders etc1 charitable fundraisin from the public will re8uire permits from the +ardaW, and only re istered charities will be able to conduct charitable fundraisin . Sealed collection bo4es will be the standard re8uirement for collections in public places and the bo4es will have to display the name and charity number of the charity .the Re ulator has the discretion to ma6e an e4ception to the sealed collection bo4 rule to facilitate the ma6in of chan e for to6en sellers1.

(1

(2

http:CC""">pobail>ieCenC1harities9e!ulationC09I4 L2-F32TT#31#29ITI3S21T-*>pdf< at (-)< para (> See Factsheet issued by the Wheel entitled The Charities %ct #$$* at: http:CC""">"heel>ieCsitesCdefaultCfilesC1harities=2ct=2--*=Factsheet>pdf> 2ccordin! to the information pro&ided at http:CC""">"heel>ieCabout< /The Wheel is a support and representati&e body connectin! community and &oluntary or!anisations and charities across Ireland> 3stablished in 1***< The Wheel has e&ol&ed to become a resource centre and forum for the community and &oluntary sector>/

255

Charities that fundraise will be e4pected to comply with the nonstatutory Statement of Principles for 'undraisin .available at www.ictr.ie1, and will also be e4pected to comply with specific Codes of +ood Practice for 'undraisin when they are developed.< 3) +(> 2 ne" definition of <collection< is pro&ided under section *3 of the 2--* 2ct "hich states: <9collection9 means the collection or attempted collection of money from the public in any public place or places or by house to house visits or both in such place or places and by such visits for the benefit .actual, alle ed or implied1 of a particular ob;ect, whether charitable or not, and whether U .a1 .b1 any consideration is or is not iven, or any bad e, emblem or other to6en is or is not e4chan ed or offered in e4chan e,

for money so collected, but does not include e4empt activity, be in or receivin alms N .< +)> Section *3 also introduces ne" definitions of <money< and <noncash collection<. Throu!h the 2--* reforms< ne" methods of collection< "hich "ere pre&iously un:no"n under the 1*%2 2ct Asuch as direct debits and standin! ordersB< are no" "ritten into the la" and are sub6ect to re!ulation and control "hen used in a charity fundraisin! acti&ity> +*> 2s noted earlier< the ne" reforms "ill also encompass the use of non-statutory codes of practice> In line "ith this< a Statement :f +uidin Principles 'or 'undraisin has already been issued>(+ This document< "hich "as dra"n up by charity fundraisin! practitioners and donors< (5 is stated to be intended <to complement and build on the e4istin le al framewor6 within which all charities operate< < and <see6s to o further than the minimum le al re8uirements by offerin a set of overarchin principles and some uidance about how fundraisin should be approached and or anised.< (%

(3 (+

(5 (%

http:CC""">"heel>ieCsitesCdefaultCfilesC1harities=2ct=2--*=Factsheet>pdf< at para 2>3> See Irish 1harities Ta; 9esearch 8td< Statement :f +uidin Principles 'or 'undraisin AFeb 2--)B at: http:CC""">ictr>ieCfilesC92>L2-7uidin!L2-0rinciplesL2-of L2-Fundraisin!L2--L2-FebL2-2--)>pdf> Same as abo&e< at *> Same as abo&e< at *>

25%

Ne, Eea-a"%
5-> 4e" 5ealand's principal le!islation !o&ernin! charities is comprised in the 1harities 2ct 2--5> 2s "e sa" earlier in this paper< 4e" 5ealand< li:e 3n!land< has a charity commission to maintain a re!ister of charities> #o"e&er< "hile 3n!land has !one further and produced detailed 1odes to influence ho" charity fundraisin! acti&ities are to be carried out< 4e" 5ealand has not yet ta:en that step> 51> Fundraisin! acti&ities by means of telephone and internet appeals are< ho"e&er< re!ulated under section 3* of the 2--5 2ct> This states that "here a collector actin! on behalf of a charitable entity is re@uestin! funds< can&assin! for subscriptions< sellin! raffle or lottery tic:ets< or appealin! for donations by means of the telephone or the internet< the collector is under a duty to disclose the re!istration number of the entity if re@uested to do so by a member of the public>

S $#-a"%
52> In Scotland< re!ulation of charitable fundraisin! acti&ities is pro&ided in sections )1 to *2 of the 1harities and Trustee In&estment AScotlandB 2ct 2--5>(( 53> <Public benevolent collections<() are re!ulated by section )5 of the 2--5 2ct> Knder section )5A1B of the 2ct< an or!aniser of a public bene&olent collection commits an offence if the collection is held in the area of a local authority "ithout the local authority's consent !i&en under section )% of the 2ct> In !rantin! its consent< the local authority may attach conditions under section )%A5B of the 2--5 2ct> These conditions may relate to the date< time or fre@uency of the collectionH "here it may ta:e placeH ho" it is to be conductedH the use of identification bad!es by collectors and the form of collection bo;es< other containers and any other articles "hich may be used for the purposes of the collection> 5+> 0ro&isions to re!ulate the conduct of <professional fundraisers< and <commercial participators< in fundraisin! acti&ities< includin! the definition

((

()

For a useful discussion of these control measures< see <Charity Re ulation in Scotland< at: http:CCiascl>tal:ban:>or!CmediaCdocumentsC,S19-1harity-9e!ulation-in-Scotland-,&er&ie">pdf> Section )+A2B defines /Public benevolent collection/ as a collection from the public of money or promises of money A"hether or not !i&en by them for a consideration by "ay of !oods or ser&icesB for the benefit of bene&olent bodies or for charitable< bene&olent or philanthropic purposes ta:en AaB in a public place< or AbB by means of &isits to t"o or more houses or business premises>

25(

of <benevolent contributions<(* are contained in sections (* to )1 of the 2--5 2ct>)55> Knauthorised fundraisin! is prohibited under section )2 of the 2--5 2ct> Knder this section< an interdict Ain6unctionB a!ainst a person raisin! funds for the benefit of a charity may be !ranted if the sheriff Ae@ui&alent to a .istrict 1ourt Dud!eB is satisfied either that the person in @uestion is usin! methods of fundraisin! to "hich the bene&olent body ob6ects< that the person is not a fit and proper person to raise funds for the body< and the person is ma:in! representations that bene&olent contributions are to be paid to the bene&olent body but the body does not "ish to be associated "ith that fundraisin! &enture>

S'"*a.$re
5%> In Sin!apore< fundraisin! acti&ities carried out by charities are re!ulated by the 1harities 2ct> Sections 33 to 3) of the 2ct< at 0art MII< pro&ide for the control of fundraisin! for charitable institutions< and the re!ulation of fundraisin! appeals is re!ulated by sections 3* to +- of the 2ct< at 0art MIII> 5(> Supplementary to these le!islati&e controls are !uidelines set out in the Code of +overnance 'or Charities and Institutions of a Public Character)1 issued by the 1harity 1ouncil in 2-11 "hich has refined the 1ode first published in 2--(> The ob6ecti&es of the 1ode are to: <Ea6e charities more effective by sharing recommended practices on how effective charities are governed and managed; Provide uidance to Board members to help them carry out their duties as fiduciaries (representatives entrusted to act in the interests of the charity);

(*

)-

)1

Section (*A1B of the 2--5 2ct defines <benevolent contributions<< in relation to a representation made by a commercial participator or other person< to mean AaB the "hole or part of AiB the consideration !i&en for !oods or ser&ices sold or supplied by that person< AiiB any proceeds Aother than such considerationB of a promotional &enture underta:en by that person< AbB sums !i&en by that person by "ay of donation in connection "ith the sale or supply of such !oods or ser&ices> Section (*A1B of the 2--5 2ct defines a <professional fundraiser< as AaB a person Aother than a bene&olent body or a company connected "ith itB "ho carries on a fundraisin! business< AbB any other person "ho for re"ard solicits money or other property for the benefit of a bene&olent body or for charitable< bene&olent or philanthropic purposes other"ise than in the course of a fundraisin! &enture underta:en by a person fallin! "ithin para!raph AaB> Section (*A1B defines a <commercial participator< as a person "ho AaB carries on for profit a business other than a fundraisin! business< but AbB in the course of that business< en!a!es in a promotional &enture in the course of "hich it is represented that bene&olent contributions are to be AiB !i&en to or applied for the benefit of one or more particular bene&olent bodies< or AiiB applied for charitable< bene&olent or philanthropic purposes> http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(>

25)

Boost public confidence in the charity sector by setting the standards of good governance for charities to aspire towards. </# The !uidelines in the refined 1ode are applicable dependin! on the siNe of the charity>)3 Knli:e its le!islati&e counterpart< the 1ode is not intended to be mandatory> It is stated in the preamble to the 1ode: <Charities differ reatly in si@e, activity and circumstances. Cot all Code uidelines will apply to every charity. But all charities should o throu h the entire Code and ta6e the necessary action to improve their overnance.</2 5)> In 0art MII of the 2ct< t"o types of persons are specifically mentioned as the persons carryin! out fundraisin! for charitable institutions> They are professional fund-raisers)5 and the commercial participators>)% In 0art MII< &arious re@uirements are imposed on these persons "ho act on behalf of< or in the name of< a charitable or!anisation in a fundraisin! acti&ity> The purpose of these controllin! pro&isions is to enable the public and the charities concerned to :no" more about the role played by these fundraisin! professionals in the fundraisin! acti&ity< and ho" the charity funds obtained in a fundraisin! acti&ity are to be used and distributed> 5*> Knder section 3+A1B of the 2ct< a professional fund-raiser is prohibited from solicitin! money or other property for the benefit of a charitable institution unless there is an a!reement "ith the institution and the prescribed re@uirements ha&e been satisfied> 8i:e"ise< in section 3+A2B of the 2ct< it is pro&ided that a commercial participator is prohibited from representin! that charitable contributions are to be !i&en to< or applied for< the benefit of a charitable institution unless there is an a!reement to that effect "ith the institution and the prescribed re@uirements ha&e been satisfied> The reportin! pro&isions imposed on professional fundraisers in relation to specific fundraisin! appeals are contained in section 35 of the 2ct> %-> The definition of <fund-raisin appeal< appears in section 3*A1B of the 2ct< "hich states:

)2 )3

)+ )5

)%

http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(< at 5> 1harities "ith !ross annual receipts of less than ?5-<--- are re@uired to comply "ith Fasic I tier !uidelines> 1harities "ith !ross annual receipts of ?5-<--- and up to ?1- million are re@uired to comply "ith Fasic II tier !uidelines> 8ar!e 1harities "ith !ross annual receipts of ?1- million or more are re@uired to comply "ith Fasic II and 3nhanced !uidelines> A2ll fi!ures mentioned in this note refer to Sin!apore dollars>B 2&ailable at: http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(< at %> http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(< at 5> Section 33A1B of the 2ct defines a <professional fund-raiser< as AaB any person Aapart from a charitable institutionB "ho carries on a fundraisin! businessH or AbB any other person Aapart from a person e;cluded by &irtue of subsection A2B or A3BB "ho for re"ard solicits money or other property for the benefit of a charitable institution< if he does so other"ise than in the course of any fundraisin! &enture underta:en by a person fallin! "ithin para!raph AaB> Section 33A1B of the 2ct pro&ides that a <commercial participator<, in relation to any charitable institution< means any person "ho carries on for !ain a business other than a fundraisin! business< but in the course of that business< en!a!es in any promotional &enture in the course of "hich it is represented that charitable contributions are to be !i&en to or applied for the benefit of the institution>

25*

<9fund-raisin appeal9 means .a1 an appeal, whether made e4pressly or impliedly, to any member of the public to ive money or other property .whether for consideration or otherwise1 which is made in association with a representation that the whole or any part of its proceeds is to be applied for charitable, benevolent or philanthropic purposesP or a receipt from any member of the public of any money or other property .whether for consideration or otherwise1 which is iven in whole or in part for any charitable, benevolent or philanthropic purposes".

.b1

%1> In respect of the standard of beha&iour e;pected of a charity in fundraisin! acti&ities< the 1ode specifies that <The charity should ensure that its fundraising activities are transparent and ethical. It should account to its donors on what how and when the funds would be used. The charity should also be prudent in engaging third party fundraisers.<)( The 1ode further specifies that in conductin! fundraisin! acti&ities< the charity should ensure that its fundraising activities will preserve the integrity and transparency of the charity.)) %2> In the Fasic II and 3nhanced !uidelines< charities are re@uired to comply "ith further fundraisin! practices relatin! to accountability to donors on "hat< ho" and "hen the funds "ould be used> 2s specified earlier< the charity should also be prudent in en!a!in! third party fundraisers> It is stated in the !uidelines that <.a1 The charity should ensure that donors receive accurate and ethical advice about the charity, and the intended use, value and ta4 implications of donations. %ll collections should be properly recorded, promptly deposited and accounted for. The charity should respect donors! confidentiality. It should not disclose the identity of donors or share information on donors without prior permission from the donors.</*

.b1 .c1

)(

)) )*

Sin!apore 1harity 1ouncil< 1ode of 7o&ernance for 1harities and Institutions of a 0ublic 1haracter A2-11B< a&ailable at: http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(< at FI-3< FII-( and 3*> Same as abo&e> Sin!apore 1harity 1ouncil< 1ode of 7o&ernance for 1harities and Institutions of a 0ublic 1haracter A2-11B< a&ailable at: http:CC""">charities>!o&>s!CcharityCcharityCcharity1MSFile.o"nload>do idS2(< at FII-( and 3-*>

2%-

%3> !uideline: <.a1

1harities are also re@uired to comply "ith the follo"in! The charity should e4ercise due care in en a in third party fundraisers. It should ta6e into account how the public may view its use of third party fundraisers. The use of a third party fundraiser, its rationale and fee arrangements should be approved by the Board and disclosed to potential donors.

.b1

In eneral, it is discouraged to pay third party fundraisers based on the value of donations raised. 'undraisin tar ets should be set based on the charity9s needs and disclosed to donors.<*$

S$&#( Afr' a
%+> In South 2frica< <nonprofit or anisations< A40,sB are re!ulated by the 4onprofit ,r!anisations 2ct 1**( and the Codes of +ood Practice for South %frican Con-profit :r anisations .CP:s1 *1 issued under section %A1BAbB AiB of the 1**( 2ct> %5> 9e!ulation and control of fundraisin! acti&ities of 40,s are pro&ided in section F of the 1odes> Knder this< 40,s< and those connected "ith the fundraisin! "or: of 40,s< are ad&ised to follo" the <ethical values< that are stated in the 1odes>*2 The ethical &alues stipulated include:*3
           

#onesty Inte!rity 0romise :eepin! FidelityCloyalty Fairness 1arin! for others 9espect for others Transparency 9esponsible citiNenship 0ursuit of e;cellence 2ccountability Safe!uard public trust>

%%> For <professional fundraisers< "ho are under a contract "ith an 40, and raise funds for remuneration in the form of a commission or retainer or both< the 1odes state that< as the public "ould e;pect those en!a!ed in 40,s to beha&e in an e;emplary "ay< professional fundraisers are e;pected
**1 *2

*3

Same as abo&e> http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf> The 1odes< at 21-23< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf> The 1odes< at 1(-1)< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf>

2%1

to carry out their fundraisin! "or: <N in attitude and behaviour that rise above merely doin a ;ob in a competent manner.< *+ %(> For 40,s handlin! fundraisin! themsel&es< the 1odes state *5 that such a function should be carried out by the 13,< the fundraisin! committee appointed by a !o&ernin! body< and some full-time or part-time staff< if any> In the 1odes< it is stressed that any of the persons or or!anisations in&ol&ed in fundraisin! acti&ities conducted by or on behalf of 40,s should maintain <or anisational and professional standards based on traditional personal ethics.< *% The 1odes also specify a number of further responsibilities "hich must be complied "ith by 40, fundraisers and outside fundraisers "or:in! for or on behalf of an 40,> *( %)> In hirin! an outside fundraiser or a professional fundraiser "ho carries out fundraisin! acti&ities for or on behalf of an 40, for a certain percenta!e of the funds raised or a retainer< the 1odes su!!est *) that a detailed contract should be si!ned by both the 40, and the professional fundraiser> The contract should clearly state the parties' responsibilities and their income tar!ets> 8i:ely e;penses that mi!ht incur in the fundraisin! process< such as administration or tra&el costs< and ho" these costs are to be controlled< should also be clearly stated in the contract> The contract should pro&ide for re!ular opportunities for parties to re&ie" pro!ress>

*+

*5

*%

The 1odes< at 22< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf> The 1odes< at 22< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf> The 1odes< at 23< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf>
The 1odes< at 23-2+< a&ailable at:

*(

*)

http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf> The 1odes< at 25< a&ailable at: http:CC""">dsd>!o&>NaCnpoCdmdocumentsCModelL2-1odesL2-ofL2-7oodL2-0ractice>pdf>

2%2

A""e< 7

T(e -a, '" $#(er 4&r')%' #'$") $" (ar'#'e) a"% #a< A&)#ra-'a
1> In 2ustralia< charities are e;empt from income ta; under the Income Ta; 2ssessment 2ct 1**( Athe 1**( 2ctB> Subdi&ision 5--2 of the 1**( 2ct specifies the &arious entities that are e;empt from income ta;> 2 charity is one of the <e4empt entities< under section 5--5 of the 1**( 2ct> 2> In section 5--5 of the 1**( 2ct< at item 1>1< charity is listed as an entity e;empt from income ta; in respect of its total ordinary and statutory income> 4ote 1 of section 5--1 of the 1**( 2ct pro&ides that the ordinary and statutory income of charities that is e;empt from income ta; is called <e4empt income<**> 3> Section 5--5 of the 1**( 2ct pro&ides that to be eli!ible for ta; e;emption< the charity has to meet a number of special conditions set out in sections 5--5- and 5--52 of the 1**( 2ct> +> follo"s: Section 5--5- of the 1**( 2ct sets out the special conditions as

<%n entity covered by item !.! or !.# is not e4empt from income

ta4 unless the entity& .a1 has a physical presence in %ustralia and, to that e4tent, incurs its e4penditure and pursues its ob;ectives principally in %ustraliaP or is an institution that meets the description and re8uirements in item ! of the table in section )$-!0P or

.b1

**

The term <54empt income< is defined in section %-2- of the Income Ta; 2ssessment 2ct 1**( to mean: <.!1 %n amount of ordinary income or statutory income is e4empt income if it is made e4empt from income ta4 by a provision of this %ct or another Commonwealth law. 'or summary lists of provisions about e4empt income, see sections !!-0, !!-!$ and !!!0. .#1 :rdinary income is also e4empt income to the e4tent that this %ct e4cludes it .e4pressly or by implication1 from bein assessable income. .)1 By contrast, an amount of statutory income is e4empt income only if it is made e4empt from income ta4 by a provision of this %ct outside this =ivision or another Commonwealth law. .21 If an amount of ordinary income or statutory income is non-assessable non-e4empt income, it is not e4empt income. Cote& %n amount of non-assessable non-e4empt income is not ta6en into account in wor6in out the amount of a ta4 loss.<

2%3

.c1

is a prescribed institution which is located outside %ustralia and is e4empt from income ta4 in the country in which it is residentP or is a prescribed institution that has a physical presence in %ustralia but which incurs its e4penditure and pursues its ob;ectives principally outside %ustralia.<

.d1

5> The other special conditions that a charitable or!anisation has to satisfy before ta; e;emption can be !ranted are pro&ided in section 5--52 of the 1**( 2ct: <.!1 %n entity covered by item !.!, !.0, !.0%, !.0B or 2.! is not e4empt from income ta4 unless the entity is endorsed as e4empt from income ta4 under Subdivision 0$-B. Cote& The entity will not be e4empt from income ta4 unless it also meets other conditions& see section 0$-0$ .for an entity covered by item !.!1, 0$-03 .for an entity covered by item !.01, 0$-"$ .for an entity covered by item 2.!1. .)1 This section has effect despite all the other sections of this Subdivision. Cote& This means that an entity covered both by an item other than !.!, !.0, !.0%, !.0B or 2.! and by one of those items is not e4empt from income ta4 unless the entity is endorsed under Subdivision 0$-B as e4empt from income ta4 and the entity meets the re8uirements of whichever of sections 0$-0$, 0$-03, 0$-"$ and 0$-3# is relevant.< %> 2s noted abo&e< section 5--52A1B of the 1**( 2ct pro&ides that charity is not e;empt from income ta; unless it has been endorsed as e;empt from income ta; under Subdi&ision 5--F of the 1**( 2ct> Sections 5--1--< 5--1-5< 5--11- are the pro&isions that fall "ithin Subdi&ision 5-F> (> Section 5--1-- pro&ides that charities are only e;empt from income ta; if they are endorsed> Section 5--1-5 pro&ides that the 1ommissioner must endorse an entity as e;empt from income ta; if it: <.a1 .b1 is entitled to be endorsed as e4empt from income ta4P and has applied for that endorsement in accordance with =ivision 2#" in Schedule ! to the Ta4ation %dministration %ct !*0).<

)> Section 5--11- of the 1**( 2ct pro&ides for the re@uirements "hich ha&e to be met before a charity is entitled to be endorsed as e;empt from income ta;> Section 5--11- pro&ides that:

2%+

<+eneral rule .!1 %n entity is entitled to be endorsed as e4empt from income ta4 if the entity meets all the relevant re8uirements of this section.

,hich entities are entitled to be endorsedT .#1 To be entitled, the entity must be an entity covered by item !.!, !.0, !.0% or !.0B of the table in section 0$-0 or item 2.! of the table in section 0$-#$.

Re8uirement for %BC .)1 .21 To be entitled, the entity must have an Z %BC. (owever, for a trust& .a1 covered by item !.0 of the table in section 0$-0 because the trust is covered by para raph 0$/$.!1.d1P or covered by item !.0% of the table in section 0$-0 .because the trust is covered by para raph 0$/$.!1.c11P

.b1

to be entitled, the e4istin trust mentioned in para raph 0$-/$.!1.a1 must have an Z %BC. Re8uirement to meet special conditions .01 To be entitled& .a1 the entity must meet the relevant conditions referred to in the column headed 9Special conditions9 of whichever of items !.!, !.0, !.0% and !.0B of the table in section 0$-0 and item 2.! of the table in section 0$-#$ covers the entityP or both of the followin conditions must be met& .i1 the entity must not have carried on any activities as a charitable institution .if the entity is covered by item !.! of the table in section 0$-01 or for public charitable purposes .if the entity is covered by item !.0, !.0% or !.0B of that table1P there must be reasonable rounds for believin that the entity will meet the relevant conditions referred to in the column

.b1

.ii1

2%5

headed 9Special conditions9 of whichever of items !.!, !.0, !.0% or !.0B of the table in section 0$-0 covers the entityP or .c1 if the entity is covered by item 2.! of the table in section 0$-#$ and has not made any distributions -there must be reasonable rounds for believin that the entity will satisfy section 0$-3#.

."1

To avoid doubt, the condition set out in section 0$-0# .re8uirin the entity to be endorsed under this Subdivision1 is not a relevant condition for the purposes of subsection .01.<

Ca"a%a
*> In 1anada< under the Income Ta; 2ct only re!istered charities are eli!ible for e;emption from income ta;> .ue to this re@uirement< the re!istered status of a charity is crucial in determinin! "hether an or!anisation established for public !ood "ould be entitled to e;emption from income ta;> 1-> Section 12(>2A2B of the 2ct pro&ides that a person described in any of the para!raphs 1+*A1BAeB to AyB of the 2ct is eli!ible for e;emption from income ta;> Section 12(>2A2B pro&ides: <.#1 ,here a ta4payer who was throu hout a ta4ation year a person described in any of para raphs !2*.!1. e1 to .y1 files with the ta4payer9s return of income under this Part for the year a prescribed form containin prescribed information, the ta4payer shall be deemed to have paid, on the day on which the return is filed, an amount, on account of the ta4payer9s ta4 under this Part for the year, e8ual to the ta4payer9s share-purchase ta4 credit for the year.<

Thus< in 1anada< only re!istered charities< as opposed to unre!istered charities or other non-profit or!anisations< are e;empt from income ta;< as only the term <re istered charity< is pro&ided in section 1+*A1BAfB of the 2ct> 2 <re istered charity<< as defined in section 2+)A1B of the 2ct< means:
11> <.a1 a charitable or ani@ation, private foundation or public foundation, within the meanin s assi ned by subsection !2*.!.!1, that is resident in Canada and was either created or established in Canada, or a branch, section, parish, con re ation or other division

.b1

2%%

of an or ani@ation or foundation described in para raph .a1, that is resident in Canada and was either created or established in Canada and that receives donations on its own behalf, that has applied to the Einister in prescribed form for re istration and that is at that time re istered as a charitable or ani@ation, private foundation or public foundationP N .< 12> The meanin!s assi!ned to a <charitable or anisation<

under

section 1+*>1A1B of the 2ct are as follo"s:
<N an or ani@ation, whether or not incorporated, . a1 .b 1 all the resources of which are devoted to charitable activities carried on by the or ani@ation itself, no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof, more than 0$O of the directors, trustees, officers or li6e officials of which deal with each other and with each of the other directors, trustees, officers or officials at arm9s len th, and where it has been desi nated as a private foundation or public foundation pursuant to subsection .".)1 of this section or subsection !!$./.!1 or ./.#1 of the Income Ta4 %ct, chapter !2/ of the Revised Statutes of Canada, !*0#, or has applied after 'ebruary !0, !*/2 for re istration under para raph !!$./1.c1 of that %ct or under the definition 9re istered charity9 in subsection #2/.!1, not more than 0$O of the capital of which has been contributed or otherwise paid into the or ani@ation by one person or members of a roup of persons who do not deal with each other at arm9s len th and, for the purpose of this para raph, a reference to any person or to members of a roup does not include a reference to (er Ea;esty in ri ht of Canada or a province, a municipality, another re istered charity that is not a private foundation, or any club, society or association described in para raph !2*.!1.l1.<

.c 1

.d 1

E"*-a"% a"% Wa-e)
13> In 3n!land and Wales< charities are eli!ible for e;emption and relief from ta;ation on income and profits they recei&e> This is pro&ided for

2%(

under the Income and 1orporation Ta;es 2ct 1*))> Section 5-5A1B of the 1*)) 2ct deals "ith ta; e;emption< and section 5-5A2B and A3B of the same 2ct deals "ith ta; relief> 2part from these pro&isions< charities are also eli!ible to e;emption from capital !ains ta; under section 25% of the Ta;ation of 1har!eable 7ains 2ct 1**2> 1+> The e;emption and relief of charities from ta;ation on their income and profits under the Income and 1orporation Ta;es 2ct 1*)) co&er a "ide ran!e of financial !ains< includin! land< trade< interest< annuities< di&idends< shares of annuities< etc> In relation to ta; e;emption of charities< section 5-5A1B of the 1*)) 2ct states: <.!1 Sub;ect to subsections .#1 and .)1 below, the followin e4emptions shall be ranted on a claim in that behalf to the Board U .a1 e4emption from ta4 under Parts ) and 2 of CT% #$$* in respect of any profits or ains arisin in respect of rents or other receipts from an estate, interest or ri ht in or over any land .whether situated in the Snited -in dom or elsewhere1 to the e4tent that the profits or ains .i1 .ii1 .aa1 arise in respect of rents or receipts from an estate, interest or ri ht vested in any person for charitable purposesP and are applied to charitable purposes onlyP

e4emption from ta4 under Parts ) and 2 of CT% #$$*, or under Parts # and ) of ITT:I% #$$0, in respect of distributions to which section !#! of the 'inance %ct #$$" .Real 5state Investment Trusts& distributions1 applies to the e4tent that the distributions .i1 .ii1 arise in respect of shares vested in a person for charitable purposesP and are applied to charitable purposes onlyP

.b1 .c1

...P e4emption .i1 .ii1 ... from ta4 under section #** of CT% #$$* .nontradin profits in respect of loan relationships1, .ii@@a1 from ta4 under Part *% of CT% #$$* .company distributions1, .ii@a1 from ta4 under Chapter 0 of Part !$ of that %ct .distributions from unauthorised unit trusts1, .ii@b1 from ta4 under Chapter 3 of that Part .annual payments not otherwise char ed1, .iic1 from ta4 under Part / of CT% #$$* in respect of

2%)

non-tradin

ains on intan ible fi4ed assets,

where the income in 8uestion forms part of the income of a charitable company, or is, accordin to rules or re ulations established by %ct of Parliament, charter, decree, deed of trust or will, applicable to charitable purposes only, and so far as it is applied to charitable purposes onlyP .d1 e4emption from ta4 in respect of public revenue dividends on securities which are in the name of trustees, to the e4tent that the dividends are applicable and applied only for the repair of .i1 .ii1 .e1 any cathedral, colle e, church or chapel, or any buildin used only for the purposes of divine worshipP

e4emption from ta4 under Part ) of CT% #$$* in respect of the profits of any trade carried on by a charitable company .whether in the Snited -in dom or elsewhere1, if the profits are applied solely to the purposes of the charitable company and either .i1 .ii1 the trade is e4ercised in the course of the actual carryin out of a primary purpose of the charitable companyP or the wor6 in connection with the trade is mainly carried out by beneficiaries of the charitable companyP

.f1

e4emption from ta4 under Schedule = in respect of profits accruin to a charitable company from a lottery if the profits are applied solely to the charitable company9s purposes and .i1 .ii1 .iii1 the lottery is an e4empt lottery within the meanin of the +amblin %ct #$$0 by virtue of Part ! or 2 of Schedule !! to that %ctP the lottery is promoted in accordance with a lottery operatin licence within the meanin of Part 0 of that %ctP or the lottery is promoted and conducted in accordance with %rticle !)) or !)0 of the Bettin , +amin , Lotteries and %musements .Corthern Ireland1 :rder !*/0.<

15>

It is pro&ided in section 5-5 A1FB that : <'or the purpose of subsection .!1.e1 -

2%*

.a1

where a trade is e4ercised partly in the course of the actual carryin out of a primary purpose of the charitable company and partly otherwise, each part shall be treated as a separate trade .for which purpose reasonable apportionment of e4penses and receipts shall be made1, and where the wor6 in connection with the trade is carried out partly but not mainly by beneficiaries, the part in connection with which wor6 is carried on by beneficiaries and the other part shall be treated as separate trades .for which purpose reasonable apportionment of e4penses and receipts shall be made1.<

.b1

Section 5-5A2B pro&ides : <%ny payment which .a1 .b1 .c1 .d1 is received by a charitable company from another charityP and is not made for full consideration in money or money9s worthP and is not char eable to corporation ta4 apart from this subsectionP and is not, apart from this subsection, of a description which .on a claim1 would be eli ible for relief from ta4 by virtue of any provision of subsection .!1 aboveP

shall be char eable to corporation ta4 under the char e to corporation ta4 on income but shall be eli ible for relief from ta4 under subsection .!1.c1 above as if it were an annual payment.< Section 5-5A+B pro&ides : <If a charitable company incurs .or is treated as incurrin 1 noncharitable e4penditure in an accountin period, relief shall be disallowed in respect of such amount of relievable income and ains as e8uals the amount of the non-charitable e4penditure.<

Ire-a"%
1%> In Ireland< sub6ect to prescribed conditions< income< profits or !ains recei&ed by charities or charitable trusts are eli!ible for e;emption from char!es under different types of ta;es> 9eco!nised charities are thus eli!ible for e;emption from ta;es such as <income ta4<< <capital ac8uisitions ta4<< <capital ains ta4<< <corporation ta4<< <ta4 arisin from disposal of asset made to charities<< <dividend withholdin ta4<< <deposit interest retention ta4< and

2(-

<stamp duties< etc> 1(> In relation to char!es arisin! from <income<< section 2-( of the Ta;es 1onsolidation 2ct 1**( pro&ides e;emption from income ta; for income recei&ed and applied to charitable purposes only> Section 2-(A1B of the 1**( 2ct !rants e;emption to or!anisations from income ta; char!eable under the rele&ant Schedules in the 1**( 2ct> Section 2-(A1B of the 1**( 2ct pro&ides: <.!1 .a1 54emption shall be ranted A from income ta4 char eable under Schedule = in respect of the rents and profits of any property belon in to any hospital, public school or almshouse, or vested in trustees for charitable purposes, in so far as those rents and profits are applied to charitable purposes onlyP from income ta4 char eable U .i1 .ii1 .iii1 under Schedule C in respect of any interest, annuities, dividends or shares of annuities, under Schedule = in respect of any yearly interest or other annual payment, and under Schedule ' in respect of any distribution, formin part of the income of any body of persons or trust established for charitable purposes only, or which, accordin to the rules or re ulations established by statute, charter, decree, deed of trust or will, are applicable to charitable purposes only, and in so far as the same are applied to charitable purposes onlyP

.b1

.c1

from income ta4 char eable under Schedule C in respect of any interest, annuities, dividends or shares of annuities in the names of trustees applicable solely towards the repairs of any cathedral, colle e, church or chapel, or any buildin used solely for the purposes of divine worship, and in so far as the same are applied to those purposes.<

1)> Section 2-) of the 1**( 2ct pro&ides ta; e;emption to charities' <income< deri&ed from lands and trades> The term <charity< is defined in section 2-)A1B of the 1**( 2ct to mean <any body of persons or trust established for charitable purposes only< > Ta; e;emption for charities in respect of their income from lands and trades is pro&ided under section 2-)A2B of the 1**( 2ct:

2(1

<.#1 .a1

54emption shall be ranted A from income ta4 char eable under Case I .b1 of Schedule = by virtue of section !/ .#1 where the profits or ains so char eable arise out of lands, tenements or hereditaments which are owned and occupied by a charityP from income ta4 char eable under Schedule = in respect of the profits of a trade carried on by any charity, if the profits are applied solely to the purposes of the charity and either U .i1 .ii1 the trade is e4ercised in the course of the actual carryin out of a primary purpose of the charity, or the wor6 in connection with the trade is mainly carried on by beneficiaries of the charity.<

.b1

1*> 1apital ac@uisitions ta; is payable in Ireland "here a person recei&es a !ift or inheritance> #o"e&er< under the 1apital 2c@uisitions Ta; 1onsolidation 2ct 2--3 Athe 2--3 2ctB< charities are e;empt from such a ta;> Section (% of the 2--3 2ct pro&ides that a person "ho recei&es a !ift or inheritance <for public or charitable purposes< is e;empt from char!es in ta;> Section (%A2B of the 2--3 2ct pro&ides as follo"s: <.#1 % ift or an inheritance which is ta6en for public or charitable purposes is e4empt from ta4 and is not ta6en into account in computin ta4, to the e4tent that the Commissioners are satisfied that it has been, or will be, applied to purposes which, in accordance with the law of the State, are public or charitable.< 2-> 1harities are e;empt from stamp duties under the Stamp .uties 1onsolidation 2ct 1***> Section )2A1B of the 2ct pro&ides: <.!1 Stamp duty shall not be char eable on any conveyance, transfer or lease of land made, or a reed to be made, for charitable purposes in the State or Corthern Ireland to a body of persons established for charitable purposes only or to the trustees of a trust so established.< 21> ,ther e;emptions from ta; in respect of income< profits or !ains recei&ed by charities include e;emptions from capital !ains ta; under section %*- of the 1**( 2ct< from corporation ta; under section (* of the 1**( 2ct< from ta; arisin! from disposal of assets made to charities under section %11 of the 1**( 2ct< and from deposit interest retention ta; under section 2%% of the 1**( 2ct>

2(2

Ne, Eea-a"%
22> In 4e" 5ealand< charities are entitled to e;emption from income ta;> This is pro&ided in 0art 1 of the Income Ta; 2ct 2--( under "hich income from business or trade-li:e acti&ities carried out by charities is eli!ible for income ta; e;emption> 2lso< income from a charitable be@uest can be ta; e;empt under the 2--( 2ct> Knder the 2--( 2ct< ho"e&er< only re!istered charities are eli!ible for e;emption from income ta;> Sections 1W +1 to +3 of 0art 1 of the 2--( 2ct respecti&ely deal "ith <non-business income<< <business income<< and income from charitable be@uests> 23> Section 1W 3+ of the 2--( 2ct pro&ides for the types of <nonbusiness income< of charities that are entitled to income ta; e;emption> The types of e;empt income are specified in section 1W +1A1B of the 2--( 2ct< the pro&isions of "hich state: <.!1 The followin are e4empt income& .a1 .b1 an amount of income derived by a trustee in trust for charitable purposesP an amount of income derived by a society or institution established and maintained e4clusively for charitable purposes and not carried on for the private pecuniary profit of any individual.<

2+> The e;emption !ranted under section 1W +1A1B abo&e< ho"e&er< applies only to the <non-business< income of charities> Fusiness income of charities< ho"e&er< is not e;empted under this section> This is pro&ided in section 1W +1A3B of the 2--( 2ct "hich states: <.#1 This section does not apply to an amount of income derived from a business carried on by, or for, or for the benefit of a trust, society, or institution of a 6ind referred to in subsection .!1.< 25> The income ta; e;emption pro&ided in section 1W +1A1B of the 2--( 2ct is also not applicable to the income of council-controlled or!anisations> 1W +1A+B of the 2--( 2ct pro&ides as follo"s: <.)1 This section does not apply to an amount of income derived by A .a1 a council-controlled or anisation, other than a council-controlled or anisation operatin a hospital as a charitable activityP a local authority from a council-controlled or anisation, other than from a council-controlled or anisation operatin a hospital as a charitable

.b1

2(3

activity on behalf of the local authority.< 2%> 2s mentioned in the outset of this part< only re!istered charities are eli!ible for e;emption from income ta;> Section 1W +1 of the 2--( 2ct stipulates that trustees< societies< or institutions that ha&e not been re!istered under the 1harities 2ct 2--5 "ould be e;cluded from the income ta; e;emption pro&ided in section 1W +1A1B of the 2--( 2ct> Section 1W +1A2B pro&ides for this by statin!: <.#1 This section does not apply to an amount of income if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, a ta4 charity.< 2 <ta4 charity< is defined in 1W +1A5B as: <.a1 a trustee or trustees of a trust, a society, or an institution, re istered as a charitable entity under the Charities %ct #$$0P a trustee or trustee of a trust, a society, or an institution .the entity1, that .i1 has started, before ! >uly #$$/, to ta6e reasonable steps in the process of preparin an application for re isterin the entity as a charitable entity under the Charities %ct #$$0P and intends to complete the process of preparin application described in subpara raph .i1P and an

.b1

.ii1 .iii1 .c1

has not been notified by the Commissioner that the entity is not a ta4 charityP

a trustee or trustee of a trust, a society, or an institution, that is or are non-resident and carryin out its or their charitable purposes outside Cew Dealand, and which is approved as a ta4 charity by the Commissioner in circumstances where re istration as a charitable entity under the Charities %ct #$$0 is unavailable.<

2(> The 2--( 2ct also pro&ides income ta; e;emption for <business income< of charities> The different types of e;empt business income are specified in section 1W +2A1B of the 2--( 2ct the terms of "hich are as follo"s: <.!1 Income derived directly or indirectly from a business carried on by, or for, or for the benefit of a trust, society, or institution of a 6ind referred to in section C, 2!.!1 is e4empt income if U

2(+

.a1 .b1

the trust, society, or institution carries out its charitable purposes in Cew DealandP and the trustee or trustees of the trust, the society, or the institution is or are, at the time that the income is derived, a ta4 charityP and no person with some control over the business is able to direct or divert, to their own benefit or advanta e, an amount derived from the businessN.<

.c1

2)> The income ta; e;emption pro&ided in section 1W +2A1B abo&e< ho"e&er< does not apply to the income of a council-controlled or!anisation> Section 1W +2A2B of the 2--( 2ct pro&ides: <.#1 This section does not apply to income derived by U .a1 a council-controlled or anisation, other than a council-controlled or anisation operatin a hospital as a charitable activityP a local authority from a council-controlled or anisation, other than from a council-controlled or anisation operatin a hospital as a charitable activity on behalf of the local authority.<

.b1

2*> Section 1W +3 of the 2--( 2ct pro&ides that income deri&in! from charitable be@uests is also eli!ible to income ta; e;emption> Section 1W +3A1B pro&ides that income from an estate that has been left to a trust< society< or institution may be e;empted from income ta;> Section 1W +3A1B of the 2--( 2ct pro&ides that: <.!1 %n amount of income derived by a deceased9s e4ecutor or administrator is e4empt income to the e4tent to which the re8uirements in subsections .#1 and .)1 are met, havin re ard to all relevant matters includin U .a1 the terms of the deceased9s will, includin the ri hts of annuitants, le atees, and other beneficiariesP and the nature and e4tent of the debts and liabilities of, and other char es a ainst, the estate and their li6ely effect on the income and assets available for distribution to the beneficiariesP and the shares and prospective shares of the beneficiaries in the income and assets of the estate.<

.b1

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2(5

The re@uirements in subsections A2B and A3B mentioned in section 1W +3A1B abo&e are: <.#1 The first re8uirement is that the amount arises from or is attributable to assets of the estate that have been left to a trust, society, or institution of a 6ind referred to in section C, 2!.!1.< <.)1 The second re8uirement is that the amount, if derived by the trust, society, or institution or by a business carried on by, or for, or for the benefit of it, would be e4empt income under section C, 2! or C, 2#.< 3-> Section 1W +3A+B of the 2--( 2ct pro&ides that< for the purpose of !rantin! income ta; e;emption to a charitable be@uest< bein! a ta; charity is not re@uired until the end of the income year that follo"s the income year in "hich the deceased died> Section 1W +3A+B to A%B is rele&ant to the consideration of ta; e;emption for income from a charitable be@uest> These pro&isions state: <.21 %n amount of income derived by a deceased9s e4ecutor or administrator that is derived durin the period be innin on the deceased9s date of death and endin at the end of the income year that follows the income year in which the deceased died is not prevented from bein e4empt income under this section merely because the trustee or trustees of the trust, the society, or the institution is not, or are not, a ta4 charity. .01 'or the purposes of subsection .21, until the end of the income year that follows the income year in which the deceased died, the re8uirements in sections C, 2! and C, 2# for the trustee or trustees of the trust, the society, or the institution to be a ta4 charity must be disre arded when applyin those sections for the purposes of this section. ."1 This section does not apply to an amount of income derived after the end of the income year that follows the income year in which the deceased died if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, a ta4 charity.< 31> In !eneral< !ifts to charities and certain bodies are e;empt from income ta;> Section (3A2B of the 3state and 7ift .uties 2ct 1*%) specifies a number of !ifts that shall not constitute dutiable !ifts> The classes of !ifts that fall "ithin this cate!ory are @uite substantial> 3;amples include: any !ifts to the 4e" 5ealand #istoric 0laces Trust for the purposes of the #istoric 0laces 2ct 1**3H any !ift of a protected 4e" 5ealand ob6ect Aas defined in the 0rotected ,b6ects 2ct 1*(5B to the Minister of Internal 2ffairs on behalf of the 1ro"n< or to any library< museum< or other public institution for the benefit of the publicH and any !ift to the Museum of 4e" 5ealand Te 0apa Ton!are"a Foard for the purposes of the Museum of 4e" 5ealand Te 0apa Ton!are"a 2ct 1**2>

2(%

32> Section (3A1B of the 1*%) 2ct pro&ides for the !eneral e;emption from income ta; for !ifts to charities and certain bodies> Knder this section< any !ift creatin! a charitable trust< or establishin! any society or institution e;clusi&ely for charitable purposes< or any !ift in aid of any such trust< society< or institution< shall not constitute a dutiable !ift> Section (3A1B pro&ides: <.!1 %ny ift creatin a charitable trust, or establishin any society or institution e4clusively for charitable purposes, or any ift in aid of any such trust, society, or institution, shall not constitute a dutiable ift if, at the time that the ift is made, the society, institution, or trustees of the trust is or are a ta4 charity, as that term is defined under section C, 2!.01 of the Income Ta4 %ct #$$3.<

S $#-a"%
33> 0art 1- of the Income Ta; 2ct 2--(< at section 51)A2B< pro&ides that some of the income of charitable trusts is to be e;empt from char!es to income ta;> In sections 52+ to 53( of the 2--( 2ct< pro&isions are made for e;emption for charitable trusts of their different types of income from char!es to income ta;> <Charitable trust< is defined in section 51* of the 2--( 2ct to mean a trust established for charitable purposes only> 3+> Section 52+ of the 2--( 2ct pro&ides for e;emption from ta; of profits of <charitable trades< carried out by charitable trusts> Section 52+A1B of the 2--( 2ct pro&ides that the income mentioned in section 52+A2B of the 2--( 2ct is not to be ta:en into account in calculatin! the total income of a charitable trust if conditions 2 and F specified in section 52+A3B and A+B are met> In section 52+A2B< it is pro&ided that the income mentioned is not to be ta:en into account in calculatin! total income of a charitable trust> Section 52+A2B states: <.a1 .b1 the profits of a trade carried on by a charitable trust, amounts treated as ad;ustment income of a charitable trust under section ##/ of ITT:I% #$$0 !$$ in respect of a trade carried on by the trust, and post-cessation receipts arisin from a trade carried on by a charitable trust which are received by the trustees of the trust or to which they are entitled.<

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35> Section 52+A3B and A+B of the 2--( 2ct defines conditions 2 and F in the follo"in! terms: <.)1
1--

Condition % is U

Knder section 1-1( of the Income Ta; 2ct 2--(< <ITT:I% #$$0< means the Income Ta; ATradin! and ,ther IncomeB 2ct 2--5 Ac>5B>

2((

.a1

in the case of the profits of a trade, that the profits are profits of a ta4 year in relation to which the trade is a charitable trade, in the case of an amount treated as ad;ustment income, that the amount arises in a ta4 year in relation to which the trade is a charitable trade, and in the case of a post-cessation receipt, that the trade was a charitable trade in relation to the ta4 year in which the cessation occurred.

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.21 Condition B is that the profits are, or the amount or postcessation receipt is, .as the case may be1 applied to the purposes of the charitable trust only. .01 Sections #)#.!1 and .#1, #)0 and #)" of ITT:I% #$$0 .when ad;ustment income is treated as arisin 1 apply for the purposes of subsection .)1 as they apply for the purposes of Chapter !3 of Part # of that %ct.< 3%> The term <charitable trade< mentioned abo&e is defined in section 525 of the 2--( 2ct to mean a trade carried on by a charitable trust in relation to a ta; year if throu!hout the basis period for the ta; year the trade is e;ercised in the course of carryin! out a primary purpose of the charitable trust< or the "or: in connection "ith the trade is mainly carried out by beneficiaries of the charitable trust> Section 525A2B of the 2--( 2ct specifies that if a trade is only partly carryin! out a primary purpose of the charitable trust and partly other"ise< each part "ill then be treated as a separate trade> 8i:e"ise< under section 525A3B of the 2--( 2ct< if the "or: in connection "ith a trade is carried out partly but not mainly by beneficiaries< the part in connection "ith "hich "or: is carried out by beneficiaries and the other part "ill then be treated as separate trades> 3(> Section 52% of the 2--( 2ct pro&ides e;emption for profits of <small scale trades< carried out by charitable trusts> Knder section 52%A1B of the 2--( 2ct< the income specified in section 52%A2B of the 2--( 2ct is not to be ta:en into account in calculatin! the total income of a charitable trust if conditions 2 and F as pro&ided in section 52%A+B and A5B of the 2--( 2ct are met> The income specified in section 52%A2B of the 2--( 2ct is as follo"s: <.#1 .a1 .b1 The income referred to in subsection .!1 is the profits of a trade carried on by a charitable trust, amounts treated as ad;ustment income of a charitable trust under section ##/ of ITT:I% #$$0 in respect of a trade carried on by the trust, and post-cessation receipts arisin from a trade carried on by a charitable trust which are received by the trustees of

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2()

the trust or to which they are entitled.< 3)> 1onditions 2 and F mentioned in section 52%A1B of the 2--( 2ct are pro&ided for in section 52%A+B and A5B of the 2--( 2ct in terms as follo"s: <.21 .a1 Condition % is U in the case of the profits of a trade, that the profits are profits of a ta4 year in relation to which the condition specified in section 0#/ .condition as to tradin and miscellaneous incomin resources1 is met, in the case of an amount treated as ad;ustment income, that the amount arises in such a ta4 year, and in the case of a post-cessation receipt, that it is received in such a ta4 year.

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.01 Condition B is that the profits are, or the amount or postcessation receipt is, .as the case may be1 applied to the purposes of the charitable trust only.< 3*> 0rofits from <fund-raisin events< of a charitable trust are also e;empt from ta; under section 52* of the 2--( 2ct> Section 52*A1B of the 2--( 2ct pro&ides that the profits of a trade carried on by a charitable trust are not ta:en into account in calculatin! its total income so far as the profits arise from a Malue 2dded Ta; AM2TB-e;empt e&ent> #o"e&er< for section 52*A1B to apply< the profits ha&e to be applied to the purposes of the charitable trust only> Section 52*A3B of the 2--( 2ct defines an e&ent to be a M2T-e;empt e&ent if the supply of !oods and ser&ices by the charitable trust in connection "ith the e&ent "ould be e;empt from M2T under 7roup 12 of Schedule * to the Malue 2dded Ta; 2ct 1**+> Fund-raisin! e&ents of charities and other @ualifyin! bodies "ould fall "ithin this cate!ory> +-> 0rofits from <lotteries< are e;empt from ta; under section 53- of the 2--( 2ct> Section 53-A1B of the 2--( 2ct pro&ides that the profits accruin! to a charitable trust from a lottery are not to be ta:en into account in calculatin! its total income if conditions 2 and F are met> 1onditions 2 and F are pro&ided in section 53-A2B and A3B> They are as follo"s: <.#1 .a1 Condition % is that the lottery is an e4empt lottery within the meanin of the +amblin %ct #$$0 by virtue of Part ! or 2 of Schedule !! to that %ct, the lottery is promoted in accordance with a lottery operatin licence within the meanin of Part 0 of that %ct, or the lottery is promoted and conducted in accordance with

.ab1

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2(*

%rticle !)) or !)0 of the Bettin , +amin , Lotteries and %musements .Corthern Ireland1 :rder !*/0 .S.I. !*/0J!#$2 .C.I. !!11.< +1> <Property income< recei&ed by charitable trusts is e;empt from ta;ation under section 531 of the 2--( 2ct> Section 531A1B of the 2--( 2ct pro&ides that tradin! income char!eable to income ta; under 0art 2 of ITT,I2 2--5 as a result of section 2%1 of that 2ct< is not to be ta:en into account in calculatin! the total income of a charitable trust if the income arises in respect of rents or other receipts from an estate< interest or ri!ht in or o&er landH and the estate< interest or ri!ht is &ested in any person in trust for a charitable trust or for charitable purposes> Similarly< section 531A2B of the 2--( 2ct pro&ides that property income char!eable to income ta; under 0art 3 of ITT,I2 2--5 is not ta:en into account in calculatin! total income if the income arises in respect of an estate< interest or ri!ht in or o&er land< and the estate< interest or ri!ht is &ested in any person in trust for a charitable trust or for charitable purposes> Section 531A3B of the 2--( 2ct pro&ides that section 531A1B to A22B of the 2--( 2ct applies so far as the income is applied to charitable purposes only> +2> <Savin s and investment income< of charitable trusts is e;empt from ta;ation under section 532 of the 2--( 2ct> Section 532A1B of the 2--( 2ct pro&ides that the income mentioned in subsection A2B "ould not be ta:en into account in calculatin! the total income of a charitable trust if it is an income of a charitable trust< or if it is re@uired< under an 2ct< court 6ud!ment< charter< trust deed or "ill< to be applied for charitable purposes only> Section 532A2B of the 2--( 2ct pro&ides: <.#1 .a1 .b1 .c1 .d1 .e1 .f1 The income referred to in subsection .!1 isU interest, a dividend or other distribution of a S- resident company, a dividend of a non-S- resident company, an annuity payment under a purchased life annuity, profits on the disposal of deeply discounted securities, or income treated for the purposes of Chapter !$ of Part 2 of ITT:I% #$$0 .distributions from unauthorised unit trusts1 as received by a unit holder from a scheme to which section 023 of that %ct applies .unauthorised unit trust schemes1.<

Section 532A+B of the 2--( 2ct< ho"e&er< pro&ides that subsection A1B mentioned abo&e applies so far as the income is applied to charitable purposes only> +3> Section 533A1B of the 2--( 2ct pro&ides that <public revenue

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dividends on securities< "hich are in the name of trustees are not to be ta:en into account in calculatin! the total income of a charitable trust if the di&idends are applicable and applied only for the repair of a cathedral< colle!e< church or chapel< or a buildin! used only for the purposes of di&ine "orship> Section 533A2B defines <public revenue dividends< to mean income from securities "hich is payable out of the public re&enue< or income from securities issued by or on behalf of a !o&ernment or a public or local authority in a country outside the Knited $in!dom> ++> Section 53+ of the 2--( 2ct pro&ides ta; e;emption for <transactions in deposits<> Section 53+A1B of the 2--( 2ct pro&ides that profits or !ains arisin! to a charitable trust from the disposal of e;empt deposit ri!hts are not to be ta:en into account in calculatin! its total income> <54empt deposit ri hts< are defined by section 53+A+B of the 2--( 2ct to mean: <.a1 a ri ht to receive, with or without interest, a principal amount stated in, or determined in accordance with, the current terms of issue of an eli ible debt security, where in accordance with those terms the issue of uncertificated units of the eli ible debt security corresponds to the issue of a certificate of deposit, a ri ht to receive the principal amount stated in a certificate of deposit, with or without interest, and an uncertificated ri ht to receive a principal amount, with or without interest, as a result of a deposit of money.<

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#o"e&er< for section 53+A1B to apply< the profits or !ains ha&e to be applied to charitable purposes only> +5> Section 535 of the 2--( 2ct pro&ides e;emption for <offshore income ains<> Section 535A1B of the 2--( 2ct pro&ides that offshore income !ains accruin! to a charitable trust are not to be ta:en into account in calculatin! its total income> #o"e&er< for section 535A1B to apply< the !ain is applicable and applied to charitable purposes only> +%> Section 53% of the 2--( 2ct pro&ides e;emption for certain <miscellaneous income<> Section 53%A1B of the 2--( 2ct pro&ides that the income mentioned in subsection A3B is not to be ta:en into account in calculatin! the total income of charitable trusts if Z <.a1 .b1 it is income of a charitable trust, or it is re8uired, under an %ct, court ;ud ment, charter, trust deed or will, to be applied to charitable purposes only.<

The income mentioned in section 53%A3B of the 2--( 2ct is as follo"s: <.a1 royalties and other income from intellectual property that do not fall within Chapter # of Part # of ITT:I% #$$0

2)1

.receipts of a trade etc1, .b1 income derived from a relevant telecommunication ri ht that is not income fallin within Chapter # of Part # of ITT:I% #$$0 .receipts of a trade etc1, annual payments char ed to ta4 under Chapter 3 of Part 0 of ITT:I% #$$0, and relevant forei n distributions.<

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Section 53%A2B of the 2--( 2ct pro&ides that section 53%A1B applies if the income is applied to charitable purposes only> +(> Section 53( of the 2--( 2ct pro&ides e;emption for income from <estates in administration<> Section 53(A1B of the 2--( 2ct pro&ides that "here a person liable for income ta; on estate income is a trustee of a charitable trust< the estate income "ill not be ta:en into account in calculatin! the total income of the charitable trust> #o"e&er< section 53(A1B of the 2--( 2ct applies if the estate income is applied to the purposes of the charitable trust only>

S'"*a.$re
+)> In Sin!apore< not all charitable or!anisations are eli!ible for income ta; e;emption> Knder section 13A1BANmB of the Income Ta; 2ct A1ap 13+B< only re!istered charities or charities e;empt from re!istration can be e;empt from income ta;> +*> Section 13A1BANmB of the Income Ta; 2ct A1ap 13+B pro&ides that <the income of any charity re istered or e4empt from re istration under the Charities %ct .Cap. )31< shall be e;empt from ta;> 5-> Thus< to be eli!ible for income ta; e;emption< an or!anisation has to first re!ister itself as a <charity< "hich is defined in section 2A1B of the 1harities 2ct A1ap 3(B as: <F%Gny institution, corporate or not, which is established for charitable purposes and is sub;ect to the control of the (i h Court in e4ercise of the Court9s ;urisdiction with respect to charities<. 51> The term <charitable purposes< mentioned abo&e is defined in section 2A1B of the 1harities 2ct A1ap 3(B to mean <purposes which are e4clusively charitable accordin to the law of Sin apore< > Knder this definition< the purposes of an or!anisation claimin! e;emption from income ta; on the !round of it bein! a charitable or!anisation ha&e to be <e4clusively< charitable under the la" of Sin!apore> 2ny <non-charitable purpose<< it seems< "ould ha&e frustrated the claim>

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52> 2s noted abo&e< charities in Sin!apore are entitled to e;emption from income ta; only if they ha&e been re!istered> 9e!istration of charities is pro&ided in section 5A%BAaB of the 1harities 2ct A1ap 3(B> Knder this section< the charity trustees of a charity "hich has neither been re!istered nor e;cepted from re!istration ha&e to< "ithin three months after the establishment of the charity or such lon!er period as the 1ommissioner of 1harities may allo"< apply for the charity to be re!istered> 53> 1harities in Sin!apore are also entitled to e;emption from property ta;> In section %A%BAcB of the 0roperty Ta; 2ct A1ap 25+B< it is pro&ided that all buildin!s or parts of buildin!s used e;clusi&ely for charitable purposes shall be e;empted from payment of property ta;>

S$&#( Afr' a
5+> In South 2frica< a <public benefit or anisation< A0F,B is eli!ible to e;emption from normal ta; 1-1 under section 1- of the Income Ta; 2ct 1*%2 Athe 1*%2 2ctB> 2 number of conditions< ho"e&er< ha&e to be fulfilled before an or!anisation or an association of persons can become a 0F,> These conditions are pro&ided in section 3- of the 1*%2 2ct> They "ill be considered later in this section> 55> Knder section 3-A1B of the 1*%2 2ct< a 0F, is defined to mean an or!anisation: AaB "hich is a company formed under section 21 of the 1ompanies 2ct< or a trust or an association of persons that has been incorporated< formed or established in South 2fricaH or any branch "ithin South 2frica of any company< association or trust incorporated< formed or established in any country other than South 2frica that is e;empt from ta; on income in that other countryH of "hich the sole or principal ob6ect of the or!anisation is the carryin! on one or more <public benefit activities< "here: <.i1 all such activities are carried on in a nonprofit manner and with an altruistic or philanthropic intentP .ii1 no such activity is intended to directly or indirectly promote the economic self - interest of any fiduciary or employee of the or anisation, otherwise than by way of reasonable remuneration payable to that fiduciary or employee.< 5%>
1-1

AbB

The term <public benefit activity< is defined in section 3-A1BAaB
Section 5A1B of the Income Ta; 2ct< 1*%2 defines <normal ta4< to mean <income ta4< for the purposes of the 1*%2 2ct>

2)3

and AbB of the 1*%2 2ct to mean: <.a1 .b1 any activity listed in Part I of the Cinth ScheduleP and any other activity determined by the Einister from time to time by notice in the +a@ette to be of a benevolent nature, havin re ard to the needs, interests and well bein of the eneral public.<

5(> 3;emptions from normal ta; are pro&ided in section 1-A1B of the 1*%2 2ct> .ifferent situations under "hich ta; e;emption is !ranted are pro&ided in the section> Section 1-A1BAc4B of the 1*%2 2ct< ho"e&er< specifically pro&ides for e;emption from normal ta; for a 0F,> It is as follo"s: <.!1 .cC1 There shall be e4empt from normal ta4 N the receipts and accruals of any public benefit or anisation approved by the Commissioner !$# in terms of section )$ .)1, to the e4tent that the receipts and accruals are derived .i1 .ii1 otherwise than from any business underta6in tradin activityP or or

from any business underta6in or tradin activity .aa1 if the underta6in or activity .%1 is inte ral and directly related to the sole or principal ob;ect of that public benefit or anisation as contemplated in para raph .b1 of the definition of 9public benefit or anisation9 in section )$P is carried out or conducted on a basis substantially the whole of which is directed towards the recovery of costP and does not result in unfair competition in relation to ta4able entitiesP

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if the underta6in or activity is of an occasional nature and underta6en substantially with assistance on a voluntary basis without compensationP

1-2

Section 1 of the 1*%2 2ct defines <Commissioner< to mean the 1ommissioner for the South 2frican 9e&enue Ser&ice>

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if the underta6in or activity is approved by the Einister by notice in the +a@ette, havin re ard to.%1 .B1 the scope and benevolent nature of the underta6in or activityP the direct connection and interrelationship of the underta6in or activity with the sole or principal ob;ect of the public benefit or anisationP the profitability of the underta6in or activityP and the level of economic distortion that may be caused by the ta4 e4empt status of the public benefit or anisation carryin out the underta6in or activityP or

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other than an underta6in or activity in respect of which item .aa1, .bb1 or .cc1 applies and do not e4ceed the reater of .i1 0 per cent of the total receipts and accruals of that public benefit or anisation durin the relevant year of assessmentP or R!0$ $$$.<

.ii1

5)> 2s noted abo&e< under section 1-A1BAc4B< e;emption from normal ta; is only !ranted if the receipts and accruals of the public benefit or!anisation are appro&ed by the 1ommissioner in terms of section 3- A3B of the 1*%2 2ct> 2 number of conditions relatin! to the mana!ement and operation of the 0F, are pro&ided in section 3-A3B> Section 3-A3BAbBAiB and AiiB of the 1*%2 2ct has the effect of pre&entin! the mana!ement of the 0F, from bein! controlled by a sin!le person< and its funds from bein! misused> Section 3-A3BAbBAiB and AiiB pro&ides as follo"s: <.i1 re8uired to have at least three persons, who are not connected persons in relation to each other, to accept the fiduciary responsibility of such or anisation and no sin le person directly or indirectly controls the decision ma6in powers relatin to that or anisation& Provided that the provisions of this subpara raph shall not apply in respect of any trust established in terms of a will of any person who died on or before )! =ecember #$$)P

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.ii1 prohibited from directly or indirectly distributin any of its funds to any person .otherwise than in the course of underta6in any public benefit activity1 and is re8uired to utilise its funds solely for the ob;ect for which it has been established<.

2)%

A""e< 8

T(e -a, '" $#(er 4&r')%' #'$") $" #(e 0-.r=) %$ #r'"e
1> While the cy-pr?s doctrine as applied in #on! $on! is deri&ed from and follo"s the common la"< &arious o&erseas 6urisdictions ha&e broadened the scope of the doctrine and codified it in le!islation> In 1hapter 11< "e closely e;amined the statutory model in 3n!land and Wales> 2 number of further o&erseas models are discussed belo" as e;amples of statutory cy-pr?s re!imes>

A&)#ra-'a
New South 0ale 2> In 4e" South Wales< section 11 of the 1haritable Trusts 2ct 1**3 Athe 4SW 1**3 2ctB pro&ides that< in appropriate circumstances< a trustee is under a duty to secure the application of trust property cy-pr?s> Section 11 states: <% charitable trust places a trustee under a duty, if the case permits and re8uires the trust property or any part of it to be applied cy pres, to secure its effective use for charitable purposes by ta6in steps to enable it to be so applied.< 3> Section * of the 4SW 1**3 2ct< ho"e&er< e;tends the occasions under "hich trust property can be applied cy-pr?s> Section *A1B of the 4SW 1**3 2ct pro&ides that the cy-pr?s doctrine may also apply "hen the ori!inal purposes of the charitable trust ha&e <ceased to provide a suitable and effective method of usin the trust property<. It is important to note that the section does not pro&ide for all the occasions under "hich trust property may be applied cy-pr?s> It merely e;tends these occasions to co&er those specified in section *A1B of the 4SW 1**3 2ct< "hich states: <.!1 The circumstances in which the ori inal purposes of a charitable trust can be altered to allow the trust property or any part of it to be applied cy pres include circumstances in which the ori inal purposes, wholly or in part, have since they were laid down ceased to provide a suitable and effective method of usin the trust property, havin re ard to the spirit of the trust. References in this section to the ori inal purposes of a charitable trust are to be construed, if the application of the trust property or any part of it has been altered or re ulated by a scheme or otherwise, as references to the purposes for which the trust property are for the time

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bein applicable.< +> 2s mentioned at the be!innin! of 1hapter 11< for the cy-pr?s doctrine to apply< the donor must ha&e <a eneral charitable intention< "hen the trust "as first created> If this cannot be found in the settlement or the "ill< the court "ould ha&e no po"er to allo" the trust property to be applied for another purpose "hich is similar to the purpose e;pressly pro&ided in the trust> Section 1- of the 4SW 1**3 2ct pro&ides that this !eneral charitable intention of the donor is re@uired for the cy-pr?s doctrine to apply: <.!1 This Part does not affect the re8uirement that trust property can not be applied cy pres unless it is iven with a eneral charitable intention. (owever, a eneral charitable intention is to be presumed unless there is evidence to the contrary in the instrument establishin the charitable trust.<

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Iueen land 5> In Wueensland< the situations in "hich the cy-pr?s doctrine is applicable to trust property are pro&ided in section 1-5 of the Trusts 2ct 1*(3> Section 1-5 pro&ides: <.!1 Sub;ect to subsection .#1, the circumstances in which the ori inal purposes of a charitable trust can be altered to allow the property iven or part of it to be applied cy pres shall be as follows U .a1 where the ori inal purposes, in whole or in part U .i1 have been as far as may be fulfilledP or .ii1 can not be carried outP or .iii1 can not be carried out accordin to the directions iven and to the spirit of the trustP where the ori inal purposes provide a use for part only of the property available by virtue of the trustP where the property available by virtue of the trust and other property applicable for similar purposes can be more effectively used in con;unction, and to that end can suitably, re ard bein had to the spirit of the trust, be made applicable to common purposesP where the ori inal purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased to be suitable,

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re ard bein had to the spirit of the trust, or to be practical in administerin the trustP .e1 where the ori inal purposes, in whole or in part, have, since they were laid down U .i1 been ade8uately provided for by other meansP or .ii1 ceased, as bein useless or harmful to the community or for other reasons, to be in law charitableP or .iii1 ceased in any other way to provide a suitable and effective method of usin the property available by virtue of the trust, re ard bein had to the spirit of the trust.

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Subsection .!1 shall not affect the conditions which must be satisfied in order that property iven for charitable purposes may be applied cy pres, e4cept in so far as those conditions re8uire a failure of the ori inal purposes. References in subsections .!1 and .#1 to the ori inal purposes of a trust shall be construed, where the application of the property iven has been altered or re ulated by a scheme or otherwise, as referrin to the purposes for which the property is for the time bein applicable.<

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South 3u tralia %> In South 2ustralia< section %*F of the Trustee 2ct 1*3% Athe 1*3% 2ctB pro&ides that the purposes for applyin! trust property may be altered by a trust &ariation scheme> The section lists out the circumstances under "hich the purposes for applyin! the trust property may be altered> Section %*F states: <.!1 The purposes for which property is re8uired or permitted to be applied in pursuance of a charitable trust may be altered by a scheme .a trust variation scheme1 approved under this section in any of the followin circumstances& .a1 where the ori inal purposes, in whole or in part U .i1 have been as far as possible fulfilledP or .ii1 cannot be carried out, or not accordin to the directions iven and to the spirit of the iftP or where the ori inal purposes provide a use for part only of the trust propertyP or where the trust property could be more effectively

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used if combined with other property applicable for similar purposes and administered ;ointly with that propertyP or .d1 where it is not reasonably practicable havin re ard to U .i1 the value of the trust propertyP or .ii1 chan es in circumstances that have ta6en place since the constitution of the trustP or .iii1 any other relevant factor, to apply the trust property in accordance with the ori inal purposesP or where the ori inal purposes, in whole or in part U .i1 have been ade8uately provided for by other meansP or .ii1 have ceased to be charitable purposesP or .iii1 have ceased to provide a suitable and effective method of usin the trust property.<

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(> The term <ori inal purposes< referred to in section %*FA1B abo&e is defined in section %*FA2B of the 1*3% 2ct to include the situation "here the purposes for "hich the trust property is to be applied ha&e been altered or re!ulated by a scheme> )> Knder section %*FA3B of the 1*3% 2ct< a trust &ariation scheme may be appro&ed by the Supreme 1ourt or the 2ttorney 7eneral< if the &alue of the trust property does not e;ceed 2K.3--<---< or another limit prescribed by re!ulation> The Supreme 1ourt or the 2ttorney 7eneral< in their capacity as the <relevant authority< in considerin! trustees' applications for trust &ariation schemes ha&e to ta:e into account the follo"in! factors listed in section %*FA%B of the 1*3% 2ct:
<."1

If the relevant authority is satisfied, on application under this section, that the variation of the terms of a trust proposed in a trust variation scheme U .a1 .b1 accords, as far as reasonably practicable, with the spirit of the trustP and is ;ustified in the circumstances of the particular case,

the relevant authority may approve the trust variation scheme and the approved scheme prevails over inconsistent provisions of a relevant instrument or declaration of trust.<

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Ta mania *> In Tasmania< the &ariation of the purposes of a charitable trust is pro&ided for in section 5A2B and A3B of the Mariation of Trust 2ct 1**+ Athe 1**+ 2ctB> These pro&isions state: <.#1 If it has become impossible, impracticable or ine4pedient to carry out the ori inal purposes of a trust for charitable purposes in whole or in part, an application may be made for a variation of those purposes by a scheme approved under this Part. ,ithout limitin the enerality of subsection .#1, an application for a variation of trust may be made in the followin circumstances& .a1 if the ori inal purposes, in whole or in part A .i1 have been as far as possible fulfilledP or .ii1 cannot be carried out, either at all or accordin to the directions iven or to the spirit of the iftP if the ori inal purposes provide a use for a part only of the trust propertyP if the trust property could be used more effectively if combined with other property applicable for similar purposes and administered ;ointly with that propertyP if it is not reasonably practicable to apply the trust property in accordance with the ori inal purposes havin re ard to A .i1 the value of the trust propertyP or .ii1 chan es in circumstancesP or .iii1 any other relevant factorP if the ori inal purposes, in whole or in part A .i1 have been ade8uately provided for by other meansP or .ii1 have ceased to be charitable purposesP or .iii1 have ceased to provide a suitable and effective method of usin the trust property.<

.)1

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1-> Section 5A+B of the 1**+ 2ct pro&ides that "here a !eneral charitable intention is re@uired as a condition for the &ariation of the purposes of a charitable trust< such a re@uirement "ill not be affected by the terms of the section>

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Jictoria 11> In Mictoria< the occasions for applyin! trust property cy-pr?s are pro&ided in section 2 of 1harities 2ct 1*() Athe 1*() 2ctB< "hich states: <.!1 Sub;ect to sub-section .#1, the circumstances in which the ori inal purposes of a charitable ift can be altered to allow the property iven or part of it to be applied cy pr?s shall be as follows U .a1 where the ori inal purposes, in whole or in part U .i1 have been as far as may be fulfilledP or .ii1 cannot be carried out, or not accordin to the directions iven and to the spirit of the iftP or where the ori inal purposes provide a use for part only of the property available by virtue of the iftP or where the property available by virtue of the ift and other property applicable for similar purposes can be more effectively used in con;unction, and to that end can suitably, re ard bein had to the spirit of the ift, be made applicable to common purposesP or where the ori inal purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased to be suitable, re ard bein had to the spirit of the ift, or to be practical in administerin the iftP or where the ori inal purposes, in whole or in part, have, since they were laid down U .i1 been ade8uately provided for by other meansP or .ii1 ceased, as bein useless or harmful to the community or for other reasons, to be in law charitableP or .iii1 ceased in any other way to provide a suitable and effective method of usin the property available by virtue of the ift, re ard bein had to the spirit of the ift.

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Sub-section .!1 shall not affect the conditions which must be satisfied in order that property iven for charitable purposes may be applied cy pr?s, e4cept in so far as those conditions re8uire a failure of the ori inal purposes.

2*2

.)1

References in this section to the ori inal purposes of a ift shall be construed, where the application of the property iven has been altered or re ulated by a scheme, by or under an %ct or otherwise, as referrin to the purposes for which the property is for the time bein applicable.<

12> In some cases< the identity of donors mi!ht be un:no"n> This occurs "hen money is recei&ed from street collections> 2lso< donors mi!ht ha&e disclaimed the ri!ht to ha&e the property or the remainin! portion of the property re&erted bac: to them> Section 3 of the 1*() 2ct pro&ides for these circumstances as follo"s: <.!1 Property iven for specific charitable purposes which fail shall be applicable cy pr?s as if iven with a eneral charitable intention, where it has been iven U .a1 by a donor who, after such advertisements and in8uiries as are reasonable, cannot be identified or cannot be foundP or by a donor who has e4ecuted a written disclaimer of his ri ht to have the property returned.

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'or the purposes of this section property shall be conclusively presumed .without any advertisement or in8uiry1 to have been iven by donors who cannot be identified, in so far as it consists U .a1 of the proceeds of cash collections made by means of collectin bo4es or by other means not adapted for distin uishin one ift from anotherP or of the proceeds of any lottery, competition, entertainment, sale or similar money-raisin activity, after allowin for property iven to provide pri@es or articles for sale or otherwise to enable the activity to be underta6en.

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The court may by order direct that property not fallin within sub-section .#1 shall for the purposes of this section be treated .without any advertisement or in8uiry1 as havin been iven by donors who cannot be identified, where it appears to the court either U .a1 that it would be unreasonable, havin re ard to the amounts li6ely to be returned to the donors, to incur e4pense with a view to returnin the propertyP or

2*3

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that it would be unreasonable, havin re ard to the nature, circumstances and amount of the ifts, and to the lapse of time since the ifts were made, for the donors to e4pect the property to be returned.

.21

,here property is applied cy pr?s by virtue of this section, the donor shall be deemed to have parted with all his interest at the time when the ift was madeP but where property is so applied as havin been iven by donors who cannot be identified or cannot be found, and is not so applied by virtue of sub-section .#1 or .)1 U .a1 .b1 the scheme shall specify the total amount of that propertyP and the donor of any part of that amount shall be entitled, if he ma6es a claim not later than twelve months after the date on which the scheme is made, to recover from the charity for which the property is applied a sum e8ual to that part, less any e4penses properly incurred by the charity trustees after that date in conne4ion with claims relatin to his iftP and the scheme may include directions as to the provision to be made for meetin any such claim.<

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13> Section 3A5B of the 1*() 2ct pro&ides that a charitable purpose shall be deemed to <fail< "here <any difficulty in applyin property to those purposes ma6es that property or the part not applicable cy pr?s available to be returned to the donors.< 1+> Section 3A%B of the 1*() 2ct e;tends the definitions of <a donor< and <property< beyond that of the ori!inal donor and the property ori!inally !i&en to the trust> Section 3A%B pro&ides that <N e4cept in so far as the conte4t otherwise re8uires, references to a donor include persons claimin throu h or under the ori inal donor, and references to property iven include the property for the time bein representin the property ori inally iven or property derived from it.< 0e tern 3u tralia 15> In Western 2ustralia< property held in trust for a charitable purpose may be disposed of for other charitable purposes in the situations listed under section ( of the 1haritable Trusts 2ct 1*%2 Athe 1*%2 2ctB> Section ( pro&ides:

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<.!1

Sub;ect to the provisions of subsection .)1, where any property or income is iven or held upon trust, or is to be applied, for any charitable purpose, and U .a1 .b1 .c1 .d1 it is impossible, impracticable or ine4pedient to carry out that purposeP or the amount available is inade8uate to carry out that purposeP or that purpose has been effected alreadyP or that purpose is ille al or useless or uncertain,

then .whether or not there is any eneral charitable intention1 the property and income, or any part or residue thereof, or the proceeds of sale thereof, shall be disposed of for some other charitable purpose, or a combination of such purposes, in accordance with a scheme approved under this Part. .#1 Sub;ect to the provisions of subsection .)1, where any property or income is iven or held upon trust, or is to be applied, for any charitable purpose, and the property or income that has accrued or will accrue is more than is necessary for the purpose, then .whether or not there is any eneral charitable intention1 any e4cess property or income or proceeds of sale may be disposed of for some other charitable purpose, or a combination of such purposes, in accordance with a scheme approved under this Part. <

1%> 2s noted earlier< the cy-pr?s doctrine at common la" Aand< for e;ample< under the statutory re!ime in 4e" South Wales discussed abo&eB re@uires there to ha&e been a < eneral charitable intention< on the part of the donor "hen the trust "as first created before the doctrine may apply> #o"e&er< section ( of the 1*%2 2ct does not re@uire such a !eneral charitable intention> 1(> Further< "here the trust property does not fall "ithin any of the occasions set out in section (A1B and A2B of the 1*%2 2ct< the property can still be disposed of for a charitable purpose other than that set out "hen the trust "as first created> Section (F of the 1*%2 2ct pro&ides that this is permissible if the charitable purpose of the trust could be more effecti&ely carried out by combinin! the property and income "ith other property and income !i&en or held on trust< or to be applied< for a similar purpose> Section (F states:

2*5

<.!1

,here U .a1 .b1 any property or income is iven or held upon trust, or is to be applied, for any charitable purposeP and the charitable purpose could be more effectively carried out if the property and income were combined with other property and income iven or held on trust, or to be applied, for a similar purpose,

then the property and income may be combined, and ;ointly administered and applied, with that other property and income in accordance with a scheme approved under this Part. <

Ire-a"%
1)> In Ireland< under the 1harities 2ct 1*%1 Athe 1*%1 2ctB< the ori!inal purposes of a charitable !ift may be altered so as to enable the !ift to be applied cy-pr?s> In appropriate circumstances< trustees in a charitable trust are under a le!al duty to ensure that the trust property is to be applied cy-pr?s. This is pro&ided in section +(A+B of the 1*%1 2ct under "hich a charitable trustee is re@uired to secure the effecti&e use of the charitable property> In appropriate circumstances< trustees ha&e to ta:e steps to ensure that the property or some part of it is to be applied cy-pr?s> Section +(A+B pro&ides as follo"s: <.21 It is hereby declared that a trust for charitable purposes places a trustee under a duty, where, the case permits and re8uires the property or some part of it to be applied cy-pr?s, to secure its effective use for charity by ta6in steps to enable it to be so applied.< 1*> The situations in the 1*%1 2ct under "hich the ori!inal purposes of a charitable !ift may be altered are not confined to the limited circumstances "here the ori!inal purposes ha&e been fulfilled< or cannot be carried out> 9ather< under section +(A1B of the 1*%1 2ct< other circumstances such as "here only part of the !ift has been used to fulfill the ori!inal purposes< or the !ift can be better used in con6unction "ith other property< for e;ample< are also pro&ided to allo" the ori!inal purposes to be altered for the purpose of applyin! cy-pr?s to the charitable property> The circumstances< in their totality< for alterin! the ori!inal purposes of a charitable !ift are pro&ided in section +(A1B and A2B of the 1*%1 2ct< the terms of "hich are as follo": <.!1 Sub;ect to subsection .#1, the circumstances in which the ori inal purposes of a charitable ift may be altered to allow the property iven or part of it to be applied cy-pr?s shall be as follow A

2*%

.a1

where the ori inal purposes, in whole or in part A .i1 have been as far as may be fulfilledP or .ii1 cannot be carried out, or cannot be carried out accordin to the directions iven and to the spirit of the iftP or where the ori inal purposes provide a use for part only of the property available by virtue of the iftP or where the property available by virtue of the ift and other property applicable for similar purposes can be more effectively used in con;unction, and to that end can suitably, re ard bein had to the spirit of the ift, be made applicable to common purposesP or where the ori inal purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased, either to be suitable, re ard bein had to the spirit of the ift, or to be practical in administerin the iftP or where the ori inal purposes, in whole or in part, have, since they were laid down A .i1 been ade8uately provided for by other meansP or .ii1 ceased, as bein useless or harmful to the community or for other reasons, to be in law charitableP or .iii1 ceased in any other way to provide a suitable and effective method of usin the property available by virtue of the ift, re ard bein had to the spirit of the ift.

.b1 .c1

.d1

.e1

.#1 Subsection .!1 shall not affect the conditions which must be satisfied in order that property iven for charitable purposes may be applied cy-pr?s, e4cept in so far as those conditions re8uire a failure of the ori inal purposes.< 2-> Where property has been !i&en for a <non-charitable purpose< 1-3 "hich fails< section +)A1B of the 1*%1 2ct pro&ides that it can still be deemed as !i&en for a <charitable purpose< and the property can thus be applied cypr?s> This is permissible only if either of the conditions in subsection A1BAaB or A1BAbB has been satisfied> Section +)A1B of the 1*%1 2ct pro&ides as follo"s: <.!1
1-3

Property

iven for specific charitable or non-charitable

Section +) of the 1*%1 2ct X /^ A5B 'or the purposes of this section, purposes shall be deemed to fail where any difficulty in applyin property to those purposes ma6es that property, or, in the case of property to be applied for charitable purposes, the part not applicable cy-pr[s under section 23, available to be returned to the donors. N/

2*(

purposes which fail shall be applicable cy-pr?s by a Court of competent ;urisdiction as if iven for charitable purposes enerally, where it belon s U .a1 .b1 to a donor who, after such advertisements and in8uiries as are reasonable, cannot be identified or cannot be foundP or to a donor who has e4ecuted a written disclaimer of his ri ht to have the property returned,

but in applyin cy-pr?s property iven for specific non-charitable purposes re ard shall be had to the wishes of the trustees or other persons in char e of the property.< 21> Section +)A2B of the 1*%1 2ct pro&ides that< for the purposes of the section< property shall be conclusi&ely presumed to belon! to donors "ho cannot be identified< and no ad&ertisement or in@uiry is re@uired< if the property consists: <.a1 of the proceeds of cash collections made by means of collectin bo4es or by other means not adapted for distin uishin one ift from anotherP or of the proceeds of any lottery, competition, entertainment, sale or similar money-raisin activity, after allowin for property iven to provide pri@es or articles for sale or otherwise to enable the activity to be underta6en.<

.b1

22> Section +)A3B of the 1*%1 2ct pro&ides that the 1ourt may order that property not fallin! "ithin subsection A2B abo&e shall be treated A"ithout any ad&ertisement or in@uiryB as belon!in! to donors "ho cannot be identified< "here it appears to the 1ourt: <.a1 that it would be unreasonable, havin re ard to the amounts li6ely to be returned to the donors, to incur e4pense with a view to returnin the propertyP or that it would be unreasonable, havin re ard to the nature, circumstances and amount of the ifts, and to the lapse of time since the ifts were made, for the donors to e4pect the property to be returned.<

.b1

23> Where property is applied cy-pr?s by &irtue of section +) of the 1*%1 2ct< the donor shall be deemed to ha&e parted "ith all his interest at the time "hen the !ift "as made< as pro&ided in subsection A+B> #o"e&er "here the property is so applied as belon!in! to donors "ho cannot be identified or cannot be found< and is not so applied by &irtue of subsection A2B or A3B as mentioned abo&e< subsection A+B further pro&ides that: <.a1 the scheme shall specify the total amount of that propertyP and

2*)

.b1

the donor of any part of that amount shall be entitled, if he ma6es a claim not later than twelve months after the date on which the scheme is made, to recover from the charity for which the property is applied a sum e8ual to that part, less any e4penses properly incurred by the charity trustees after that date in connection with claims relatin to his iftP and the scheme may include directions as to the provision to be made for meetin any such claim.<

.c1

Ne, Eea-a"%
2+> In 4e" 5ealand< &ariations of the purposes in a charitable trust are pro&ided for in the 1haritable Trusts 2ct 1*5( Athe 1*5( 2ctB> Section 32 of the 1*5( 2ct deals "ith disposal of property in charitable trustsH "hereas section +- deals "ith disposal of charitable funds raised by &oluntary contribution> 25> Section 32 of the 1*5( 2ct pro&ides that "here property or income is held upon trust for a charitable purpose< and: it has become impossible or impracticable or ine;pedient to carry out that purpose< the amount a&ailable is inade@uate to carry out that purpose< that purpose has been effected already< that purpose is ille!al or useless or uncertain< or the property or the income "hich has accrued or "ill accrue is more than necessary for that purposeH

then< re!ardless of "hether there is any !eneral charitable intention or not< the property and income Aand in the case of the accrued income scenario< any e;cess property or income or proceeds of sale B can be disposed of for some other charitable purpose> 2%> Section 32A3B of the 1*5( 2ct sets out the situations in "hich disposal of trust property pursuant to section 32A1B and A2B of the 1*5( 2ct is not allo"ed> These include "here <in accordance with any rule of law the intended ift thereof would otherwise lapse or fail and the property or income would not be applicable for any other charitable purpose< and "here <the property or income can be disposed of under Part 2 of this %ct.< 2(> 0art + Asections 3) to 5-B of the 1*5( 2ct !o&erns charitable funds raised by &oluntary contribution and section 3) pro&ides the follo"in! definition of <charitable purpose" in this conte;t:

2**

<In this Part of this %ct, unless the conte4t otherwise re8uires, the term Charita&le purpo e means every purpose which in accordance with the law of Cew Dealand is charitableP and includes the followin purposes, whether or not they are beneficial to the community or to a section of the community& .a1 The supply of the physical wants of sic6, a ed, destitute, poor, or helpless persons, or of the e4penses of funerals of poor personsP The education .physical, mental, technical, or social1 of the poor or indi ent or their childrenP The reformation of offenders, prostitutes, drun6ards, or dru addictsP The employment and care of dischar ed offendersP The provision of reli ious instruction, either denominationalP The support of libraries, readin classes for instructionP eneral or

.b1 .c1 .d1 .e1 .f1 . 1 .h1 .i1 .;1 .61

rooms, lectures, and

The promotion of athletic sports and wholesome recreations and amusementsP Contributions towards losses by fire and other inevitable accidentsP 5ncoura ement of s6ill, industry, and thriftP Rewards for acts of coura e and self sacrificeP and The erection, layin out, maintenance, or repair of buildin s and places for the furtherance of any of the purposes mentioned in this section.<

2)> Section 3* of the 1*5( 2ct defines the types of money to "hich 0art + applies> Knder section 3* of the 1*5( 2ct< 0art + applies: <N to cases in which money has been raised for any charitable purpose by way of voluntary contribution, or by the sale of oods voluntarily contributed, or as the price of admission to any entertainment, or in any other manner of voluntary contribution, whether or not the money has been invested pendin application for that charitable purpose.< 2*> In respect of charitable funds raised under 0art + of the 1*5( 2ct< the situations "here these funds may be disposed of for other charitable purposes are pro&ided in section +-< "hich states:

3--

<.!1

In any case to which this Part of this %ct applies U .a1 If it becomes impossible or impracticable or ine4pedient to carry out the charitable purpose for which the money raised is held, or if the amount available is inade8uate to carry out that purpose, or that purpose has been effected already, or that purpose is ille al or useless or uncertainP and If the money has not been entirely applied, and is not in the course of bein applied, for the charitable purpose for which it is held at any time after the e4piration of one year after the contribution or receipt of any part of the money or the sale of any part of the oods U

.b1

then, whether or not there is any eneral charitable intention, the money and the income therefrom or any part of residue thereof shall be disposed of for some other charitable purpose, or a combination of such purposes, in the manner and sub;ect to the provisions hereafter contained in this Part of this %ct. .#1 In any case to which this Part of this %ct applies, if the money raised and the income which has accrued or will accrue therefrom or any residue thereof is more than is necessary to carry out the ori inal charitable purpose, any e4cess money or income may be disposed of for some other charitable purpose, or a combination of such purposes, in the manner and sub;ect to the provisions hereafter contained in this Part of this %ct.<

S $#-a"%
3-> In Scotland< &ariation of the use of trust property held by a charity can be effected by a <reor anisation scheme<> The 1harities and Trustee In&estment AScotlandB 2ct 2--5 Athe 2--5 2ctB pro&ides that application for appro&al to reor!anise a charity under a reor!anisation scheme can be made by a charity to the ,ffice of the Scottish 1harity 9e!ulator A,S19B "hich is also capable< of its o"n accord or on the application of the rele&ant charity trustees< to apply to the 1ourt of Session for the appro&al of a reor!anisation scheme> 31> 2 reor!anisation scheme under the 2--5 2ct in&ol&es &ariation of the charity's constitution< transfer of the charity's property and amal!amation of charities> The scheme is e;plained in section +2A3B of the 2--5 2ct as follo"s:

3-1

<.)1

% 9reor anisation scheme9 is a scheme for U .a1 .b1 variation of the constitution of the charity .whether or not in relation to its purposes1, transfer of the property of the charity .after satisfaction of any liabilities1 to another charity .whether or not involvin a chan e to the purposes of the other charity1, or amal amation of the charity with another charity.<

.c1

32> 2n application made by a charity for its reor!anisation is !o&erned by section 3* of the 2--5 2ct< "hile an application made by the ,S19 is !o&erned by section +- of the 2ct> 2n application in&ol&in! the ,S19's appro&al of a reor!anisation scheme "ill only be appro&ed if the reor!anisation conditions pro&ided in the 2--5 2ct ha&e been satisfied> These conditions are defined in section +2A2B of the 2--5 2ct in terms as follo"s: <.#1 The 9reor anisation conditions9 are U .a1 that some or all of the purposes of the charity U .i1 .ii1 have been fulfilled as far as possible or ade8uately provided for by other means, can no lon er be iven effect to .whether or not in accordance with the directions or spirit of its constitution1, have ceased to be charitable purposes, or have ceased in any other way to provide a suitable and effective method of usin its property, havin re ard to the spirit of its constitution,

.iii1 .iv1

.b1 .c1

that the purposes of the charity provide a use for only part of its property, and that a provision of the charity9s constitution .other than a provision settin out the charity9s purposes1 can no lon er be iven effect to or is otherwise no lon er desirable.<

33> <.!1

Section +-A1B of the 2--5 2ct pro&ides: ,here :SCR considers A .a1 that any of the reor anisation conditions is

3-2

satisfied in relation to a charity, .b1 and that a reor anisation scheme proposed by it or by the charity trustees of the charity will A .i1 where the condition satisfied is that set out in para raph .a1 or .b1 of section 2#.#1, enable the resources of the charity to be applied to better effect for charitable purposes consistently with the spirit of its constitution, havin re ard to chan es in social and economic conditions since it was constituted, or where the condition satisfied is that set out in para raph .c1 or .d1 of that section, enable the charity to be administered more effectively,

.ii1

:SCR may, of its own accord or on the application of the charity trustees of the charity, apply to the Court of Session for approval of the scheme.< 3+> 2s noted earlier< the ,S19 may of its o"n accord or on the application of the charity trustees of the charity< apply to the 1ourt of Session for appro&al of the reor!anisation scheme> The 1ourt of Session may appro&e the proposed reor!anisation scheme if it considers that the matters set out in para!raphs AaB and AbB of section +2A2B are satisfied in relation to the charity to "hich the application relates> Section +2A+B of the 2--5 2ct pro&ides that nothin! in section +- of the 2--5 2ct "ould affect the po"er of the 1ourt of Session to appro&e a cy-pr?s scheme in relation to a charity>

S$&#( Afr' a
35> In South 2frica< althou!h trustees can still rely on the common la" !o&ernin! the application of the cy-pr?s doctrine to &ary the ori!inal purposes of a charitable trust< the enactment of the Trust 0roperty 1ontrol 2ct 5( of 1*)) Athe 1*)) 2ctB has pro&ided another route throu!h "hich the purposes of a trust can be &aried> 3%> Section 13 of the 1*)) 2ct pro&ides that "here any pro&ision of a trust document has brou!ht about conse@uences "hich are beyond the contemplation or foresi!ht of the founder of the trust< the court may &ary the pro&ision to brin! about a 6ust result> The te;t of section 13 states: <If a trust instrument contains any provision which brin s about conse8uences which in the opinion of the court the founder of a trust did not contemplate or foresee and which-

3-3

.a1 .b1 .c1

hampers the achievement of the ob;ects of the founderP or pre;udices the interests of beneficiariesP or is in conflict with the public interest,

the court may, on application of the trustee or any person who in the opinion of the court has a sufficient interest in the trust property, delete or vary any such provision or ma6e in respect thereof any order which such court deems ;ust, includin an order whereby particular trust property is substituted for particular other property, or an order terminatin the trust.<

3-+

A""e< ;

T(e -a, '" $#(er 4&r')%' #'$") $" #(e e)#a:-')(1e"# $f a (ar'#0 $11'))'$" $r e>&'+a-e"# :$%0 A&)#ra-'a
1> 2s discussed earlier< there is no sin!le re!ulator for charities in 2ustralia> The 2ustralian Ta;ation ,ffice ser&es as the closest body to a national re!ulator of charitable or!anisations> Its po"ers include mana!in! and shapin! ta;< e;cise and superannuation systems that fund ser&ices for 2ustralians>

Ca"a%a
2> Similar to the position in 2ustralia< super&ision of charities is the responsibility of the federal ta;in! authority< the 1anada 9e&enue 2!ency< "hich is seen as the primary re!ulator of charities> There is no sin!le re!ulator responsible for the super&ision and monitorin! of charities>

E"*-a"% a"% Wa-e)
3> 0rior to the establishment of the 1harity 1ommission for 3n!land and Wales< charitable acti&ities in 3n!land and Wales "ere re!ulated by the 1harity 1ommissioners for 3n!land and Wales> Knder the recently inserted section 12 of the 1harities 2ct 1**3 Ainserted by the 1harities 2ct 2--%B<1-+ the office of the 1ommissioners "as abolished and the functions of the 1ommissioner "ere transferred to the 1ommission< "hich is no" the official body responsible for re!ulatin! charities in 3n!land and Wales> +> Knder a number of pro&isions included in the 1**3 2ct< the 1ommission is pro&ided "ith statutory po"ers to in&esti!ate into mismana!ement in charitiesH to suspend andCor remo&e from office persons in the charities "ho are responsible for the mismana!ementH and to ensure that funds raised by charities are used for the purposes for "hich they are donated> 5> 2s "e shall see in the para!raphs that follo"< these po"ers conferred upon the 1ommission< to!ether "ith its clearly stated ob6ecti&es<

1-+

It should be noted that a ne" 1harities Fill has been put before the K$ 0arliament in March 2-11< the ob6ect of "hich is to consolidate the 1harities 2ct 1**3 and other enactments relatin! to charities> 2s part of the consolidation< the Fill has included pro&isions from the 9ecreational 1harities 2ct 1*5)< the 1harities 2ct 1**3 and the 1harities 2ct 2--%< leadin! to the repeal of the former t"o 2cts and some sections Asections 1 to * and 11 to ++B and some Schedules of the 1harities 2ct 2--%>

3-5

are directly rele&ant to the re!ulation and control of the acti&ities of 3n!lish charities> O&'ective of the Commi ion

%> The ob6ecti&es< functions and duties of the 1harity 1ommission are respecti&ely pro&ided in sections 1F< 11 and 1. of the 1**3 2ct> The fi&e ob6ecti&es of the 1harity 1ommission< are as follo"s: AaB AbB AcB AdB AeB The public confidence ob6ecti&e> The public benefit ob6ecti&e> The compliance ob6ecti&e> The charitable resources ob6ecti&e> The accountability ob6ecti&e>

(> These fi&e ob6ecti&es set out in clear and une@ui&ocal terms the purposes "hich the 1ommission is e;pected to ser&e> These ob6ecti&es hi!hli!ht the re!ulatory role of the 1ommission in super&isin! the &arious acti&ities carried out by the charitable or!anisations in 3n!land and Wales> These ob6ecti&es are the cornerstones upon "hich the 1ommission's functions and duties are founded> )> The re!ulatory function of the 1ommission is facilitated by the compliance ob6ecti&e< under "hich the 1ommission is tas:ed to promote amon!st charity trustees !reater compliance "ith their le!al obli!ations "hen mana!in! their charitable or!anisations> 1ompliance on the part of the charity trustees "ith their le!al obli!ation is necessary for the fulfilment of the accountability ob6ecti&e under "hich the 1ommission is re@uired to ensure that charities are accountable to donors< beneficiaries and the !eneral public> 2s "e ha&e e;amined earlier in 1hapter ) and 2nne; + of this paper< the 1ommission is empo"ered by le!islation to e;amine the accounts of charities< so in&esti!ation of problematic charities can be carried out by the 1ommission> If misconduct or mismana!ement is found in the administration of the charity< the 1ommission may suspend or remo&e the rele&ant persons from mana!in! the charity< or order any property held by the charity to be &ested in an official custodian instead> *> Knder the public confidence ob6ecti&e< the 1ommission is re@uired to "or: to increase public trust and confidence in charities> The charitable resources ob6ecti&e re@uires the 1ommission to promote a more effecti&e use of charitable resources< "hile the public benefit ob6ecti&e calls for the 1ommission to promote a"areness and understandin! of the operation

3-%

of the <public benefit re8uirement< "hich is defined in section 1FA+B of the 1**3 2ct>1-5 )eneral function and dutie of the Commi ion

1-> The functions and duties of the 1ommission are to ensure that the mana!ement of the charities and the conduct of their &arious fundraisin! acti&ities are properly carried out by the charity trustees and all responsible personnel of the charitiesH to redress the problems arisin! from misconduct and mismana!ement of the charitiesH and to ensure that charity funds ha&e been properly used> 11> The !eneral functions of the 1ommission are stated in section 11A2B of the 1**3 2ct> Knder this section< the 1ommission is authorised to determine "hether an institution is a charity or not> It also has the functions to encoura!e and to facilitate the better administration of charitiesH to identify and to in&esti!ate misconduct in and mismana!ement of charitiesH to ta:e appropriate remedial or protecti&e action to redress the problemH and to determine in public charitable collections "hether public collections certificates should be issued and remain in force> The 1ommission is also re@uired under this section to maintain an accurate and up-to-date re!ister of charities> 12> In performin! its functions< the 1ommission is specifically re@uired by le!islation to adopt a moderate and sensiti&e approach so as not to discoura!e any inno&ation by or on behalf of charities> 2ccordin!ly< section 1.A2B2 of the 1**3 2ct pro&ides that the 1ommission is under a !eneral duty "hilst in the performance of its functions to act in a "ay "hich is compatible "ith the encoura!ement of all forms of charitable !i&in!< and &oluntary participation in charity "or:> Section 1.A2B+ of the 1**3 2ct pro&ides as follo"s: <In performin its functions the Commission must, so far as relevant, have re ard to the principles of best re ulatory practice .includin the principles under which re ulatory activities should be proportionate, accountable, consistent, transparent and tar eted only at cases in which action is needed1.<

1-5

The <public benefit re8uirement< is defined by section 1FA+B of the 1**3 2ct to mean the re@uirement in section 2A1BAbB of the 1harities 2ct 2--% that a purpose fallin! "ithin section 2A2B of that 2ct must be for the public benefit if it is to be a charitable purpose> Knder section 2A1BAbB of the 1harities 2ct 2--%< a charitable purpose in 3n!land and Wales is a purpose "hich is for public benefit> Section 2A1BAaB of the 1harities 2ct 2--%< ho"e&er< pro&ides that for the purposes of the la" of 3n!land and Wales< a charitable purpose is a purpose "hich falls "ithin subsection A2B> Subsection A2B in turn pro&ides that< <FaG purpose falls within this subsection if it falls within any of the followin descriptions of purposes ...< > 3;amples of some of the descriptions mentioned in subsection A2B include the pre&ention or relief of po&erty< the ad&ancement of education< reli!ion< health or the sa&in! of li&es< etc>

3-(

+egi ter of charitie 13> 2s noted abo&e< the 1ommission is re@uired to :eep an accurate and up-to-date re!ister of charities> Section 3A1B of the 1**3 2ct pro&ides that <FtGhere shall continue to be a re ister of charities, which shall be 6ept by the Commission>< Subsection A3B pro&ides that the re!ister shall contain the name of e&ery charity re!istered< and such other information and particulars about the charity as the 1ommission thin:s fit> 1+> Section 32A1B of the 1**3 2ct pro&ides that e&ery charity must be re!istered in the re!ister of charities unless it is not so re@uired under subsection A2B "hich pro&ides that charities not re@uired to be re!istered include e;empt charitiesH charities e;cepted by 1ommission's order or by re!ulations made by the MinisterH and charities "hose !ross income do not e;ceed £5<---> 15> Institutions appearin! on the re!ister of charities are presumed to be charities< and the presumption is absolute and irrebuttable> Section +A1B of the 1**3 2ct pro&ides: <%ny institution shall for all purposes other than rectification of the re ister be conclusively presumed to be or to have been a charity at any time when it is or was on the re ister of charities.< 1%> Where a charity re@uired to re!ister has not done so< section 3F of the 2ct pro&ides that the charity trustees are under a duty to apply to the 1ommission for the charities to be re!isteredH to supply to the 1ommission copies of the charity trusts or particulars of them< and such other documents or information as the 1ommission may re@uire for the application> 1(> For a charity that has been re!istered< the trustees are under a duty pursuant to section 3FA3B of the 1**3 2ct to notify the 1ommission if < ^ the institution ceases to e4ist, or if there is any chan e in its trusts or in the particulars of it entered in the re ister<. This helps to pre&ent unscrupulous solicitation of donation in the name of charities "hich no lon!er e;ist> 1)> The re@uirement that e&ery charity< sa&e those that fall "ithin statutory e;ceptions< has to be re!istered is indeed si!nificant> The !eneral public can conclusi&ely presume from seein! the name of an or!anisation appearin! on the re!ister of charities that it is a charity "hich is sub6ect to re!ulation and control by the 1ommission> This helps to increase public trust and confidence in charities and in the fundraisin! acti&ities they are carryin! out> The Commi ionK power to in titute in4uirie

1*> Section ) of the 1**3 2ct pro&ides that< sa&e for any e;empt charity< the 1ommission may institute in@uiries on charities> In the in@uiry< the 1ommission may direct any person to furnish accounts and "ritten statements rele&ant to the in@uiry> The 1ommission may also direct any

3-)

person to pro&ide "ritten ans"ers to any @uestions or in@uiries made to him> The person may also be directed by the 1ommission to &erify accounts< statements or ans"ers by statutory declaration> 2-> In the in@uiries mentioned abo&e< the 1ommission may also direct any person to furnish copies of documents under his control or custody< and to &erify the copied documents by statutory declaration> The in@uiry results and report may be printed and published by the 1ommission> 21> The in&esti!ati&e po"er conferred upon the 1ommission in the course of an in@uiry is si!nificant> 2ccounts and "ritten statements< or persons in&ol&ed in a fundraisin! acti&ity suspected of bein! mismana!ed are all sub6ect to close scrutiny by the 1ommission> This po"er to institute in@uiries has helped to promote !reater compliance on the part of the charity trustees "ith their le!al obli!ations "hen mana!in! their charities> ,ocument 1 record and information of u e to the Commi ion

22> When the 1ommission is dischar!in! any of its functions< section *A1B of the 1**3 2ct pro&ides that it may order any person to furnish it "ith any information relatin! to any charity that is in the possession of the personH or to re@uire copies or e;tracts of documents "hich are relatin! to any charity and "hich are in the person's custody or control to be furnished to the 1ommission> 23> Section 1- of the 1**3 2ct pro&ides that public authorities may disclose information to the 1ommission if the disclosure "ould enable or assist the 1ommission to dischar!e its functions> 2+> Similarly< under section 1-2 of the 1**3 2ct< to assist a rele&ant public authority to dischar!e its functions< the 1ommission may disclose to it any information recei&ed by the 1ommission in connection "ith any of its functions> 25> Section 11 of the 1**3 2ct pro&ides that it is an offence for a person to supply to the 1ommission information "hich is false or misleadin! in a material particular> 2%> These po"ers conferred upon the 1ommission to re@uest and to recei&e materials "hich "ould facilitate the dischar!e of the 1ommission's functions and duties are e;tremely important< as anyone relatin! to a charity "hich is problematic< or is under an in@uiry< may be as:ed andCor ordered by the 1ommission to ma:e a&ailable to it the information and documents that are necessary for the in&esti!ati&e "or:> The pro&ision ma:in! it an offence to supply false or misleadin! information to the 1ommission "ould deter misleadin! the 1ommission throu!h such means> Protection of charitie

3-*

2(> In the course of the in@uiry< "here misconduct or mismana!ement is found in the charity< or it is necessary and desirable to protect the charity's property< or to secure a proper application for the purposes of the charity of that property or of property comin! to the charity< the 1ommissioner may< under section 1)A1BAbB of the 1**3 2ct< deal "ith the charity in the follo"in! manner: AiB suspend any trustee< charity trustee< officer< a!ent or employee of the charity from the e;ercise of his office or employment pendin! consideration bein! !i&en to his remo&alH appoint additional charity trustees necessary to administer the charityH &est the property held by or in trust for the charity in the official custodianH order any person holdin! the charity property not to part "ith it unless the 1ommission appro&esH order any debtor of the charity not to pay to the charity "ithout the appro&al of the 1ommissionH by order restrict the transactions "hich may be entered into< or the nature or amount of the payment "hich may be made< in the administration of the charity "ithout the appro&al of the 1ommissionH and order the appointment of an interim mana!er and mana!er to handle the property and affairs of the charity>

AiiB AiiiB Ai&B A&B A&iB

A&iiB

2)> If it is disco&ered in the in@uiry that there is misconduct or mismana!ement in the administration of the charity< and that it is necessary or desirable to protect the charity's property or to secure a proper application for the purposes of the charity of that property or of property comin! to the charity< the 1ommission may< pursuant to section 1)A2BAbBAiB of the 1**3 2ct< order the remo&al of any trustee< charity trustee< officer< a!ent or employee of the charity that is responsible for the misconduct or mismana!ement> 2*> Thus< for e;ample< in the course of an in@uiry "here a charity trustee responsible for a fundraisin! acti&ity is found to ha&e misused the funds raised< the trustee can be suspended or remo&ed from office under section 1) of the 1**3 2ct> The same applies to the other officers< a!ent or employees of the charity> *mplementation of c!"pr# and di Commi ion olution of charitie &! the

3-> The 1ommission or the court has the po"er to ma:e schemes for the application of property cy-pr?s by pro&idin! for the property to be applied for such charitable purposes and by or on trust for such other charity< as it considers appropriate> The 1ommission is also empo"ered under section %1 of the 1**3 2ct to ma:e an order to dissol&e an incorporated body

31-

upon situations< such as X <.a1 .b1 .c1 that an incorporated body has no assets or does not operate, or that the relevant charity in the case of an incorporated body has ceased to e4ist, or that the institution previously constitutin , or treated by them as constitutin , any such charity has ceased to be, or .as the case may be1 was not at the time of the body9s incorporation, a charity, or that the purposes of the relevant charity in the case of an incorporated body have been achieved so far as is possible or are in practice incapable of bein achieved.<

.d1

Commission9s uidance to charities 31> In the abo&e discussion< the different ob6ecti&es< functions< duties and po"ers of the 1ommission are set out for the purpose of sho"in! that the 1ommission has been !i&en the necessary statutory authority to o&ersee< re!ulate and control the acti&ities of the charitable or!anisations in 3n!land and Wales> 1ertainly< the fundraisin! acti&ities of the 3n!lish charities are also "ithin these statutory controls> 32> 2s mentioned abo&e< one of the statutory ob6ecti&es of the 1ommission is to promote amon!st charity trustees !reater compliance "ith their le!al obli!ations "hen mana!in! their charitable or!anisations> 2 number of different sets of !uidance ha&e been issued by the 1ommission for such a purpose> In the sets of !uidance issued by the 1ommission< charities are ad&ised< amon!st other thin!s< on their le!al obli!ations arisin! from the fundraisin! acti&ities carried out by them> Many of these le!al obli!ations come from the statutory pro&isions mentioned earlier< and they are e;pressed in the !uidance in easily understood terms for the compliance of those responsible for runnin! the charities>

Ire-a"%
33> In 2--*< the 1harities 9e!ulatory 2uthority "as established under section 13 of the Irish 1harities 2ct 2--*> Schedule 1 to the 2ct pro&ides in detail for the establishment of the 1harities 9e!ulatory 2uthority> The 2uthority is a body corporate "ith perpetual succession and has the po"er to sue and be sued in its corporate name> With the consent of the Minister for 1ommunity< 9ural and 7aeltacht 2ffairs and the Minister for Finance< it has the po"er to ac@uire< hold and dispose of land< an interest in land and of any other property>

311

3+> AaB AbB

The !eneral functions of the 2uthority include X to increase public trust and confidence in the mana!ement and administration of charitable trusts and charitable or!anisationsH to promote compliance by charity trustees "ith their duties in the control and mana!ement of charitable trusts and charitable or!anisationsH to promote the effecti&e use of the property of charitable trusts or charitable or!anisationsH to ensure the accountability of charitable or!anisations to donors and beneficiaries of charitable !ifts and the publicH to promote understandin! of the re@uirement that charitable purposes confer a public benefitH to establish and maintain a re!ister of charitable or!anisationsH to ensure and monitor compliance by charitable or!anisations "ith the 1harities 2ct 2--*H to carry out in&esti!ations in accordance "ith the 2ctH to encoura!e and facilitate the better administration and mana!ement of charitable or!anisations by the pro&ision of information or ad&iceH to carry on such acti&ities or publish such information Aincludin! statistical informationB concernin! charitable or!anisations and charitable trustsH and to pro&ide information Aincludin! statistical informationB or ad&ice< or ma:e proposals< to the Minister on matters relatin! to the functions of the 2uthority>

AcB AdB AeB AfB A!B AhB AiB

A6B

A:B

35> ,ne of the ma6or functions of the 2uthority is to establish and maintain a re!ister of charitable or!anisations and to monitor and ensure compliance by charitable or!anisations "ith the Irish 1harities 2ct 2--*> AKnder section 3* of the 2ct< the 2uthority shall< after consultation "ith the 9e&enue 1ommissioners< establish and maintain a re!ister of charitable or!anisations in such form as it considers appropriate< includin! in electronic form>B 3%> Knder section 52 of the 2ct< the charity trustees of a charitable or!anisation are re@uired to prepare and submit to the 2uthority a report in respect of its acti&ities in that financial year not later than ten months after the end of each financial year> Knder section 53 of the 2ct< the 2uthority may direct a charitable or!anisation in "ritin! to pro&ide the 2uthority "ith such information as it may reasonably re@uire to enable it to perform its functions>

312

The 2uthority "ill ma:e a&ailable for inspection by members of the public all annual reports and documents :ept by the 2uthority at all reasonable times and at such place or places as it determines> 3(> Knder section 55A+B of the 2ct< the 2uthority establishes and maintains a re!ister of all persons "ho ha&e ceased to hold the position of charity trustee of a charitable or!anisation> Such re!ister is made a&ailable for inspection by members of the public at all reasonable times at the principal office of the 2uthority> 3)> The 2uthority may appoint an inspector to in&esti!ate the affairs of a charitable or!anisation> Knder section %% of the 2ct< an inspector appointed may ma:e interim reports to the 2uthority and on the conclusion of the in&esti!ation< "ill ma:e a final report to the 2uthority> The 2uthority may furnish a copy of a report of an inspector to the charitable or!anisation that is the sub6ect of the report on re@uest and sub6ect to payment of a prescribed fee> 3*> The 2uthority is empo"ered under section %) of the 2ct to re@uire a charitable or!anisation or the charity trustees of a charitable or!anisation to produce boo:s< documents or other records if the 2uthority is of opinion that X AaB it is necessary to e;amine them for the purpose of determinin! "hether an inspector should be appointed to conduct an in&esti!ation into the affairs of the charitable or!anisationH the affairs of the body are bein! or ha&e been conducted "ith intent to defraud any personH any act or omission committed by or on behalf of the charitable or!anisation is< or "ould be unla"ful if committedH or the body "as formed for any fraudulent or other unla"ful purpose>

AbB AcB AdB

Ne, Eea-a"%
+-> The 4e" 5ealand 1harities 1ommission is established under section ) of the 4e" 5ealand 1harities 2ct 2--5> Knder section 1- of the 2ct< the functions of the 1ommission are as follo"s X AaB AbB AcB to promote public trust and confidence in the charitable sectorH to encoura!e and promote the effecti&e use of charitable resourcesH to educate and assist charities in relation to matters of !ood !o&ernance and mana!ementH

313

AdB AeB AfB A!B AhB AiB

to ma:e appropriate information a&ailable to assist persons to ma:e re!istration applications under the 2ctH to recei&e< consider< and process applications for re!istration as charitable entitiesH to ensure that the re!ister of charitable entities is compiled and maintainedH to recei&e< consider< and process annual returns submitted by charitable entitiesH to supply information and documents in appropriate circumstances for the purposes of the Inland 9e&enue 2ctsH to monitor charitable entities and their acti&ities to ensure that entities that are re!istered as charitable entitles continue to be @ualified for re!istration as charitable entitiesH to in@uire into charitable entities and into persons "ho ha&e en!a!ed in< or are en!a!in! in< conduct that constitutes< or may constitute< a breach of this 2ct or serious "ron!doin! in connection "ith charitable entityH to monitor and promote compliance "ith the 2ct< includin! by ta:in! prosecutions for offences a!ainst the 2ct in appropriate circumstancesH to consider< and to report and ma:e recommendations on any matter Afor e;ample< a proposed !o&ernment policyB relatin! to charitiesH to stimulate and promote research into any matter relatin! to charities< for e;ample X AiB AiiB by collectin! and disseminatin! information or research about charitiesH by ad&isin! on areas "here further research or information about charities should be underta:en or collectedH by enterin! into contracts or arran!ements for research or information about charities to be underta:en or collectedH and

A6B

A:B

AlB

AmB

AiiiB

AnB

to carry out any other functions that the Minister may direct the 1ommission to perform in accordance "ith section 112 of the

31+

1ro"n 3ntities 2ct 2--+>1-% +1> Knder section 23 of the 2ct< the 1ommission holds the office of 9e!istrar of the re!ister of charities and must ensure that the re!ister is compiled and maintained> +2> 2s discussed in 1hapter ) and 2nne; +< the 1ommission is empo"ered to in@uire into any charitable entity and any person "ho "as en!a!ed in conduct that is in breach of the 2ct< or serious "ron!doin! in connection "ith a charitable entity> This po"er includes the po"er to e;amine and in@uire into the matters in connection "ith the charitable entity or persons< such as the acti&ities and proposed acti&ities of the charitable entity or person< the nature< ob6ects< and purposes of the charitable entity< the mana!ement and administration of the charitable entity< the results and outcomes achie&ed by the charitable entity or person< and the &alue< condition< mana!ement< and application of the property and income belon!in! to the charitable entity or person> +3> The 1ommission is also empo"ered under sections 51 and 53 of the 2ct to re@uire any person to supply to the 1ommission any information for the purposes of assistin! anyone in the e;ercise of his po"ers under the 2ct or detectin! and prosecutin! offences under any other 2ct> ++> The 1ommission may publish a notice that contains information or statements to the follo"in! effect: AaB AbB the name of the charitable entity or personH a statement to the effect that the 1ommission considers that X AiB the charitable entity< or a person in connection "ith the charitable entity< has en!a!ed in< or is en!a!in! in< conduct that constitutes< or may constitute< a breach of the 1harities 2ct 2--5 or serious "ron!doin!H or the charitable entity is< or may be< no lon!er @ualified to be re!istered as a charitable entityH or the person has en!a!ed in< or is en!a!in! in< conduct that constitutes< or may constitute< a breach of section 3( of the 2ctH

AiiB AiiiB

AcB AdB

a statement of the action that the 1ommission has ta:en< or is considerin! ta:in!< in relation to those mattersH a summary of the !rounds for the 1ommission's opinion>

#o"e&er< before the 1ommission e;ercises its po"ers< the 1ommission must
1-%

Section 112 of the 1ro"n 3ntities 2ct 2--+ X <.!1 If an %ct, or a Crown entity company9s constitution, ives the responsible Einister power to add to the functions of a Crown entity, the Einister may direct the entity to perform any additional function that is so added and that is consistent with the entity9s ob;ectivesN.<

315

!i&e to the charitable entity or person notice of the 1ommission's decision to publish a notice< the reasons for its decision< and the ri!ht of the entity or person to appeal a!ainst its decision under section 5*> +5> The 1ommission may !i&e a "arnin! notice to the charitable entity or person if the 1ommission considers that X AaB a charitable entity< or a person in connection "ith a charitable entity< has en!a!ed in< or is en!a!in! in< conduct that constitutes< or may constitute< a breach of the 2ct or serious "ron!doin!H or a charitable entity is< or may be< no lon!er @ualified to be re!istered as a charitable entityH or a person has en!a!ed in< or is en!a!in! in< conduct that constitutes< or may constitute< a breach of section 3(> 1-(

AbB AcB

+%> Knder section 5* of the 2ct< a person "ho is a!!rie&ed by a decision of the 1ommission under the 2ct may appeal to the #i!h 1ourt> 2n appeal under this section must be made by lod!in! a notice of appeal "ith the 9e!istrar of the #i!h 1ourt in Wellin!ton and "ith the 1ommission "ithin 2"or:in! days after the date of the decision< or any further time that the #i!h 1ourt may allo">

S $#-a"%
+(> The Scottish 1harity 9e!ulator is a body corporate established under section 1 of the 1harities and Trustee In&estment AScotlandB 2ct 2--5 and has the follo"in! !eneral functions : AaB AbB AcB AdB
1-(

to determine "hether bodies are charitiesH to :eep a public re!ister of charitiesH to encoura!e< facilitate and monitor compliance by charities "ith the pro&isions of the 2ctH to identify and in&esti!ate apparent misconduct in the administration of charities and to ta:e remedial or protecti&e

Section 3( of 4e" 5ealand 1harities 2ct 2--5 X % person must not A .a1 use a style or title includin the words 9re istered charitable entity9P or .b1 state or imply, or permit a statement or implication, that A .i1 the person is re istered as a charitable entity under this %ctP or .ii1 an entity that the person acts on behalf of is re istered as a charitable entity under this %ct. .#1 Subsection .!1 does not apply to A .a1 a charitable entityP or .b1 a person who acts on behalf of a charitable entity. .)1 % person must not state or imply, or permit a statement or implication, that the person acts on behalf of a charitable entity if the person does not act on behalf of that charitable entity.< <.!1

31%

action in relation to such misconductH and AeB to !i&e information or ad&ice< or to ma:e proposals< to the Scottish Ministers on matters relatin! to ,ffice of the Scottish 1harity 9e!ulator's functions>

+)> The ,ffice of the Scottish 1harity 9e!ulator A,S19B :eeps a re!ister of charities :no"n as the Scottish 1harity 9e!ister> 2 charity must see: the consent of the ,S19 for actions relatin! to amendment of its constitution so far as it relates to its purposes< amal!amation "ith another body< "indin! itself up or dissol&in! itself< and application to the court in relation to such actions> 2 charity is re@uired to notify the ,S19 of any chan!es< such as any chan!e in the principal office of the charity< any other details set out in its entry in the re!ister and to its constitution> It must also notify the ,S19 any administration order or an order for "indin! up made by the court and the appointment of a recei&er in respect of any of the charity's property> The charity should set out in its notification the date on "hich the chan!e< action< order or appointment too: effect> +*> Knder section 22 of the 2ct< the ,S19 has the po"er to obtain information from charities "hich it re@uires in relation to the charity's entry in the re!ister> It may also disclose any information to any public body or officeholder for any purpose connected "ith the e;ercise of its functions< or for the purpose of enablin! or assistin! the public body or office-holder to e;ercise any functions> 5-> 2s mentioned in 1hapter )< the ,S19 is empo"ered to ma:e in@uiries about charities< other bodies or a person appearin! to represent themsel&es as a charity for either !eneral or particular purposes> Knder section 2* of the 2ct< the ,S19 may re@uire any charity to pro&ide it "ith documents or information "hich it considers necessary for its in@uiries< unless the charity "ould be entitled to refuse on the !rounds of confidentiality in the 1ourt of Session> 51> The ,S19 "ill ta:e actions under section 3- of the 2ct if it appears to it that as a result of in@uiries< a charity no lon!er meets the charity test> It must either direct the charity to ta:e any necessary steps to meet the test or remo&e the charity from the re!ister> If the charity fails to comply "ith such direction< the 9e!ulator must remo&e it from the re!ister> 52> The 9e!ulator is empo"ered under section 31 of the 2ct to suspend a charity trustee< a!ent or employee for the protection of a charity's property if it appears to it that there has been misconduct in the administration of a charity< or to ensure that the property is used for charitable purposes> 2nother "ay of protectin! the property of a charity is for the ,S19 to !i&e a direction to restrict any transaction or payments that may be made in the administration of the body "ithout its consent> It may also direct a financial institution or person holdin! property for a charity not to part "ith the property "ithout the 9e!ulator's consent> Where it appears to the 9e!ulator follo"in! in@uiries that a body has been falsely representin! itself to be a charity< it may direct the body or person to stop representin! itself as a charity and to pay to

31(

the charity or body any assets that it has collected> It may also direct a ban: to pay sums collected for the charity or not to part "ith the property "ithout its consent> 53> Knder section 3+ of the 2ct< the ,S19 may< follo"in! its in@uiries< apply to the 1ourt of Session for further actions to be ta:en to protect the property of the charity or to ensure that property is used for the purposes of the charity> 5+> Knder section 3* of the 2ct< the ,S19 is empo"ered< on the application of a charity< appro&e a reor!anisation scheme proposed by the charity if it considers X AaB AbB that any of the reor!anisation conditions is satisfied in relation to the charity< and that the proposed reor!anisation scheme "ill X AiB enable the resources of the charity to be applied to better effect for charitable purposes consistently "ith the spirit of its constitution< ha&in! re!ard to chan!es in social and economic conditions since it "as constituted< or enable the charity to be administered more effecti&ely>

AiiB

S'"*a.$re
55> 2 1ommissioner of 1harities is appointed by the Minister under section 3 of the Sin!apore 1harities 2ct> Knder section + of the 2ct< the ob6ecti&es of the 1ommissioner are: AaB AbB to maintain public trust and confidence in charitiesH to promote compliance by charity trustees "ith their le!al obli!ations in e;ercisin! control and mana!ement of the administration of their charitiesH to promote the effecti&e use of charitable resourcesH and to enhance the accountability of charities to donors< beneficiaries and the !eneral public> The !eneral functions of the 1ommissioner are: AaB AbB AcB to determine "hether institutions are or are not charitiesH to encoura!e and facilitate the better administration of charitiesH to identify and in&esti!ate apparent misconduct or

AcB AdB 5%>

31)

mismana!ement in the administration of charitiesH AdB AeB to ta:e remedial or protecti&e action in connection "ith misconduct or mismana!ement in the administration of charitiesH to obtain< e&aluate and disseminate information in connection "ith the performance of any of the 1ommissioner's functions or meetin! any of the 1ommissioner's ob6ecti&esH to !i&e information or ad&ice< or ma:e proposals< to the Minister on matters relatin! to any of the 1ommissioner's functions or meetin! any of the 1ommissioner's ob6ecti&esH and to perform such other functions as the Minister may determine>

AfB

A!B

5(> 2 1harity 1ouncil is established under section +2 of the 2ct> Its function is to ad&ise the 1ommissioner on any @uestion "hich he may refer to it in connection "ith the administration of the 2ct and the ob6ecti&es and functions of the 1ommissioner> The 1ouncil also ma:es recommendations to the 1ommissioner in relation to the re!ulation of charities< and the promotion of self-re!ulation and !ood !o&ernance standards in the charity sector> 5)> 2s discussed in 2nne; 3< the 1ommission :eeps a re!ister of charities in "hich the particulars of any re!istered charity are entered> 2ny institution "hich no lon!er appears to the 1ommissioner to be a charity shall be remo&ed from the re!ister> 2ny charity "hich ceases to e;ist or does not operate shall also be remo&ed from the re!ister> The 1ommissioner has the po"er to refuse to re!ister an institution as a charity if it appears to the 1ommissioner that the re!istration of the institution "ill be contrary to the public interest or on such other !round as the Minister may prescribe> The 1ommissioner may !i&e a direction re@uirin! the name of the charity to be chan!ed "ithin such period as is specified in the direction> 5*> Knder section ) of the 2ct< the 1ommissioner may from time to time institute in@uiries "ith re!ard to charities or a particular charity or class of charities< either !enerally or for particular purposes> The 1ommissioner may either conduct such an in@uiry himself or appoint a person to conduct it and ma:e a report to him> %-> The 1ommissioner has the po"er to order< for the purpose of dischar!in! his functions under the 2ct< any person to furnish the 1ommissioner "ith any information in his possession "hich relates to any charityH and to re@uire any person "ho has in his custody or under his control any document "hich relates to any charity to furnish the 1ommissioner "ith a copy of or e;tract from the documentH or unless the document forms part of the records or other documents of a court or public authority< to transmit the document itself to the 1ommissioner for his inspection> %1> Section 11 of the 2ct deals "ith the disclosure of information to and by the 1ommissioner> 2 body or person may disclose to the 1ommissioner any information recei&ed by that body or person for the

31*

purposes of any "ritten la" for the purpose of enablin! or assistin! the 1ommissioner to dischar!e any of his functions> This is not applicable< ho"e&er< to the 1omptroller of Income Ta; and to any e;press restriction imposed by or under any other "ritten la"> The 1omptroller may disclose to the 1ommissioner the follo"in! information: AaB the name and address of any institution "hich has for any purpose been treated by the 1omptroller as established for charitable purposesH information as to the purposes of an institution and the trusts under "hich it is established or re!ulated< "here the disclosure is made by the 1omptroller in order to !i&e or obtain assistance in determinin! "hether the institution ou!ht for any purpose to be treated as established for charitable purposesH and information "ith respect to an institution "hich has for any purpose been treated as so established but "hich appears to the 1omptroller X AiB AiiB to be< or to ha&e been< carryin! on acti&ities "hich are not charitableH or to be< or to ha&e been< applyin! any of its funds for purposes "hich are not charitable>

AbB

AcB

Knless the information disclosed is sub6ect to any e;press restriction on the disclosure of the information by the 1ommissioner< the 1ommissioner may disclose to a body or person any information recei&ed by him for the purposes of any "ritten la"< "here the disclosure is made by the 1ommissioner for any purpose connected "ith the dischar!e of his functions and for the purpose of enablin! or assistin! that body or person to dischar!e any of its or his functions> This section applies to the follo"in! bodies and persons: AaB AbB AcB AdB any 7o&ernment departmentH any statutory authorityH any police officerH and any other body or person dischar!in! functions of a public nature>

%2> Knder section 2+ of the 2ct< the 1ommissioner may by order< "ith the consent of the 2ttorney-7eneral< e;ercise the same 6urisdiction and po"ers as are e;ercisable by the #i!h 1ourt in charity proceedin!s for the follo"in! purposes: AaB AbB establishin! a scheme for the administration of a charityH appointin!< dischar!in! or remo&in! a charity trustee or trustee

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for a charity< or remo&in! an officer or employeeH and AcB &estin! or transferrin! property< or re@uirin! or entitlin! any person to call for or ma:e any transfer of property or any payment>

#o"e&er< the 1ommissioner does not ha&e the 6urisdiction to try or determine the title to any property as bet"een a charity or trustee for a charity and a person holdin! or claimin! the property or an interest in it ad&ersely to the charity< or to try or determine any @uestion as to the e;istence or e;tent of any char!e or trust> The 1ommissioner shall not e;ercise his 6urisdiction Anot referred to him by order of the #i!h 1ourtB "hich< by reason of its contentious character< or of any special @uestion of la" or of fact "hich it may in&ol&e< or for other reasons the 1ommissioner may consider more fit to be ad6udicated on by the #i!h 1ourt> %3> 2n appeal a!ainst any order of the 1ommissioner may at any time be brou!ht in the #i!h 1ourt by the charity or any of the charity trustees< or any person interested in the charity< or by any person remo&ed from any office or employment by the order> %+> The 1ommission is empo"ered under section 25 of the 2ct to act for the protection of charities if he is satisfied X AaB AbB that there is or has been any misconduct or mismana!ement in the administration of the charityH and that it is necessary or desirable to act for the purpose of protectin! the property of the charity or securin! a proper application for the purposes of the charity of that property or of property comin! to be charity>

%5> The 1ommissioner may< "ith the consent of the 2ttorney7eneral< do one or more of the follo"in! thin!s: AiB by order remo&e any trustee< charity trustee< officer< a!ent or employee of the charity "ho has been responsible for or pri&y to the misconduct or mismana!ement or has by his conduct contributed to it or facilitated itH by order establish a scheme for the administration of the charityH not"ithstandin! anythin! in the trusts of the charity< by order restrict the transactions "hich may be entered into< or the nature or amount of the payments "hich may be made< in the administration of the charity< "ithout his appro&al> by order suspend any trustee< charity trustee< officer< a!ent or employee of the charity from the e;ercise of his office or employment pendin! consideration bein! !i&en to his remo&alH

AiiB AiiiB

Ai&B

321

A&B

by order appoint such number of additional charity trustees as he considers necessary for the proper administration of the charityH by order &est any property held by or in trust for the charity in the 0ublic Trustee< or re@uire the persons in "hom any such property is &ested to transfer it to the 0ublic Trustee< or appoint any person to transfer any such property to himH order any person "ho holds any property on behalf of the charity< or of any trustee for it< not to part "ith the property "ithout the appro&al of the 1ommissionerH order any debtor of the charity not to ma:e any payment in or to"ards the dischar!e of his liability to the charity "ithout the appro&al of the 1ommissionerH by order restrict the transactions "hich may be entered into< or the nature or amount of the payments "hich may be made< in the administration of the charity "ithout the appro&al of the 1ommissionerH and by order appoint a recei&er and mana!er in respect of the property and affairs of the charity>

A&iB

A&iiB

A&iiiB

Ai;B

A;B

%%> The 1ommissioner may remo&e a charity trustee by order made of his o"n motion "here the trustee X AaB AbB AcB AdB AeB AfB has been con&icted of an offence in&ol&in! dishonesty< fraud or moral turpitudeH is a ban:ruptH is a corporation in li@uidationH lac:s capacity A"ithin the meanin! of the Mental 1apacity 2ct 2--)B to e;ercise his functions as trusteeH has not acted< and "ill not declare his "illin!ness or un"illin!ness to actH or is outside Sin!apore or cannot be found or does not act< and his absence or failure to act impedes the proper administration of the charity>

%(> The 1ommissioner may< by order made of his o"n motion< appoint a person to be a charity trustee X AaB in place of a charity trustee remo&ed by him under this section or other"iseH

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AbB

"here there are no charity trustees< or "here by reason of &acancies in their number or the absence or incapacity of any of their number the charity cannot apply for the appointmentH "here there is a sin!le charity trustee< not bein! a corporation< and the 1ommissioner is of the opinion that it is necessary to increase the number for the proper administration of the charityH or "here the 1ommissioner is of the opinion that it is necessary for the proper administration of the charity to ha&e an additional charity trustee< because one of the e;istin! charity trustees "ho ou!ht ne&ertheless to remain a charity trustee cannot be found or does not act or is outside Sin!apore>

AcB

AdB

2ny person "ho contra&enes such order made by the 1ommissioner shall be !uilty of an offence> %)> The 1ommissioner is empo"ered under section 2%2 of the 2ct to direct the person concerned to apply the property in such manner as is specified in the order< if the 1ommissioner is satisfied X AaB that a person or persons in possession or control of any property held by or on trust for a charity is or are un"illin! to apply it properly for the purposes of the charityH and that it is necessary or desirable to ma:e an order under this section for the purpose of securin! a proper application of that property for the purposes of the charity>

AbB

2ny person "ho contra&enes such order shall be !uilty of an offence> %*> Knder section 31 of the 2ct< charity proceedin!s may be ta:en either by the charity< or by any of the charity trustees< or by any person interested in the charity< but not by any other person> 4o charity proceedin!s relatin! to a charity Aother than an e;empt charityB shall be entertained or proceeded "ith in any court unless the ta:in! of the proceedin!s is authorised by order of the 1ommissioner> The 1ommissioner shall not< "ithout special reasons< authorise the ta:in! of charity proceedin!s "here in his opinion the case can be dealt "ith by him under the po"ers of the 2ct> Such re@uirements do not apply to the ta:in! of proceedin!s by the 2ttorney7eneral< "ith or "ithout a relator> (-> Where it appears to the 1ommissioner< on an application for an order< that it is desirable for le!al proceedin!s to be ta:en "ith reference to any charity Aother than an e;empt charityB or its property or affairs< and for the proceedin!s to be ta:en by the 2ttorney-7eneral< the 1ommissioner shall inform the 2ttorney-7eneral< and send him such statements and particulars as the 1ommissioner thin:s necessary to e;plain the matter> (1> 2ppeals to the #i!h 1ourt a!ainst orders or decision of the

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1ommissioner are re!ulated by 9ules of 1ourt> Knder section +% of the 2ct< on such an appeal< the 2ttorney-7eneral shall be entitled to appear and be heardH and such other persons as the 9ules allo" or as the #i!h 1ourt may direct may appear and be heard> Section +(2 of the 2ct pro&ides that proceedin!s in respect of any offence under the 2ct or any re!ulations made thereunder may be conducted by any public officer "ho is authorised to conduct such proceedin!s by the 1ommissioner "ith the consent of the 2ttorney-7eneral>

S$&#( Afr' a
(2> 2 .irectorate for 4onprofit ,r!anisation has been established by the Minister under section + of the 4onprofit ,r!anisations 2ct 1**(> Knder sections 5 and % of the 2ct< the .irectorate is responsible for: AaB AbB facilitatin! the process for de&elopin! and implementin! policyH determinin! and implementin! pro!rams< includin! pro!rams X AiB AiiB AcB AdB to support nonprofit or!anisations in their endea&our to re!isterH and to ensure that the standard of !o&ernance "ithin nonprofit or!anisations is maintained and impro&edH

liaisin! "ith other or!ans of state and interested partiesH and facilitatin! the de&elopment and implementation of multi-sectoral and multi-disciplinary pro!rams>

(3> The .irectorate must prepare and issue model documents< includin! model constitutions for nonprofit or!anisations< and a model of the narrati&e report to be submitted by re!istered nonprofit or!anisations to the .irectorate> It must also prepare and issue codes of !ood practice for nonprofit or!anisations< and those persons< bodies and or!anisations ma:in! donations or !rants to nonprofit or!anisations> (+> 2ny nonprofit or!anisation that is not an or!an of state may apply to the .irector for re!istration under section 12 of the 2ct> Knder section 1+ of the 2ct< upon refusal by the .irector to re!ister a nonprofit or!anisation< the or!anisation may appeal a!ainst the decision by submittin! to the .irectorate for consideration by an 2rbitration Tribunal> If the 2rbitration Tribunal upholds an appeal< the .irector must re!ister the or!anisation by enterin! its name in the re!ister> In case of non-compliance "ith constitution and obli!ations by re!istered nonprofit or!anisation< the .irector "ill send a compliance notice in the prescribed form to a re!istered nonprofit or!anisation and refer the nonprofit or!anisation to the South 2frican 0olice Ser&ice for criminal in&esti!ation if it is satisfied that any noncompliance may constitute an offence>

32+

(5> Knder section 21 of the 2ct< if a re!istered nonprofit or!anisation "hich has recei&ed a compliance notice sent by the .irector does not comply timeously "ith the notice or ma:es material false representations in respect of the documents or reports submitted to the .irector< the .irector must cancel its certificate of re!istration and its re!istration> It "ill notify the or!anisation in "ritin! of the cancellation< the reasons for it< and the date on "hich the re!istration "as cancelled and amend the re!ister accordin!ly> (%> 2 re!istered nonprofit or!anisation may refer the decision of the .irector to cancel its re!istration for arbitration by an 2rbitration Tribunal under section 22 of the 2ct>

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