Clause 41

Charities Bill [Lords] – in a Public Bill Committee at 5:30 pm on 11 July 2006.

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Power to replace purposes

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I beg to move amendment No. 41, page 44, line 36, at end insert—

‘(8A) Where the rules of the charity provide that its members have the power to vote on amendments to its purposes—

(a) a period of notice of 28 days, or the period set out in the rules of the charity, whichever is greater, shall be given to all members of such a resolution; and

(b) this section shall be construed as if “members” were substituted for “charity trustees” in subsections (1) to (8).’.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

With this it will be convenient to discuss the following amendments: No. 125, in clause 42, page 45, line 14, at end insert

‘or,

‘(c) relating to the execution of the trusts,’.

No. 42, in clause 42, page 45, line 20, after ‘body’, insert

‘, of which a period of notice of 28 days or the period set out in the rules of the charity whichever is greater has been given,’.

No. 102, in clause 42, page 45, line 23, leave out

‘and without any expression of dissent’ and insert

‘but where consensus has been reached’.

No. 43, in clause 42, page 45, line 24, at end insert

‘or

(c) in accordance with the procedures of the charity, whichever is more onerous.’.

No. 126, in clause 42, page 45, line 35, at end insert

‘provided that the date specified in the resolution under subsection (2) cannot be earlier than the date of that resolution.’.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Amendments Nos. 41, 42 and 43, taken together, would mean that the period required for a charity to change its rules was the period set out in the Bill or the period set out in the rules of the charity, whichever was the greater. That is for the avoidance of doubt. Amendment No 126 to clause 42 specifies that that action cannot be backdated. We will shortly find out whether that is part of general charity law.

Amendment No. 125 to clause 42 is another of those for which I am indebted to the Charity Law Association, which tells me that it assumes that the intention behind clause 42 is to allow unincorporated charities to change anything in their governing documents other than those things that would affect the way in which the charity deals with its property. I am told that that more or less mirrors the power of amendment enjoyed by charitable companies.

The association welcomes that aim, but does not consider that the current wording offers such a broad power. It has been suggested that the wording allows charities to change pretty much anything, because the word “trusts” is as defined in the Charities Act 1993. Section 97 of that Act states that

“trusts” in relation to a charity, means the provisions establishing it as a charity and regulating its purposes and administration, whether those provisions take effect by way of trust or not”.

It goes on to say that the definition is broad enough to cover all aspects of a charity’s governing document, but that proposed new section 74D does not apply to all a charity’s trusts.

Subsection 2(a) and (b) of the proposed section 74D restrict the application of the section in such a way that it will not apply to administrative provisions that are not connected either to powers exercisable by the charity’s trustees or procedures to be followed. For example, it will not allow trustees to change provisions on the minimum number of trustees. Arguably, it would not allow them to change provisions about the quorum for trustee meetings, as it is unclear whether that falls within the term “procedure”. The provision would add a new subsection (3), applying to all provisions relating to the execution of the trusts. This is sufficient to widen the power to cover areas missed by the existing wording without enabling trustees to make changes to the way the charity can use its property.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

Amendment No. 102 would amend proposed new section 74D(4)(b) of the 1993 Act. At present, the new subsection (4) provides that

“Any resolution of the charity trustees under subsection (2) must be approved by a further resolution which is passed at a general meeting of the body...by a decision taken without a vote and without any expression of dissent.”

That is an unusually high test of consent. A number of examples spring to mind when that might be difficult to achieve. A Quaker meeting is an obvious one. Another is when there has been debate and discussion, and dissent, but a consensus is reached with the resolution not being put to a vote. In that context, I shall not press the amendment to a Division, thereby illustrating that it is possible to have debate and dissent but to achieve a resolution that is perfectly satisfactory to all concerned. It seems like a sensible, almost drafting amendment that would remove a strangely strict test of consent from subsection (4)(b).

I should be interested to hear the Parliamentary Secretary’s response to many of the amendments tabled by the hon. Member for Isle of Wight. I am sympathetic to amendment No. 41 because the trustees of a charity have a drastic power. We are discussing a charity that holds no designated land. It is neither a company nor an incorporated body and its gross income in its past financial year was less than £10,000. In effect, therefore, the charity trustees may resolve to  replace any or all of the purposes of the charity with other purposes. That is a drastic step and, even for a small charity, it is important for safeguards to be in place. Amendment No. 41 would provide a safeguard for the notification of members within the minimum period of 28 days. That is sensible and it would make a good improvement to the clause.

Amendment No. 125 would add the execution of the trusts to the modifiable powers of an unincorporated charity. I shall not pass judgment on that, but will await the Parliamentary Secretary’s remarks with interest. Amendment No. 42 also seems sensible. It would ensure that all members have been notified of the meeting at least 28 days in advance. It is consistent with the other amendments. I also support it.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

The Minister will note that, under amendment No. 42 to which the hon. Gentleman just referred, mention is again made of the word “body”. I should be glad to receive a response about that.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

Let me start by answering the question about the word “body”. A “body” is distinct from a person and could either be a corporate body or an unincorporated body.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

Will the Minister care at some stage to share with us how it differs from institution?

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I will definitely at a later date.

Let me turn now to the amendments, starting with Nos. 41, 42 and 102. Amendment No. 41 tabled by the hon. Member for Isle of Wight would place a decision about replacing any of the charities’ purposes on the membership of the charity, if it were a charity with membership. I am not sure that that is necessary. In fact, it is not. The duty of the charity and the responsibility for its administration rests with the trustees. It should be their decision and, at least, two thirds of the trustees must vote for a resolution. Secondly, the trustees must satisfy themselves that it is in the interests of the charity to proceed with such a resolution. In any case, the two-thirds majority reflects the 1993 Act. I do not believe that it is for us in the House to say to charities throughout the country that are, at present, governed by their trustees that it is now for members to make the decision. That would be a substantial change. It would be an imposition from the House on those charities, whatever the nature of their procedures, that the membership should decide.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I think that the Parliamentary Secretary is making quite a serious error. If I were mischievous, I could say that a new Labour Minister might be forgiven for misunderstanding the nature of democratic membership organisations. [Interruption.] If the hon. Member for High Peak (Tom Levitt) and others are whistling through their teeth, perhaps they may care to watch out for future amendments to the Labour party’s constitution.

The governing instruments of a charity are generally the memorandum and articles of association, but they do not always give exclusive power to the trustees to run the charity as they wish. In a membership organisation, those documents may well give sovereign  power to the membership that may comprise people who elect the trustees. That does not take away the trustees’ responsibilities, but it does give, in some sense, sovereign power to the membership. For a democratic membership organisation, this seems a perfectly reasonable amendment.

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

If there were a legal challenge to a decision taken by a body where members had collectively had the power that the hon. Gentleman is describing, who would be responsible for defending that legal challenge? [Interruption.] Was I intervening on an intervention? I beg your pardon, Mrs. Humble.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

Order. The Minister had the floor and the hon. Member for Cheltenham was intervening on the Minister, so the Minister will respond to the newer intervention from the hon. Member for High Peak (Tom Levitt).

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I am grateful to you, Mrs. Humble. Perhaps my hon. Friend the Member for High Peak would like to rephrase his intervention to me.

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

Given the scenario that the hon. Member for Cheltenham describes, if a membership organisation took a decision that was challenged legally, it would always be the trustees or the directors who were responsible for defending that challenge, not the membership as a whole. Is that not correct?

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

That is certainly my understanding. I know that the hon. Member for Cheltenham is a great expert, but I just point out, by the way, that Liberal Democrats should be careful what they say about membership organisations. I believe that they did not know the addresses of any of their members when their election took place. Anyway, members almost never have voting rights over the matters covered by proposed new section 74D(2). Members vote to elect trustees and for similar purposes, so this does not usurp membership rights. However, if the hon. Gentleman has information that contradicts that, I will happily give way to him.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I was not suggesting that anything in the constitution of a membership organisation usurps the rights of trustees. Clearly, that is not so.

If I may answer the intervention from the hon. Member for High Peak, of course a resolution by the membership binding the trustees has to be in order; it has to be within the bounds of charity law itself. Therefore, I suppose that it would be the legal officer—the company secretary or the CIO secretary—who would be responsible for defending such a resolution in the case of it being challenged. However, the purpose of the amendment is not to usurp the rights of trustees. It seems to me that the purpose is merely to insert a provision that ensures that the membership is consulted.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I do not think that the provision is about the membership being consulted. The amendment states:

“Where the rules of the charity provide that its members have the power to vote on amendments to its purposes...this section shall be construed as if ‘members’ were substituted for ‘charity trustees’ in subsections (1) to (8).”

If I understand the amendment correctly, the term “members” would be substituted for “charity trustees” throughout. I hope that that explanation answers the point.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I think that both the hon. Member for Cheltenham and the Minister have misunderstood my amendment, possibly due to it not being perfectly drafted. It states:

“Where the rules of the charity provide that its members have the power”.

Therefore, there is no intention to usurp the power of trustees in that respect.

We must always remember that there are two kinds of member. There are membership organisations, which may be unincorporated and which have members, and the rules may provide that those members have a right to vote. There are also incorporated organisations, of which the directors are members. There may be as few as two. However, in either circumstance, it does not seem unreasonable that where members have the power to vote, they should be provided with the power to vote, and we are just giving them time to vote in our proposed new subsection (8A)(a). I forget exactly what the purpose of our proposed new subsection (8A)(b) was, but it was not intended to usurp the power of charity trustees. It may well be that my amendment is defective in that respect and I will have to think about it a bit more before I wind up on this group.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

The amendment is defective, I am sorry to say, but let me move on. Amendment No. 42 also specifies a minimum period of 28 days for unincorporated charities to provide notice of a general meeting at which a resolution modifying the powers or procedures of the charity is to be considered. Again, however, it is not for us in this House to impose on organisations the notice period for a general meeting. The commission’s model governing documents for unincorporated associations suggest a notice period of at least 14 days to members and trustees, unless all agree to a shorter notice period. However, the period may vary from one organisation to the next, so, in the interests of flexibility, I am not persuaded by amendment No. 42.

Let me turn to amendment No. 102, which stands in the name of the hon. Member for Cheltenham. We are all alive to the concerns that the Religious Society of Friends has expressed in relation to the clause—indeed, it recently sent me a letter on that very point. However, its concerns are misplaced, and I shall try to explain why. As drafted, clause 42 allows for a resolution to be approved by a decision taken at a general meeting without a vote and without any expression of dissent. However, the key point is that clause 42 allows for dissent in the debate, even though it requires a decision  without dissent. That is perfectly consistent with the notion of consensus, which the Religious Society of Friends understandably thinks is important.

Proposed new section 74D(4)(b) of the 1993 Act says:

“by a decision taken without a vote and without any expression of dissent.”

I am assured—although I promise to check on this point—that the expression of dissent is taken to mean for the process of voting, not the previous discussion. I hope that hon. Members will accept my assurances on that point.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 5:45, 11 July 2006

If I understand clause 41 correctly, we are talking only about where an organisation’s gross income in the past financial year did not exceed £10,000. The figure of £10,000 recurs throughout the Bill as though it describes a small charity, but it almost seems to have been plucked out of thin air. If in the previous two years a charity had raised £1 million but then stopped fundraising, it would still fall under that category. The issue relates to the earlier question about auditing. Perhaps the Minister could reflect on that point and consider whether £10,000 is a catch-all amount or whether more consideration should be given.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

The problem is that we have to draw the line somewhere, although I am happy to consider the issue again. No doubt when we consider the threshold in the Bill, that will be raised again, as the hon. Gentleman makes an important point. However, I am aware that time is marching on, so let me make progress.

Amendment No. 43 stands in the name of the hon. Member for Isle of Wight. I confess that we do not totally understand the nature of his amendment, because it is not wholly clear what is meant by “whichever is more onerous”. I do not know whether I missed that in the hon. Gentleman’s remarks, but perhaps he would like to explain it to us.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

It simply meant that the charity might have already set out procedures that require more than a two-thirds majority or something else, in which case it would seem reasonable for the charity to adhere to those procedures.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

That might indeed be reasonable, but proposed new sections 74D(4)(a) and 74D(4)(b) of the 1993 Act are relatively onerous procedures as they stand. I am not sure that we necessarily need more onerous procedures than those.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

If I understand amendment No. 43 correctly, the hon. Member for Isle of Wight is not proposing to make any procedures more onerous than they are already. He is in fact doing the reverse—he is trying to prevent the Bill from making procedures that are less onerous than those that the charity has set itself under its own rules, terms and conditions. However, I am not sure that amendment No. 43 makes that entirely clear, so perhaps the general point could be considered, rather than the hon. Gentleman’s amendment as drafted.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I shall endeavour to take the point away and consider it, in order that we can make further  progress. Let me now turn to amendments Nos. 125 and 126, on both of which I hope that I can offer satisfactory reassurance.

The Government understand the hon. Gentleman’s wish for trustees to make suitable modifications to the powers and procedures of the charity. He named a couple of specific issues about which he was concerned, and I am assured that those that he named come within subsections (2)(a) and (b) as inserted by clause 42, and that the amendment is therefore unnecessary. I think that the hon. Gentleman was advised on this by the CLA, but I can give that assurance. He raised the issues of changing the quorum level and of changing the number of trustees. I am pretty certain that those are already covered under subsections (2)(a) and (b) too. If they are not, we shall obviously seek to do something about it.

Amendment No. 126 addresses the problem of ensuring that, when trustees have made a resolution, the date on which the resolution takes effect cannot be earlier than the date of the resolution. We agree that that is a necessary condition, but there is a common law rule that new rules of unincorporated associations cannot be made retrospective in the absence of an express power to that effect. We want to check that it is sufficient, however. If it is not, we shall propose an amendment, and I am grateful to the hon. Gentleman for raising the point. With that, I hope that he will withdraw his amendments.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

With the Minister’s assurances of both kinds—that my amendments are defective, where they are defective, and that they are useful, where they are useful—and with my gratitude that he has indicated he will examine the issues, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 41 ordered to stand part of the Bill.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

May I ask for clarification from Mr. Horwood, who in moving amendment No. 102 said that he might wish to press it?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I beg your pardon, Mrs. Humble. That was a rhetorical point.