Automatic disqualification

Last week, the Charity Commission published guidance on the new rules on the automatic disqualification of trustees and senior managers.

For those who don’t remember, one of the biggest changes in the Charities (Protection and Social Investment) Act 2016 was to extend automatic disqualification to more circumstances and a wider range of people. The law comes fully into force on 1 August 2018 – just over six months away.

In this blog post, I’ll sum up the changes.

What does the law say now?

Automatically disqualified individuals cannot be charity trustees. The Commission doesn’t need to do anything – for as long as the condition applies, an individual is disqualified unless the Commission gives them a waiver.

Individuals are automatically disqualified if they have unspent convictions for offences of dishonesty or deception. How long a conviction remains unspent depends upon the sentence a person was given after conviction.

Individuals are usually also automatically disqualified if subject to certain financial restrictions or disqualified from being a company director. They’re also disqualified if they were removed as a charity trustee, officer, agent or employee by the Commission or High Court due to misconduct or mismanagement.

What’s changing?

A wider range of circumstances will now trigger disqualification. The new offences are:

• several terrorism-related, money laundering and bribery offences
• violating certain Commission orders relating to finances or property
• misconduct in public office, perjury or perverting the course of justice
• disobeying an order or direction of the Commission on application to the High Court
• attempting, aiding or abetting either these offences, or offences of deception or dishonesty.

Some new cases apart from criminal offences are also covered under the new rules:

• civil contempt of court relating to false statements (only for as long as disqualification would have lasted had the same penalty been imposed for a criminal conviction)
• where someone is designated by the Treasury for reasons linked to terrorist activity
• where someone is subject to notification requirements under the Sexual Offences Act 2003.

The bigger issue is probably that senior managers as well as trustees will become subject to automatic disqualification.

Who counts as a senior manager?

The first type of senior management function relates to the overall management of the charity. The person holding that function can only be responsible to a trustee. This person, if anyone, would probably be your chief executive (they might be called your director).

The second involves control over money. The person holding this function can only be responsible to a trustee or another employee with senior management functions that don’t involve control over money.

How large the charity is, whether a person is paid and whether their contract is permanent doesn’t matter here. The key questions are:

• what kind of responsibility does the person have?
• where in the organisational structure does the person fit?

Exceptions that prove the rule? Applying for waivers

The new rules come into force on 1 August 2018. However, from 1 February people who are affected by the new rules can apply for an advance waiver.

Individuals, not charities, apply for waivers. The Commission will decide whether to grant one based on individual circumstances and:

• the level of risk they present to the best interests of charities to which the waiver would apply
• whether giving a waiver is likely to damage public trust and confidence in a charity or charities.

There are a number of more specific factors. The Commission will want the information from the trustees of the charity or charities as part of the process.

Where can I find out more?

We’ve put together a longer piece on Knowhow Nonprofit.

The Commission has published guidance for individuals, for charities and how it decides about waivers. Unlock, the charity working on behalf of people with criminal records, will also be publishing guidance on 1 February.

We will also be discussing automatic disqualification at our Regulation Conference on 5 February. Do sign up if you’re interested!