The Brief

28.04.2009

Charities Act 2009

The Charities Act 2009 was signed into law on the 28th February 2009. As of the date of this article its provisions are not as yet effective pending the signing of commencement orders by the Minister for Community, Rural and Gaeltacht Affairs (“the Minister”).
 
The Act establishes a new regulatory body for charities known as the Charities Regulatory Authority whose function includes determining whether an organisation is a “charitable organisation” and can be registered as such under the new regime. It is important to note however that the Revenue Commissioners continue to have sole responsibility for determining whether any organisation is eligible for designation with charitable tax status.
 
No changes have been made within the Act to the legal structures available for charities who will continue to operate as heretofore, normally as charitable trusts, unincorporated associations or as charitable companies (usually limited by guarantee).
 
The Act establishes for the first time ever in Irish law a framework for regulating charities in Ireland. It provides for the establishment of the Charities Regulatory Authority (“the Authority”) and Charity Appeals Tribunal (“the Tribunal”), the dissolution of the Commissioners of Charitable Donations and Bequests for Ireland (“the Commissioners”), mechanisms for registration, regulation and protection of charitable organisations and regulation of fundraising by or on behalf of registered charitable organisations.
 
Definitions
 
A number of important definitions are contained in the Act including for the first time under Irish law a definition of “charitable purpose” which is defined as –
 
(a)           the prevention or relief of poverty or economic hardship,
 
(b)           the advancement of education,
 
(c)           the advancement of religion,
 
(d)           any other purpose that is of benefit to the community.
 
A purpose shall not be a charitable purpose unless it is of public benefit which is defined as including–
 
(a)           the advancement of community welfare including the relief of those in need by reason of youth, age, ill-health, or disability,
 
(b)           the advancement of community development, including rural or urban regeneration,
 
(c)           the promotion of civic responsibility or voluntary work,
 
(d)           the promotion of health, including the prevention or relief of sickness, disease or human suffering,
 
(e)           the advancement of conflict resolution or reconciliation,
 
(f)            the promotion of religious or racial harmony and harmonious community relations,
 
(g)           the protection of the natural environment,
 
(h)           the advancement of environmental sustainability,
 
(i)            the advancement of the efficient and effective use of the property of charitable organisations,
 
(j)            the prevention or relief of suffering of animals,
 
(k)           the advancement of the arts, culture, heritage or sciences, and
 
(l)            the integration of those who are disadvantaged, and the promotion of their full participation, in society.
 
A “charitable organisation” is defined as –
 
(a)           the trustees of a charitable trust, or
 
(b)           a body corporate or an unincorporated body of persons -
 
(i)                   that promotes a charitable purpose only,
 
(ii)                 that under its constitution is required to apply all of its property (both real and personal) in furtherance of that purpose, except for moneys expended-
 
(I)                   in the operation and maintenance of the body, including moneys paid in remuneration and superannuation of members of the staff of the body, and
 
(II)                 in the case of a religious organisation or community, on accommodation and care of members of the organisation or community,
 
and
 
(iii)                none of the property of which is payable to the members of the body other than in accordance with Section 89,
 
but shall not include an “excluded body” which is defined as –
 
(a)           a political party, or a body that promotes a political party or candidate,
 
(b)           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,
 
(c)           an approved body of persons within the meaning of Section 235 of the Taxes Consolidation Act 1997,
 
(d)           a trade union or a representative body of employers,
 
(e)           a chamber of commerce, or
 
(f)            a body that promotes purposes that are -
 
(i)                   unlawful,
(ii)                 contrary to public morality,
(iii)                contrary to public policy,
(iv)                in support of terrorism or terrorist activities, whether in the State or outside the State, or
(v)                  for the benefit of an organisation, membership of which is unlawful.
 
Offences
 
The level of penalty provided for offences committed under the Act are on summary conviction a fine not exceeding €5,000 and/or 12 months imprisonment and on indictment a fine not exceeding €300,000 and/or 10 years imprisonment. The Authority has the power to bring summary proceedings for offences alleged under the Act.
 
Charities Regulatory Authority
 
The general functions of the Authority (which shall be effective from the ‘establishment day’ as per the Ministerial commencement order) shall be to –
 
(a)           increase public trust and confidence in the management and administration of charitable trusts and charitable organisations,
 
(b)           promote compliance by charity trustees with their duties in the control and management of charitable trusts and charitable organisations,
 
(c)           promote the effective use of the property of charitable trusts or charitable organisations,
 
(d)           ensure the accountability of charitable organisations to donors and beneficiaries of charitable gifts, and the public,
 
(e)           promote understanding of the requirement that charitable purposes confer a public benefit,
 
(f)            establish and maintain a register of charitable organisations,
 
(g)           ensure and monitor compliance by charitable organisations with this Act,
 
(h)           carry out investigations in accordance with this Act,
 
(i)            encourage and facilitate the better administration and management of charitable organisations by the provision of information or advice, including in particular by way of issuing (or, as it considers appropriate, approving) guidelines, codes of conduct, and model constitutional documents,
 
(j)            carry on such activities or publish such information (including statistical information) concerning charitable organisations and charitable trusts as it considers appropriate,
 
(k)           provide information (including statistical information) or advice, or make proposals, to the Minister on matters relating to the functions of the Authority.
 
It is worth noting that all functions vested in the Attorney General regarding charitable organisations and charitable trusts are transferred to the Authority.
 
The Act also provides for the dissolution of the Commissioners and the transfer of all its employees to the Authority together with all of its functions, lands and rights and liabilities. All existing claims against the Commissioners are now deemed to be against the Authority and any legal proceedings in being shall substitute the Authority for the Commissioners.
 
Regulation of Charitable Organisations
 
The Authority shall establish a register of charitable organisations. All charitable organisations who intend to operate or carry on activities in the State shall apply to be registered and it shall be the duty of the charity trustees to make the application for registration on behalf of the charitable organisation. Existing charitable organisations must apply to register within 6 months of the commencement of the Authority. The nature of the application procedure together with details of the data to be supplied by the charitable organisation on making an application for registration are set out and are very comprehensive including details such as the name and principal place of business of the organisation, the names and addresses of all charity trustees of the organisation, the places in which the organisation operates or carries on activities (including outside the State), its bank account details, kinds of activities carried on, manner of fund raising, amount raised over the past 12 months, plans for funding activities in furtherance of its objects, particulars of professional fund raising agents or consultants used or to be used, details of risk assessment procedures, safety checks and safeguards employed where its activities include working with vulnerable people, details of gross income during the previous financial year and there is an obligation on the organisation to furnish with its application for registration a copy of its accounts for the preceding 12 months (or since formation if 12 months are not available) together with a copy of its constitution and any other documents which the Authority may require including payment of a registration fee. On receipt of an application for registration the Authority may as soon as practicable either grant registration or refuse same (such refusal is subject to an appeal against that refusal by the organisation to the Tribunal). The register shall be available for public inspection at the offices of the Authority and on the internet. On registration of an organisation which is a company the Authority shall notify the Registrar of Companies.
 
Charitable organisations with an existing tax exemption and a charity number assigned by Revenue shall be deemed registered as long as their entitlement to tax exemption continues. Notwithstanding these organisations deemed registration, the Authority is entitled to ask the charitable organisation to provide the usual information specified above or is entitled to obtain same from Revenue and the charitable organisation must pay the applicable registration fee.
 
It shall be an offence for an unregistered charitable organisation to carry out activities in the State.
 
The Authority has discretion to refuse to register the name of the charitable organisation if that name is confusing, misleading, giving an incorrect impression of being connected to something it is not so connected to or offensive. Once registered the name of a registered charity cannot be changed without the Authority’s consent. A decision by the Authority to refuse consent to registration of a name or change of name can be appealed to the Tribunal.
 
The Authority can remove a charitable organisation from the register if, following consultation with the Gardai, it is of the opinion that the organisation has become an excluded body by virtue of promoting purposes that are unlawful, contrary to public morality or public policy or in support of terrorism or terrorist activities or for the benefit of an organisation, membership of which is unlawful.
 
The Authority can remove a charitable organisation from the register where there is a breach of accounts regulations provided for under the Act, where the organisation fails to give information following a direction for same by the Authority, where it changes its name without consent or is convicted of an offence, where the Authority believes it is not a charitable organisation (and obtains a High Court Declaration to this effect) and where a charity trustee ceases to be qualified to hold office (and a High Court Order is obtained to this effect).
 
It shall be an offence to hold out a body as being a registered charity where it is not or to hold out that a body is established inside or outside the State where it is not. A registered charity shall refer to its registered status at all times in all public documents and publications and shall provide such other information as may be prescribed by the Minister by regulation to include giving the names of the charity trustees and address of its principal office. The Minister may also make regulations exempting a particular class of charitable organisation from any of the requirements of such regulations.
 
The charity trustees of a charitable organisation which is NOT a company must keep proper books of account in a specified format which must be maintained by the charity trustees for not less than 6 years from the financial year end to which those accounts refer and which also must be preserved in the event of dissolution or termination of the organisation.
 
The charity trustees of a charitable organisation shall prepare annual statements of account in respect of each financial year as prescribed by regulations to be made by the Minister. An income and expenditure account together with a statement of its assets and liabilities will suffice where an organisations gross income/expenditure does not exceed €100,000 in the relevant year. This requirement does not apply to charitable organisations who are companies, ‘education bodies’ as defined in the legislation, charitable organisations whose gross income/expenditure is less than €10,000 in the relevant year (or such greater amount not exceeding €50,000 as may be prescribed by the Minister) or a centre for education so designated by the Minister.
 
In relation to charitable organisations which ARE companies, the Registrar of Companies shall be obliged to copy the annual returns and documents annexed to those returns to the Authority as soon as practicable after receiving same regarding companies whose registration with the Authority has been notified to the Registrar of Companies by the Authority.
 
Charitable organisations accounts must be audited not more than 9 months after the end of their relevant financial year end by a qualified person where the organisations gross income/expenditure exceeds an amount to be prescribed by the Minister (which in any event shall not be greater than €500,000). A charitable organisation to whom this provision applies can choose whether its accounts be audited by a qualified person or whether same shall be examined by an independent person approved by the Authority (unless the Authority direct the accounts shall be audited in which case the organisation does not have any choice). In the event of contravention or the Authority not being satisfied with the position the Authority can order an audit and the expense incurred in having same carried out is recoverable by the Authority as a simple contract debt against the charitable organisation. This requirement does not apply to charitable organisations who are companies, ‘education bodies’ as defined in the legislation, charitable organisations whose gross income/expenditure is less than €10,000 in the relevant year (or such greater amount not exceeding €50,000 as may be prescribed by the Minister) or a centre for education so designated by the Minister.
 
The charity trustees of a charitable organisation must prepare and submit an annual report to the Authority regarding its activities in the financial year not later than 10 months (or a longer period should the Authority specify) and the Minister can make regulations relating to the annual report and what information should be provided in same. The annual report shall be accompanied by specified documents including statements of account, income and expenditure accounts and statements of assets and liabilities, the auditor/independent person’s report, the annual accounts (where the organisation is a company which is not required to annex its accounts to its annual return). The Authority can keep the annual report and documents annexed to it received by it for such period as it thinks fit.
 
The Authority may by direction in writing require a charitable organisation to provide it with such information as it may reasonably require to perform its functions and the charitable organisation must comply with the direction.
 
All charitable organisations annual reports shall be capable of being inspected by the public unless they relate to private charitable trusts (not funded by donations from the public).
 
Charity trustees shall cease to be qualified for and shall cease to hold their positions if adjudicated bankrupt, make compositions/arrangements with their creditors, are a company being wound up, are convicted on indictment of an offence, are sentenced to a term of imprisonment, are the subject of an order under Section 160 of the 1990 Companies Act or prohibited, removed or suspended as a trustee under the 1990-2008 Pensions Acts or have been removed from the position of charity trustee by High Court order.
 
If an auditor, charity trustee, investment business firm or someone involved in the preparation of a charitable organisations annual report is of the opinion that there is/has been theft/fraud occurring/occurred amounting to an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001 that person must notify the Authority in writing of that opinion and provide the Authority with a report in writing of the particulars of the grounds upon which that opinion was formed, failing which that person shall be guilty of an offence.
 
Provision for protection from civil liability is made for ‘whistleblowers’ who report breaches of the Act to the Authority where those persons act in good faith.
 
Provision for protection of employees from penalisation for reporting breaches of the Act to the Authority is made where those employees act reasonably and in good faith.
 
It shall be an offence to knowingly make a false statement to the Authority regarding an offence/non compliance with any provision under the Act or an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001.
 
Protection of Charitable Organisations
 
The Authority may appoint inspector(s) to investigate affairs of charitable organisations and to prepare reports arising from such investigations in whatever manner the Authority shall direct.
 
All books, documents, records regarding a charitable organisation in the power possession or control of a charity trustee, agent of a charitable organisation or other relevant person in the opinion of the inspector shall be produced to the inspector and all assistance shall be given by that person to the inspector when required by the inspector to include the bank accounts of that person where the inspector has reasonable grounds for believing misconduct (whether fraudulent or not) on the part of that person. An inspector can carry out examinations on oath. Failure to comply with these provisions shall constitute an offence. An agent includes a banker, solicitor or auditor to the organisation whether current or former and a charity trustee includes a trustee to the organisation whether current or former.
 
The inspectors report(s) may be disseminated by the Authority as it considers appropriate to the charitable organisation or (on request and on payment of such fee as may be prescribed by regulation) a charity trustee of the organisation or person whose conduct is referred to in the report, the auditors of the organisation, any other person (including staff member of the organisation) whose financial interests appear to be affected, the Central Bank, the Revenue Commissioners or the Director of Public Prosecutions. The Authority may also publish any report(s) as it considers appropriate.
 
The Authority pays all expenses of and incidental to an inspectors investigation and these expenses can be recovered by the Authority in the context of any successful proceedings taken by it arising from the investigation.
 
The Authority has the power to direct in writing that a charitable organisation produce books, documents and records where the Authority is deciding whether to appoint an inspector or is of the opinion that there is intent to defraud or commit an unlawful act on the part of the organisation. Failure to comply with such a direction shall constitute an offence and in the event of failure to comply the Authority can apply to the District Court for entry and search orders and can take possession of any books, documents or records applicable.
 
The Authority may apply to the High Court for a range of orders to protect charitable organisations where in relation to that charitable organisation an offence under the Act has been or is being committed, a provision of the Act has not been or is not being complied with, an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001 has been or is being committed, any property is being misapplied or dealt with in an endangering manner or there has been misconduct/mismanagement on the part of any charity trustee or member of staff. The orders available are wide and varied, may be interim, interlocutory or permanent and can include suspension/removal of a charity trustee/member of staff, prohibition on removal, sale or application of property, vesting any property in the Authority, appointing alternate charity trustees, directing debtors not to pay debts for specified periods or to pay them to such other person as may be specified and restricting or prohibiting the entering into of agreements by the organisation.
 
Charity Appeals Tribunal
 
The Charity Appeals Tribunal is established to determine appeals provided for by the Act. All proceedings heard by and dealt with by the Tribunal shall be conducted in public.
 
Any party to a proceeding before the Tribunal can appeal the Tribunal’s decision to the High Court on a point of law.
 
 
Miscellaneous
 
The Act contains a number of helpful and varied miscellaneous provisions which can be summarised as follows –
 
A charitable organisation can enter an agreement in writing with one of its charity trustees or a person personally connected with one of its charity trustees for provision by that person of a service to or on behalf of the charitable organisation in consideration of the payment to that person of a sum or sums out of the property of the charitable organisation. Such an agreement is only possible where the sum payable is reasonable and proportionate having regard to the service being provided and where the other charity trustees are satisfied that the agreement is in the best interests of the charitable organisation. If the charitable organisation in issue only has one charity trustee then this type of agreement shall only be possible with the approval of the Authority. If an agreement of this nature is entered into in contravention of this section of the Act then the agreement is automatically null and void. Notwithstanding this fact the charitable organisation is not estopped from recovering damages for any loss incurred by it pursuant to the terms of such an agreement.
 
If a charity trustee comes before a court for breach of trust but it appears to the court that the trustee has acted honestly and reasonably and in all the circumstances should be excused the court may relieve him of all or part of his liability.
 
A charitable organisation may take out ‘trustee indemnity insurance’ whereby the organisation can pay for an insurance policy to indemnify its charity trustees out of charity funds regarding any liability on the part of its trustees from acts carried out in good faith and in the performance of their functions as charity trustees.
 
The Street and House to House Collections Act 1962 is amended by the broadening of the definition of collection to include collection by standing order, direct debit, purchase of property (emblems, badges, tokens, etc). It is now obligatory for a charitable organisation to obtain a permit to carry out non-cash collection activities within any 12 month period by an application to the Chief Superintendent of the Gardai for each collection area concerned.  The collector him/herself must wear clothing bearing the name and registered number of the charitable organisation in a prominent and clearly legible manner and any form/paperwork to be completed shall bear the same details together with the permit number and bank details into which contributions are to be made, such details to be in a prominent and clearly legible manner. For all other collections the collection box must specify the permit number, bear the name of the charitable organisation concerned and its registered number and be completely sealed with all monies donated to be inserted into the collection box in the presence of the donor. The Minister may after consulting with the Authority make regulations regarding the manner and conduct of fund raising by or on behalf of charitable organisations to include both ‘normal’ collections and non-cash collections under the 1962 Act to ensure that fund raising is not carried out in a manner that intrudes unreasonably on privacy, involves persistent approaches, results in undue pressure or involves false or misleading representations.
 
A person who sells mass cards other than pursuant to an arrangement with a ‘recognised person’ is guilty of an offence under the Act. A ‘recognised person’ is a Bishop of the Holy Catholic Apostolic and Roman Church or the Provincial of an order of priests established under the authority of and recognised by that Catholic Church. There is a presumption under this provision that a sale of a mass card is not pursuant to an arrangement with a recognised person unless the contrary can be proven on the balance of probabilities.
 
Conclusion
 
The Charities Act 2009 provides for the reform of Irish charity law and aims to ensure greater accountability by charities to enhance public trust and confidence and to increase transparency in the charities sector. The new legislation will have significant implications for all charities and their trustees and once the provisions of the Act become operational all charities and their officers must ensure that they consider the registration and reporting requirements and the implications of failure to comply with the new provisions. It is therefore important for all charity trustees to familiarise themselves with the new statutory duties imposed upon them and be prepared to implement the changes, administrative, pertaining to fundraising activities and otherwise, required. Careful consideration will be required as to whether the Act applies, whether an organisation will be deemed registered or must apply for same, what filings will be required from the effective date, what review of governance and financial operations will be needed and what, if any, additional protections (insurance or otherwise) should be introduced to protect charity trustees within an organisation to encourage their continuance with same. 

For further information please contact Brid O'Leary on 053 91 22555 or boleary@mjoc.ie

 

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