New purposes for smaller charities

(CSD1346A)

This guidance is designed to help you change the purposes of a non-company charity with an annual income of under £10,000.

Contents

1. Who is this guidance for?

1.1. This guidance is for trustees of charities that:

  • have a total yearly income from all sources of less than £10,000;
  • do not have land that has to be used to achieve some or all of the charity’s purposes; and
  • are not companies or some other form of body corporate.

1.2. Where a charity meets those requirements its trustees can decide to change their charity’s purposes, provided that they:

  • believe their charity will be more effective if some or all of its purposes are changed; and
  • do not have a power in their governing document that lets them make the change.

1.3. Even though they do not have a power in their governing document, it is still relatively simple for these charities to change their purposes by using the power provided by the Charities Act 1993, as altered by the Charities Act 2006 (the power to change purposes).

1.4. If, having read this guidance, you think that you cannot use this procedure but believe that your charity’s purposes need to be changed, we may still be able to help. Please see our publication Changing your Charity’s Governing Document (CC36) for more information. More specific advice on making changes to charities’ governing documents is also available in our information note Amending Governing Documents: Unincorporated Charities (CSD 1342A) and our Operational Guidance Alterations to governing documents: charitable companies (OG47).

1.5. All the publications referred to in this guidance are available from www.charitycommission.gov.uk or can be obtained by telephoning, writing to or e-mailing our Contact Centre.  

1.6. Please see section 7 for the telephone numbers for our Contact Centre and the postal and e-mail addresses you should use.

2. Some terms used in this guidance

In this guidance:

  • where we use ‘must’, we mean it is a specific legal or regulatory requirement affecting trustees or a charity. Trustees must comply with these requirements;
  • we use ‘should’ for items we regard as minimum good practice, but for which there is no specific legal requirement. Trustees should follow the good practice guidance unless there is a good reason not to;
  • we also offer less formal advice and recommendations that trustees may find helpful in managing their charity.

A body is a charity if it is:

  • set up under the law of England and Wales; and
  • established for exclusively charitable purposes.

This guidance does not apply to organisations set up under the laws of a foreign country, or in the Channel Islands, the Isle of Man, Northern Ireland or Scotland.

Charitable company means a charity formed as a company and registered at Companies House with a memorandum and articles of association as its governing document.

Designated land is land held upon trusts that require it to be used for any or all of the purposes of a charity, for example a village hall or recreation ground.

Governing document means any document that sets out a charity’s purposes and, usually, how it is to be run. It may be a trust deed, constitution, memorandum and articles of association, Scheme of the Commission, conveyance or will.

Purposes means the aims and activities that a charity has to carry out and for which its assets must be used. They must be exclusively charitable in English and Welsh law and will be set out in a charity’s governing document. They will usually be found in a specific clause or paragraph near the beginning of the document, but may also be found elsewhere, for example, in a clause or paragraph that says how specific property must be used or that directs how the charity’s assets are to be used when it is dissolved.

Trustees means charity trustees. You are a charity trustee of an unincorporated charity if you are:

  • a member of the committee that is responsible for running a charitable group such as a community association or a parent teacher association; or
  • the trustee of a charitable trust (charitable trusts are usually created by a formal legal document, such as a declaration of trust or someone’s will).

An unincorporated charity is a charity that is established as a trust or an unincorporated association. This means that they usually have a constitution, rules, or a formal legal document such as a trust deed or a will as their governing document.

3. What should trustees do before they pass a resolution?

3.1. We strongly recommend that trustees regularly review how effectively their charity is achieving the purposes set out in its governing document. Signs that the purposes may be in need of updating include difficulties spending all the charity’s available money, struggling to find people to help or lack of knowledge about what exactly a charity’s purposes are and ways of achieving them.

3.2. Updating the purposes is often the right solution (other options might be to transfer the assets to another charity or dissolving the charity) but it is important to choose appropriate new purposes and to follow the correct procedure.

3.3. The power to change purposes gives the trustees of the small charities referred to in paragraph 1.1 a power to change their charity’s purposes. The power is intended to be used when the charity’s governing document:

  • does not contain a power of amendment that allows the trustees to change its purposes; or
  • if there is such a power,
    • it is too limited to allow the trustees to take the most appropriate new purposes, or
    • the administrative procedure required is more administratively difficult to use than that provided by the law.

3.4. Before replacing the charity’s existing purposes with modified ones, the trustees must satisfy themselves that the existing purposes no longer provide a suitable and effective application of the charity’s resources. If they are satisfied, they can decide upon a modified form of words to replace the existing purposes in the charity’s governing document. They may find a suitable wording in the examples on our website. Alternatively their charity may be a member of an umbrella group that can provide model purposes that will be suitable for the charity’s needs.

3.5. If the trustees are unsure how to proceed they can also seek professional legal advice, ask for advice from an umbrella group, or contact us for help.

3.6. The trustees may modify as much or as a little of the existing purposes as they wish. The modified purposes must, however, be as similar in character to the existing purposes as is practical in the circumstances. What is practical will depend upon:

  • the available income and assets of the charity – for example, if it is very difficult to spend any of the charity’s money within the scope of the existing purposes, it is likely to be more practical for the nature of the changes to be more extensive than if the charity experiences only slight difficulties in spending all its money;
  • the needs of those who benefit from the charity – for example, if the charity has a beneficiary class that comprises elderly people who are in need in a particular locality, it will probably be practical for the purposes to be changed so that income that cannot be spent for that purpose can be spent on relieving other people in the locality who are in need. However, it is likely that there will be grounds for us to object if the purposes change in a way that makes the income available for providing recreational facilities in the locality with equal priority to helping the elderly people. This means that the interests of the existing beneficiaries may be harmed because less income may be available to help them and the change is unlikely to be as similar in character to the existing purposes as is practical in the circumstances because the change does not enable other people in need in the locality to benefit.

3.7. The new purposes must be wholly charitable and should:

  • be expressed in modern language; and
  • allow the trustees to apply the charity’s resources in an effective way while maintaining the original character of the charity.

3.8. Trustees cannot change the purposes in such a way that they cease to be charitable and must be satisfied that the change is in the best interests of their charity.

3.9. Having satisfied themselves that it is in the charity’s best interests to change its purposes and that all the other requirements are met, the trustees must pass a formal resolution to enable the change. We recommend that the wording of the resolution makes it clear that the trustees are using the power provided by section 74C of the Charities Act 1993, as altered by the Charities Act 2006.

4. Passing a resolution

4.1. To pass a resolution, the trustees must call a meeting or otherwise act in the way required by the charity’s governing document for their proposals to be voted on. If the governing document sets a quorum for trustees’ meetings then at least that number of trustees must be present at the meeting. A postal vote of the trustees may be used if the governing document allows it.

4.2. A resolution using the power to replace purposes must be passed by a majority of two-thirds of the trustees of the charity who actually vote on it. This means that:

  • trustees who are present at the meeting where the resolution is passed and do not vote; or
  • trustees who have not voted in a postal ballot;

cannot be included in the calculation of the majority.

4.3. For example, if there are four trustees present at a properly constituted meeting:

  • two vote in favour of the resolution;
  • one votes against the resolution; and
  • the other does not vote,

the resolution is validly passed because two thirds of the trustees voting on the resolution have voted in its favour, despite the fact that only half those present have voted for it.

4.4. When they have passed the resolution the trustees must send us a copy together with a statement of their reasons for passing it. The copy can be sent to us either by post or e-mail using the respective addresses given in section 7. If the charity is not registered with us, we recommend that the trustees also send us copies of the charity’s governing document and its latest accounts, as we will need information included in those documents to help us decide whether or not we should object to the resolution.

4.5. We strongly recommend that when sending us a copy of a resolution trustees use our declaration form CSD 1346B pdf icon small, which can either be downloaded from our website or obtained by telephoning our Contact Centre on the number given in section 7. The completed form (together with copies of the governing document and the latest accounts, if the charity is not registered with us) should provide us with all the detail we need to consider the resolution and reduce the risk of us having to ask for additional information, which will delay the change.

5. What we do when we receive a copy of a resolution using the power to replace purposes

5.1. When we receive a copy of a resolution using the power to replace purposes, together with a statement of the reasons for passing it, we will first check that all the requirements for passing such a resolution have been met. We are allowed 60 days to do this from the date we receive the resolution (the 60-day period).

5.2. If we are satisfied that the requirements have been met we will acknowledge the resolution advising the trustees of the date when it will come into force. If the trustees use our model declaration form, we expect that we will be able to do this in most cases.

5.3. If we are not sure that the requirements have been met we can ask the trustees to:

  • give public notice of the resolution in a way that we decide; and/or
  • provide us with more information or an explanation about the circumstances in which they have decided to act and their compliance with any of the requirements connected with the resolution.

5.4. The circumstances when we may ask for public notice or additional information include where we are not certain that:

  • the proposed purposes are sufficiently similar to the existing purposes in the circumstances; or
  • the procedural requirements have been followed; or
  • if it has a membership, the charity’s members are aware of the resolution; or
  • the charity’s purposes can be changed by using the power to change purposes.

5.5. If we require notices to be published, 28 days are allowed from the date of first publication for people with an interest in the charity to contact us with their comments on the resolution. Examples of people who might have an interest in a charity include beneficiaries or potential beneficiaries, donors or someone who is owed money by the charity.

5.6. Where we require:

  • the publication of a notice (or notices), the 60-day period is suspended for a period starting on the date on which we give the direction until 42 days (the 42-day period) from the date on which the trustees first publish the notice(s);
  • additional information, the 60-day period is suspended until we receive the information.

5.7. If we have required both the publication of notices and additional information the 60-day period is suspended until the end of the 42-day period or we receive the required information, whichever is the later. If the 60-day period is suspended for a period of more than 120 days because the trustees have not published the required notice or notices or provided the required information we will treat the resolution as if it had never been passed and it cannot come into force.

5.8. In cases where we require the publication of notices and/or additional information and the outcome of the publication and/or the information provided:

  • satisfies us that all the legal requirements have been met, we will then write to the trustees indicating we have no objection to the resolution and indicate the date on which the resolution will come into force;
  • does not satisfy us that all the legal requirements have been met we will write to the trustees telling them we object to the resolution and the reasons why. Our objection prevents the resolution from coming into force.

6. What happens at the end of the 60-day period?

6.1. If we do not object to the resolution, it comes into force at the end of the 60-day period, the date of which will be stated in the letter or e-mail from us that indicates that we have no objection to the resolution. From that date the trustees must use the charity’s assets for the new purposes.

6.2. If the charity is entered on the Register of Charities we will change its entry to show the new purposes at the end of the 60-day period.

7. Contacting us

If you have a query about this guidance or need further advice about using the power to change purposes or some of the other publications or forms referred to in this guidance, please telephone our Contact Centre on 0845 300 0218 (minicom 0845 300 0219) or email us or write to the following address:

Charity Commission Direct
PO Box 1227
Liverpool
L69 3UG

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