Newsletter - June 2009
LawWorks for Community Groups
Welcome to the LawWorks for Community Groups newsletter featuring articles which may be of interest to lawyers advising charitable clients, particularly if charity law is not their usual field of work. We aim to keep you updated on key legal developments affecting the charitable sector, plus stories of broader interest to the Third Sector. We hope you find the newsletter useful and interesting – please let us know if you have any feedback or suggestions
Best wishes,
Ruth Thompson (Newsletter Editor)
In this issue:
Protest over Charity Commission's conduct on new legal powers
Charities could benefit from EU contracts legislation
Give tax relief to investors in social enterprises, sector tells ministers
Call for guide to variations in charity law
What are social enterprises?
CIC Regulator launches review of dividend cap
Mergers not the only option for charities to ride out recession
Protest over Charity Commission's conduct on new legal powers
Paul Jump, Third Sector, 28 April 2009
Lawyer claims regulator failed to retrieve legacies on behalf of charities.
A senior lawyer has accused the Charity Commission of failing to engage with the profession over its controversial new powers to force people to hand over charitable funds they hold on trust.
Ian Davies, a senior associate at Wilsons, said he had contacted the commission for a number of charities that were left money in a will several years earlier but had not yet received it.
He said he asked the commission to use the new power, which is in the Charities Act 2006 and came into force last year, but the commission refused and failed to explain its reasons.
"We sent three letters and really went to town on the second one, but the response was brief to the point of discourtesy," he said.
The commission had an obligation to engage with lawyers as it developed guidelines on when it would use potentially controversial new powers, he said.
Charities could benefit from EU contracts legislation
Mathew Little, Third Sector Online, 7 May 2009
Remedies Directive consultation paves the way for legal change.
Charities that feel they have lost out on public service contracts because the bidding process was unfair could be given the right to appeal for the contracts to be cancelled.
The EU introduced the Remedies Directive in 2007 to improve procedures relating to the awarding of public contracts. Under draft legislation drawn up by the UK Office of Government Commerce to implement the EU rules, courts will be able to cancel contracts that breach procurement rules and order a new tender process. The proposals were put out to consultation on 30 April.
Under the current rules, charities and other bidders can apply for damages if a procurement process turns out to be flawed but the contract remains in place.
"There is a general right to damages if you suffer loss as a result of a failed procurement process," said Julian Blake, a partner with law firm Bates Wells & Braithwaite. "But this Remedies Directive is recognising that the general right is often not really want you want. What you really want is for the whole process to be dealt with again, so you can get the opportunity to get the contract."
The Remedies Directive consultation runs until 24 July and legislation on the directive is expected to be laid before Parliament later this year.
Give tax relief to investors in social enterprises, sector tells ministers
David Ainsworth, Third Sector Online, 14 May 2009
The Government should consider giving tax relief to people who put money into social investment, social entrepreneurs told a group of top ministers.
It was one of the suggestions put to community secretary Hazel Blears, business secretary Lord Mandelson, work and pensions secretary James Purnell, and Cabinet Office minister Liam Byrne by the heads of about 20 social enterprise organisations at a meeting in London this week.
They were meeting to discuss the role of social enterprise in the future economy at a summit organised by the Cabinet Office .
Call for guide to variations in charity law
Mathew Little, Third Sector, 19 May 2009
The authorities should publish guidance summarising the differences in charity law across the British Isles, according to some charity lawyers.
The Charity Law Association held a symposium in November on the different systems of law and regulation in England and Wales, Scotland, Northern Ireland and Ireland. The transcript was released last week.
Some of those attending, who included charity lawyers, senior officials from the Charity Commission and the Office of the Scottish Charity Regulator, representatives of the UK, Scottish and Northern Ireland governments and academics, said comparative guidance should be published to explain how and where the law differed and how charities should respond.
It was suggested that HM Revenue & Customs could compile the guidance because it assessed the charitable status of organisations in Scotland and Northern Ireland for tax purposes, but used the English definition of charity.
One major area of divergence is the enforcement of public benefit rules.
What are social enterprises?
Business Link
Social enterprises are commercially run, profit making organisations that are driven by social aims. Their profits are reinvested into social, community or environmental objectives.
If you generate the bulk of your income from trading and use the majority of your profits to further social or environmental goals then your business or charity might already be classed as a social enterprise.
Click here to see more info and a fact sheet on social enterprises from Business Link.
CIC Regulator launches review of dividend cap
Office of the Third Sector
CICs were introduced in July 2005 as a bespoke legal form for social enterprise, combining the flexibility of a limited company with a community purpose. The business model enables social enterprises to attract investment by issuing shares and paying returns to investors, while a limit is set on those returns to guarantee the majority of profits are put back into the community.
There are now more than 2,600 CICs in the UK, offering a wide range of goods and services and making a real difference to the lives and wellbeing of people across the country.
In Real Help for Communities, The OTS announced that the CIC regulator would be undertaking a review of the limits on distributions of CICs. The Regulator of Community Interest Companies, Sarah Burgess said: “I've heard anecdotal evidence about the impact the current limits have on a CIC's ability to secure investment. I now want to gather wider evidence so I can take an informed view about whether or not the limits should be changed and, if so, how.”
Anyone with experience to share should respond to the review. The review will run for 12 weeks, closing on 19 June 2009.
Article and link to review website
Mergers not the only option for charities to ride out recession
Charity Times, 5 May 2009
Mergers are not the only option for charities looking to ride out the recession, according to a leading charity law expert.
Catherine Rustomji, head of Third Sector North and charity law specialist with Hempsons, said recent Charity Commission reports that more than half of UK charities are feeling the effects of the downturn with 64% of the largest charities concerned that future work will be affected, had put the spotlight on potential joint working.
She said: “It has long been predicted that Third Sector organisations will choose to merge in response to the recession, but according to the Commission only 3% of charities are actually considering that route.
“Some charities are linking up with social enterprises where there is a distinct opportunity to move into areas previously solely serviced by the private sector, but others are looking at innovative ways to share expertise and costs in a less formal way.”
Informal collaborations could bring substantial benefits, added Catherine, but the joint service providers must have clear agreements on demarcation of risk and function.
Joint ventures might also be an option, adding more formality to the agreement and isolating the “parent” charities from risk, so that if the venture failed, only the assets of the joint venture company itself would be at risk.
“A collaboration or joint venture is seen by some as a getting-to-know-you phase, which eventually leads to a merger, but not all planned mergers proceed and not all mergers work,” said Rustomji.
“To be successful, mergers must address crucial issues, from compatibility of objectives and advantages of economies of scale to organisational fit and staff integration.”
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