Charity and Social Enterprise Update in Brief

Autumn 2013 Charity and Social Enterprise Update In brief

Contents In the year since Lord Hodgson published his report on charity law there has been a lot of discussion about his recommendations but Charity law reform 3 so far, little action, report Rosamund McCarthy and Christine Rigby. Page 3 News in brief 5 Ban on TV campaigns 7 The European Court has upheld a UK ban on charity TV advertising for the purposes of campaigning and social advocacy. Email in governance 8 Lawrence Simanowitz advises that charities should not be deterred Skateistan 11 from campaigning by the decision. Page 7 CaSE Insurance 12 Tesse Akpeki and Christine Rigby outline the legal and governance Restricted funds 14 issues for boards to consider when communicating by email. Page 8 Companies Act update 16 Our client focus in this issue is on Skateistan, an international Focus on: Education 18 family of charities that provide skateboarding and educational programmes in Afghanistan and Cambodia. Page 11 Charity Commission update 22 It is important to view buying insurance for your charity or social enterprise as a vital aspect of your risk management rather than just another purchasing decision. Huw Evans of CaSE Insurance Front cover image: Skateistan outlines a good insurance-buying process. Page 12 BWB client Skateistan is an international family of charities that provide skateboarding The Charities Act 2011 provides some welcome relief for charities and educational programmes in Afghanistan struggling to use funds that appear to be locked away from use and Cambodia. For more information please with out of date purposes or restrictions. Laura Soley and Alice refer to their website www.skateistan.co.uk Faure Walker outline some ways to release much-needed funds. Page 14 Comments Please contact us with any comments Although it is now almost four years since the Companies Act 2006 or suggestions by visiting: was fully implemented, there are key changes that have yet to be https://www.surveymonkey.com/s/ fully exploited by some companies. Chinonso Denwigwe outlines BWBDepartmentalUpdatesFeedback some of the opportunities presented by the Act, and areas that can Previous updates are available at: give rise to practical challenges. Page 16 www.bwbllp.com/knowledge/updates In our education focus, Liz Goulder outlines upcoming reforms Let us know if you would like to add a to special educational needs provision, and provides a recent name to the distribution list for this or other example of a successful tribunal case, while our new senior departmental updates; if your contact details associate, Caraline Johnson, examines the complexity of spinning have changed; or if you would prefer to out school services from local authorities. Page 18 receive our update by post/email. Contact the Marketing Department at: [email protected] or And finally, in the light of recent news on a further tightening of its visit https://www.surveymonkey.com/s/ funding, we provide our regular update of news from and about the BWBDepartmentalUpdatesFeedback Charity Commission. Page 22

2 Employment Law Update | Summer 2013 Features

Charity law reform – all talk and no action?

In the year since Lord Hodgson published his report into charity law there has been a lot of discussion about his recommendations but, so far, little action.

Rosamund McCarthy and Christine What areas are likely to be changed? Rigby look at the current state of The Law Commission has already indicated it plans charity law reform to look at:

Rosamund McCarthy n areas where trustees might be given more Partner It is now over a year since Lord Hodgson published autonomy, such as disposals (and mortgages) of T: 020 7551 7751 his 159-page report reviewing charity law and making charity land and making ‘ex gratia’ payments out [email protected] recommendations for change. In the meantime of charity funds; there has been high-profile discussion (especially Rosamund advises a n in parliament) about whether charity law, and the safeguarding bequests to charities that have wide range of charities, merged; foundations and public Charity Commission, are fit for purpose. But can we benefit organisations expect reform any time soon? n easier ways for Royal Charter bodies to amend and is recommended their charter; and by Chambers UK What has happened so far? as ‘exceptionally n widening the powers of the Charity Tribunal – for professional’. Rosamund The government issued an interim response to Lord example to give the Tribunal power to suspend the was involved in the BWB Hodgson’s report in December 2012, and a fuller effects of a Charity Commission scheme or decision submissions to Lord response is expected when parliament returns from pending the outcome of an appeal. Hodgson’s review and to its summer break. In the interim, two parliamentary the Public Administration committees have also had their say: Select Committee. The Law Commission is still considering whether it n the Public Administration Select Committee (PASC) will also carry out a review of the issues relating to published its report on the Charities Act in May social investment by charity trustees – BWB’s Luke 2013; and Fletcher and Stephen Lloyd have met with the Law Commission to encourage them to do this. n in the same month the Public Accounts Committee (PAC) published a report on the Charity Commission. So far, it is disappointing that the Law Commission Christine Rigby Senior Consultant And if that was not enough, the National Audit Office seems unlikely to tackle some of the bigger issues like T: 020 7551 7712 also plans to report in the autumn on the Charity the role of the Charity Commission or widening the [email protected] Commission’s ‘effectiveness as a regulator remit of the Charity Tribunal so it can hear appeals against any decision or non-decision of the Charity Christine combines of registered charities’. Commission. But it’s possible that with enough updating clients on new political will, some of these other areas might be legal developments What plans are there to implement suggested with providing specialist changes? tackled as well. advice on constitutional and governance issues, The Law Commission, which is a government In any event, from what government has said to date, fundraising and trading. advisory board responsible for reviewing existing legislation implementing any reforms is not expected Christine was involved law and drafting new legislation, does have time set before 2016. with submissions to Lord aside in the next two years to implement changes Hodgson’s review from to charity law. The full details of its remit will be What other areas are hitting the headlines? BWB and the Charity published in a consultation paper in the first half Law Association and with The Charity Commission and charity regulation the report from NCVO’s of 2014, but already we have a fairly clear idea Lord Hodgson and the PASC were both clear about Charity Law Review that the Commission will be focusing on some very the need for the Commission to focus its resources Advisory Group, of which technical areas and not necessarily progressing all she is a member. recommendations from Lord Hodgson, the PASC on regulation, with the latter commenting that or the PAC. the Commission’s objectives, now set out in the Charities Act 2011, represented ‘an ambition that the Commission could never fulfil, even before the budget cuts were initiated’. The PAC was concerned that ‘the Commission’s approach to regulation and enforcement

Charity and Social Enterprise Update | Autumn 2013 3 Features

“It is disappointing that the Law Commission seems unlikely to tackle some of the bigger issues like the role of the Charity Commission or widening the remit of the Charity Tribunal so it can hear appeals against any decision or non-decision of the Charity Commission. But it’s possible that with enough political will, some of these other areas might be tackled as well”

lacks vigour’. With the National Audit Office review BWB’s Philip Kirkpatrick in our Spring 2013 Update in the pipeline, we can certainly expect more rhetoric (http://www.bwbllp.com/knowledge/2013/02/28/ here, though whether that translates into changes charity-and-social-enterprise-spring-update/), the to the law (or better still, improved funding for the PASC recommended that charity annual returns Commission) is difficult to predict. should set out how much of a charity’s spending has been on political and communications work. Lord Hodgson was supportive of some level of charging by the Charity Commission for filing annual What’s next? returns and for charity registration. However, the The next thing to look out for – and by the time government’s initial response was lukewarm, and the you are reading this it may well be out – is the full PASC report was not supportive of charging, except government response to Lord Hodgson’s report. This for imposing fines for late filing of annual returns. may indicate that the government is going to ‘fast track’ some areas separate to the work the Law Public benefit Commission is doing. Otherwise, we may see further As ever, there were strong views on public benefit. change within the Charity Commission as to what it Lord Hodgson’s report and the government’s interim prioritises and that, in reality, may have as much or response were both in favour of keeping things as more impact on charities than much of the proposed they are, with no statutory definition of public benefit. law reform! The PASC took a very different view, describing the Charities Act as ‘critically flawed’ in relation to public benefit, and recent controversial public benefit cases Find out more as ‘an administrative and financial disaster for the Lord Hodgson’s report https://www.gov.uk/ Charity Commission and the charities involved’. government/uploads/system/uploads/attachment_ The PASC has recommended that the Act should be data/file/79275/Charities-Act-Review-2006- revisited by parliament. The government’s response report-Hodgson.pdf will indicate its reaction to the PASC recommendation, but it is difficult to see parliamentary time being made The Government’s interim response of December available for any amendments to the statutory public 2013 https://www.gov.uk/government/uploads/ benefit provisions. system/uploads/attachment_data/file/79277/ Charities-Act-Review-2006-response-Nick-Hurd. Fundraising pdf Here Lord Hodgson’s proposal was for the sector The Public Administration Select Committee to continue to develop a system of self-regulation, Report http://www.publications.parliament.uk/pa/ with a further review in five years’ time. The PASC cm201314/cmselect/cmpubadm/76/7602.htm was supportive of this recommendation, and noted and http://www.publications.parliament.uk/pa/ the progress already made in this respect, but cm201314/cmselect/cmpubadm/76/76vw01.htm recommended that if statutory regulation became necessary, the cost should be borne by the charities The Public Accounts Committee Report http:// themselves. For the moment, government is www.publications.parliament.uk/pa/cm201314/ funding some initial consultancy work on creating cmselect/cmpubacc/138/13802.htm a sustainable self-regulatory system for fundraising, The Law Commission’s terms of reference http:// which the Institute of Fundraising (as commissioning lawcommission.justice.gov.uk/docs/charity_law_ body) put out to tender in June 2013. terms-of-reference.pdf

Campaigning The PASC did not recommend any changes to the rules on political campaigning by charities. This is a welcome development. However, as predicted by

4 Charity and Social Enterprise Update | Autumn 2013 News in brief

News in brief

The Investment and Contract Readiness Fund BWB tops charity legal tables The ten million pound Investment and Contract Readiness Fund (‘ICRF’), which is run by Social BWB has been ranked as top charity law firm by Investment Business on behalf of the Cabinet Office, Charity Finance – retaining our position as top Luke Fletcher has been set up to enable charities and social charity law firm since the inception of the Charity Partner T: 020 7551 7750 enterprises to access new forms of investment and Finance tables. The results show that BWB stands [email protected] to compete for public service contracts. out from other firms by a significant margin – acting for 51 of the top 350 charities. The survey Luke is a commercial Grants from £50,000 to £150,000 are available is based on an analysis of law firms listed as main lawyer who manages on a rolling basis to ambitious charities and social advisers in the annual reports of organisations transactions and advises enterprises that are looking to raise at least £500,000 in the Charity Finance Charity 100 and Charity on regulatory issues for a wide range of businesses, of investment or who want to bid for contracts of £1 250 Indexes. charities, social million or more. These grants can be used for capacity enterprises, community building and to pay the professional fees involved in BWB is also consistently ranked as the number groups and public bodies. preparing business plans and bids and developing one charity law firm in the CaritasData Top 3000 appropriate investment and contractual structures. Charities annual league table – the leading source of financial information for UK charities. BWB is an approved provider as part of the ICRF and so we are able to work with charities and social enterprises to submit applications for funding from Safeguarding update Abbie Rumbold the ICRF. We are already working with a number of Partner organisations that have obtained or are applying for There have been a number of changes to the T: 020 7551 7750 funding through the ICRF, including organisations Disclosure and Barring Service (‘DBS’) over the [email protected] looking to win contracts as part of the forthcoming past few months. Abbie is a highly regarded Transforming Rehabilitation reforms to probation charity lawyer with a services. The new DBS Update Service was introduced on 17 particular expertise in June 2013. All those who have criminal record checks social enterprise. She is If you are looking to raise £500,000 of investment or done after this date will be able to apply to have their recommended by Legal to win a contract of £1 million or more and would like check kept up to date. Criminal record certificates will 500 both for her work in to know if we can help you to apply for funding from also become ‘portable’, allowing individuals to carry the health care field and the ICRF, please feel free to get in touch with Luke in the charity and social their certificates with them when moving between jobs enterprise sector. Fletcher or Abbie Rumbold. within the same workforce with the same checking requirements. Individuals will be able to subscribe to this service for an annual fee of £13. Find out more The ICRF website is at Certificates were previously sent to both the http://www.beinvestmentready.org.uk/ individual and the employer concerned. From 17 June the DBS will only send certificates to the The Next Stage for Public Service Spin Outs: individuals themselves, enabling them to review Going for Growth http://www.bwbllp.com/file/the- or challenge the certificate’s content before it is next-stage-for-public-service-spin-outs-going-for- released to the employer. The employer will then, growth-quick-guide-pdf with the individual’s consent, be able to conduct free and instant online checks to find out whether Public Service Social Ventures: Going for Growth the information on the DBS certificate released http://www.bwbllp.com/file/public-service-social- to them is up to date. ventures-going-for-growth-pdf There have also been changes to the DBS forms, The Social Value Act: Quick Guide which are outlined in detail in the July 2013 http://www.bwbllp.com/file/the-social-value-act- DBS newsletter: https://www.gov.uk/government/ quick-guide-pdf uploads/system/uploads/attachment_data/ file/212690/DBS_News_July_2013.pdf

Charity and Social Enterprise Update | Autumn 2013 5 News in brief

Permanent endowment and total return – an update

In our Spring 2013 Update (http://www.bwbllp. com/knowledge/2013/02/28/charity-and-social- Laura Soley enterprise-spring-update/) we reported that the new Partner T: 020 7551 7835 statutory power enabling trustees to take a total return [email protected] approach to investment of permanent endowment funds was a step closer. Laura advises a range of clients on general charity The Trusts (Capital and Income) Act 2013, which This year’s Remember A Charity Week runs from law matters. She has a adds the statutory power to the Charities Act 2011, 9 – 15 September 2013. particular specialism in trusts, endowments and is now in force. The next step is for the Charity legacies. Commission to issue regulations setting out the BWB is proud to support Remember A Charity Week process to be followed. and, for the third year running, is hosting a free seminar for solicitors and will-drafters as well as The Charity Commission issued draft regulations for charities, which should be especially useful to anyone consultation between April and June. Laura Soley was who is new to dealing with legacies for their charity. a member of the Charity Law Association’s working The lunchtime seminar will take place on Thursday party that made a detailed submission to the Charity 12 September and will include a guide to the types of Commission on the draft regulations. legacies that can be left to charity by will, inheritance tax basics and best practice tips on charity legacies. By and large, the draft regulations do look useful. They would allow trustees to use the total return See www.bwbllp.com/events/upcoming/ or power without seeking Charity Commission consent, www.rememberacharity.org.uk for more information. which will be welcome news to trustees of permanent endowment funds. They would also give greater flexibility than anticipated, potentially allowing trustees to spend a limited amount of capital without Charity Commission consent, subject to recoupment out of future income.

Remember a Charity

Remember A Charity Week is an annual awareness In a recent article in the Guardian (http://www. week that aims to encourage more people to consider guardian.co.uk/voluntary-sector-network/2013/apr/ leaving a legacy to charity in their will. 29/small-charities-trustee-recruitment), Ian Joseph, chief executive of Trustees Unlimited, discusses the According to Remember A Charity, ‘three quarters of importance of recruiting a diverse board to your Britons regularly give to charity in their lifetimes, yet charity and the role that this can play in ensuring only 7% currently include a charity when writing a the commercial viability of your charity. For more will. Nevertheless, gifts in wills are still the foundation information about how Trustees Unlimited can help of many of Britain’s charities, creating almost £2 you recruit quality trustees, visit http://www.trustees- billion each year, the equivalent of 19 Comic Reliefs. unlimited.co.uk/?utm_source=bwbsource&utm_ Without this income, many charities would simply not medium=bwbmedium&utm_campaign=bwbname. exist and others would have to cut crucial services.’

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Ban on TV charity campaigns

The European Court has upheld a UK ban on charity TV advertising for the purposes of campaigning and social advocacy.

Lawrence Simanowitz advises that advertisements face fewer restrictions, as do those charities should not be deterred from on the internet – the primate ad can still be found on Youtube using a simple Google search. With careful campaigning by the decision construction a charity’s campaigning message may Lawrence Simanowitz still be broadcast in a television advertisement – for Partner Earlier this year the European Court of Human Rights example where the primary aim is to raise funds for T: 020 7551 7796 reached an important and disappointing decision which the charity rather than being targeted at a specific [email protected] affects all charities that wish to use advertisements as campaign or cause. a campaigning medium. The case considered whether Lawrence is a charity UK advertising restrictions on social advocacy and specialist with a media “Perhaps the most disappointing expressions of opinion about matters of controversy background and expertise aspect of this is that the decision in intellectual property were lawful, or whether they amount to a breach of and information law. He the fundamental right to free expression. will apply to charities even though, is ranked as a leader by law, charities cannot be established in the charity field The case was brought by Animal Defenders by independent legal for political purposes and can only International (‘ADI’), which, in 2005, launched directory, Chambers UK. undertake campaigning to further a campaign called ‘my mate’s a primate’. This included a television advert comparing a sobbing their charitable aims” child in a cage with a caged chimpanzee, and asking for donations towards their campaign to Nevertheless, in the long run it is to be hoped that end the commercial use of primates on television. legislators will, in the interests of free speech, improve The advert was deemed to be ‘political’ under the the position for charities. It would not take much UK Communications Act 2003, and was therefore for parliament to establish a more level playing banned. ADI challenged the ban. The case went all field. This would mean that charities wanting to use the way to the European Court. The court upheld television adverts to campaign against some of the the ban (by a bare majority of judges – 9 to 8). In worst of corporate malpractices would face no greater other words, the UK legislation has been held not restrictions than those companies themselves, who to infringe the right to free expression under the currently can use ads to put their best foot forward European Convention on Human Rights. to the television-viewing public.

Perhaps the most disappointing aspect of this is that the decision will apply to charities even though, Find out more by law, charities cannot be established for political The Charity Commission’s main guidance on purposes and can only undertake campaigning campaigning, CC9 Speaking out: guidance on to further their charitable aims. At the same time campaigning and political activity by charities companies (including multinationals) that may is available at http://www.charitycommission. have questionable records can continue to use gov.uk/detailed-guidance/managing-your-charity/ television adverts as a smokescreen to promote speaking-out-guidance-on-campaigning-and- their environmental credentials and other socially political-activity-by-charities-cc9/ responsible activities, however minimal those activities may be in reality. There is additional guidance at http://www. charitycommission.gov.uk/running-a-charity/ We do not think that the decision should deter your-charitys-work/campaigning-and-elections/ charities from campaigning. Much campaigning remains lawful provided it is properly planned (see the Charity Commission’s guidance publication). Furthermore, while ‘political’ television adverts are restricted under the Communications Act, cinema

Charity and Social Enterprise Update | Autumn 2013 7 Features

The role of email in governance

Email has revolutionised the way in which we communicate and can enable charity boards to keep up to date with developments between board meetings. But is it really that simple?

Tesse Akpeki and Christine Rigby they knew the absent directors would have objected to. outline the legal and governance As a result, this wording was not included as standard in the model articles, but it is still possible to allow for issues to consider when majority decision making by bespoke drafting in your Tesse Akpeki communicating by email own articles. This is an option for new companies, and OnBoard Consultant companies reviewing their articles, which many of our T: 020 7551 7702 Is a board decision made by email valid? clients find attractive. Our experience is that concerns [email protected] about potential for abuse are outweighed in many Picture the scene – there has just been a board cases by boards wanting the ease and flexibility of Tesse is a consultant, meeting and the next one is not due for another trainer and mediator and majority decision making by email. three months. An urgent issue arises that senior specialises in governance management feel needs a board decision. The chief development and Charitable trusts executive has emailed round a detailed paper asking leadership. Tesse’s focus Charitable trusts are much like companies in that a for a decision. If each board member emails back is in enabling harmonious unanimous decision can be made by email (even if professional relationships, their approval, is that a valid board decision? there is nothing expressly permitting this in the trust especially for senior deed). But an email decision approved by a majority, leaders and trustee The legal answer is that it may be – it depends on boards, and in facilitating rather than unanimously, would only be valid if the legal form of the organisation and what the change management permitted by the trust deed. programmes. constitution says about ways in which board decisions can be made. Charitable incorporated organisations (CIO) The rules for this new legal form for charities are Companies more restrictive, with a specific regulation laying For companies, a unanimous decision made by email down that if a CIO’s constitution is to permit its will be valid. The company’s articles of association do charity trustees to make decisions otherwise than Christine Rigby not have to explicitly permit it. This is based on case at a meeting, ‘the constitution must make provision Senior Consultant law about unanimous decisions generally, which we as to the alternative process by which the charity T: 020 7551 7712 think would extend to email decisions. trustees may make decisions’. So, for those thinking [email protected] about converting to or setting up using the CIO form, But what if a decision is not unanimous (perhaps Christine has over 15 email decision making is something that would need years’ experience advising because some trustees disagree, a trustee is prevented to be specifically built in to the constitution, otherwise charities and not-for-profit from voting because of a conflict of interest, or some it would not be allowed at all! organisations on law and trustees simply don’t respond)? A majority decision governance. is usually enough to pass a resolution at a trustees’ Alternatives meeting but is it the same for a decision by email? If your constitution does not allow a majority decision There is no case law on this point yet, but our view is to be made by email, all is not lost. You may be that a majority decision by email would not be valid able to call a board meeting at short notice – and unless the articles expressly allow for what is known some of the trustees may be able to attend by video as ‘majority decision making outside meetings’. or telephone conferencing to ensure the meeting is quorate (although in the case of telephone Around 2008, when the government was drafting new conferencing, you generally need provision to this model articles for private companies to accompany effect in your constitution). the reforms brought in by the Companies Act 2006, an early draft did allow for majority decision making If you are confident that a decision would be approved outside meetings. However, some in the business at a meeting, you can canvass opinion between sector expressed concerns that this could be open to meetings, and at the next planned board meeting ask abuse. For example, unscrupulous directors could take the board to ratify actions taken. Although this does advantage of fellow directors being on holiday (and out have pitfalls – what if the board does not ratify the of email contact) to propose and make a decision that action?

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Some charities give delegated authority to a small committee, or even the chair, to take urgent decisions between meetings. This is certainly a good idea where the board is aware that a particular urgent issue will need to be addressed before the next meeting. It may also be worth considering generally by giving authority to a small committee to deal with the unexpected. Any delegated powers should, however, only be given if consistent with the constitution and the parameters of the delegation should be carefully recorded and minuted. There should also be prompt reporting back to the whole board of any steps taken. “Our view is that a majority decision Checklist for decision making by email by email would not be valid unless the articles expressly allow for what Is email appropriate? is known as ‘majority decision making – What procedures are in place for emergency decisions between board meetings? outside meetings’” – Is email the best means of communication in Note too that the legal restrictions about use of email this case? only apply to formal decision making. There are no – Does any board member have a conflict of difficulties at all with informal email communications interest that may make them ineligible to vote? between meetings, subject to the points we make Just one board member with a conflict may about email overload below! mean that you can’t make a decision by email – Does the constitution allow for majority Is email the answer for good governance? decisions outside meetings? Email communication can engage board members and Using email free up time in board meetings to enable participants – Consider how to frame email communication: to concentrate on strategic issues. But the exchange – Make your request clear: is an action required of views by board members between meetings comes and, if so, by when? with pros and cons. Board members must discuss – Flag any required action in the message title policies, ask questions, share opinions and debate – Ensure that responses are received from changes and alternatives. They must give sufficient authenticated email addresses thought to the potential risks and wider implications of their decisions. As much as possible, there needs Recording the decision to be opportunity to challenge, probe and provide – Let all trustees know whether a resolution has constructive feedback. been passed and a decision has been made – Confirm arrangements for the minuting of email A drawback of decision making outside meetings decisions and record a minute of the decision is that there may not be adequate opportunities for once it has been made exchange of views, to debate and to challenge. Board – Consider where actions arising from email members may rush into resolutions without due decision making should be recorded consideration. In some situations, it may be better – Decisions made by email in the absence of an not to use email between meetings – particularly express power should be ratified at the next if an issue is controversial or potentially divisive. board meeting Emotive issues, concerns, changes in policy may be better addressed using face-to-face interactions.

Charity and Social Enterprise Update | Autumn 2013 9 Features

Consider the question; ‘is email the best format for OnBoard events this exchange. Would a phone conversation, or an old fashioned, one-to-one meeting be better?’. OnBoard: Wired to Govern 1: Use email effectively Electronic Communication 24 Sept 2013, 5pm – 7.30pm There is nothing as potentially wearisome as the £30 excl. VAT tedious email round robins where everyone is copied into everything and the trail and thread of In this session, we will examine the place of the exchange becomes almost pointless. Another the virtual boardroom and look at how board danger can surface if board members selectively meetings are being made more effective by IT. email each other between meetings and form inner We will assess the impact of platforms such as cabals. Cliques that emerge can be divisive and lead Go to Meet and Smart Meetings and examine to poor governance. Before sending an email consider how tablets can contribute to effective and who needs to be copied in and remove people who efficient board meetings. Diverse applications don’t need to be in your reply, balancing this against such as Doodle and YouTube will be discussed excluding vital decision makers. in terms of how they can help your board’s communication. Some board members have a tendency to ignore boundaries, particularly if the organisation encourages To book, visit: www.bwbllp.com/events/onboard/ email between meetings. If board members email staff upcoming/ directly or inundate them with inappropriate requests this can exacerbate any management/governance tensions. OnBoard: Wired to Govern 2: Utilising Social Media for Effective Performance Consider too how to involve board members who don’t 17 Oct 2013, 5.30pm –7.30pm have access to email – we tend to make assumptions £30 excl. VAT about how people communicate, but email isn’t available to and doesn’t suit everyone. Onboard is bringing together a panel of experts to explore the various applications of social media platforms such as LinkedIn, Twitter and Facebook, examining how you can integrate OnBoard is a consultancy offering governance these technologies to your advantage. development, training and support to charities and social enterprises. It brings together To book, visit: www.bwbllp.com/events/onboard/ leading third sector consultants with Bates upcoming/ Wells Braithwaite, leaders in charity and social enterprise law. It is this unique collaboration between legal and governance experts that ensures the highest quality advice – advice that can make a measurable difference to the effectiveness of your organisation. For more information visit: www.on-board.org

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Client focus: Skateistan

Skateistan started life as a Kabul-based Afghan NGO and has now grown to become an international family of charities that provide skateboarding and educational programmes in Afghanistan and Cambodia.

Skateistan is non-political, independent, and inclusive Skateistan uses skateboarding as a tool for of all ethnicities, religions and social backgrounds. empowering youth, to create new opportunities and the potential for change. Skateboarding is simply Skateistan has emerged as Afghanistan’s first ‘the hook’ for engaging with hard-to-reach young skateboarding school, and is dedicated to teaching people. Skateistan’s development aid programmes both male and female students. It aims to build indoor work with growing numbers of marginalised youth and outdoor skateboarding facilities in which young through skateboarding, and provide them with new people can come together to skateboard; here, they opportunities in cross-cultural interaction, education, forge bonds that transcend social barriers. Here, and personal empowerment programmes. they’re enabled to effect change on issues that are important to them. On 29 October, 2009, Skateistan In Kabul, Skateistan’s participants come from all completed construction of an all-inclusive skatepark of Afghanistan’s diverse ethnic and socio-economic and educational facility on 5,428 square metres backgrounds, and include 40% female students, of land donated by the Afghan National Olympic hundreds of street-working children, and young people Committee. Skateistan recently opened another large with disabilities. In the skatepark and classrooms skateboarding facility in northern Afghanistan. they develop skills in skateboarding, leadership, civic responsibility, multimedia, and creative arts, exploring topics such as environmental health, culture/traditions, natural resources, and peace. The students themselves decide what they want to learn – Skateistan connects them with a safe space and opportunities for them to develop the skills that they consider important.

Skateistan in the United Kingdom carries out awareness-raising and fundraising to help keep Skateistan’s activities in Afghanistan and Cambodia running. Skateistan UK arranges cultural events, happenings and fundraisers and assists people in their own efforts to raise funds for Skateistan. Past events include a Skateistan book launch, skateboarding sessions and participation in the Southbank Centre’s Alchemy festival.

BWB has made all this possible by helping Skateistan UK to incorporate as a company and to register with the Charity Commission. BWB advised Skateistan on a pro bono basis, as part of its pro bono programme, which helps small start-up charities that cannot afford paid legal advice. For more details on BWB’s pro bono programme, see http://www.bwbllp.com/ pro-bono.

www.skateistan.co.uk

Charity and Social Enterprise Update | Autumn 2013 11 Features

Insuring needn’t be a pain

It is important for charities and social enterprises to view buying insurance as a vital aspect of your risk management rather than just another purchasing decision.

Huw Evans Huw Evans of CaSE Insurance outlines identify and mitigate risk, get them to specify what Marketing Director, a good insurance-buying process insurances you need and, particularly, get them to CaSE Insurance manage the buying process.

To many charities and social enterprises the process This last issue is really important. No two insurers of buying insurance is a distraction and the job is offer the same cover – their products all vary to some often given to a relatively junior member of staff. They extent. A broker is trained and qualified to understand then follow standard purchasing procedure – they get CaSE Insurance the nuances and advise which is the most suitable. CaSE Insurance is a joint three prices and choose the cheapest. Job done, the venture between BWB, documents are filed for another year. NCVO and aQmen Ltd, But also consider that some brokers specialise and providing insurance really understand the community and voluntary sector. exclusively to charities and Compare that to the process of selecting your auditor. The same is true with insurers; for example, many social enterprises. It aims Interviews are arranged, shortlists are drawn up and have a charity-specific policy wording. to provide appropriate the board is probably involved. Yet the insurance bill cover at reduced premiums for a charity or social enterprise is often larger than and to support the sector. Sell your risk! the audit fee and the downside of getting the decision Any charity that wants to get the best deal from the For more information please wrong can be far, far more serious. visit www.caseinsurance. insurance market should ‘sell their risk’ to the insurer co.uk or call Huw Evans So how can insurance buying be improved in your via your broker if you have one. An underwriter wants on 0333 800 9838. organisation? to know the risk but more importantly, wants to know that you know the risk! They then want to know that It’s a process… you are managing the risk. Or as the mantra goes, ‘it’s not about the risk but the risk management’. It’s about risk management, not insurance buying; and it’s a process, not a one-off activity. “Make sure that your insurer provides

The process starts with you reviewing the organisation’s cover for the events and activities that risks and then working to reduce risk wherever you you undertake: if in doubt, tell them. can. Risk that cannot be engineered out needs to Not mentioning risky activities on the be addressed and a risk register created. A disaster basis that ‘they didn’t ask, so I didn’t recovery or business continuity plan is needed to look after the worst case scenarios. Both documents should tell them’ isn’t a defence” be regularly reviewed at board level. Consider the cover The next stage is to identify what insurance is As your broker will explain, insurance is available required to address the risks you have identified. for many eventualities. Here are a few examples: Some will be obvious, such as cover for your computers and other contents. But how best to Business interruption provide protection for your core activities, business Check your business interruption cover. Many office- interruption, abuse issues, lone working, volunteers, based charities, for example, won’t lose revenue if their fundraising activities, carrying and storing money, premises burn down (for instance) because donations overseas travel, protecting board members and so will continue – and may even increase. However, they on? The list is a long one… should certainly consider cover for the additional costs associated with a move to alternative premises. Choose professional help

If you have a broker, get them to do what they are Abuse trained to do – they have their own professional Not all charities and social enterprises deal with indemnity cover! Get them involved in helping you the young or vulnerable, but for those that do it is

12 Charity and Social Enterprise Update | Autumn 2013 Features

vital they look at their public liability insurance. ‘they didn’t ask, so I didn’t tell them’ isn’t a defence. Traditionally many policies were ‘silent’ on the An insurance contract is based on the assumption that question of whether they covered abuse as part of the insurer cannot know all the details and so relies on their public liability cover; they didn’t exclude it so the insured being open about their risk. they would (presumably) provide the cover. And the policy that applied would be the one in place when Reputable charity brokers and insurers know how the incident occurred. But how easy is it to find to help. So if you want to have a bouncy castle at a the old policy 30 years or more later when a claim fundraising event they will simply suggest that you might surface? buy the service in from a provider with appropriate insurance so that the charity is not at risk. Current thinking is to provide abuse cover explicitly and to do so on a ‘claims made’ basis. That is, the In conclusion policy that answers will be the current policy with There is plenty of help out there. The Charity up to date limits. Commission in particular has a lot of help on its website: see in particular http://www. Lone working charitycommission.gov.uk/detailed-guidance/ If your team has to make solo visits to service users, protecting-your-charity/charities-and-insurance-cc49/ make sure your insurer knows that is the case. And make sure they see your risk assessment and that you CaSE Insurance has produced a very simple guide to pro-actively answer the first two questions they are all the insurances a typical charity will need, which sure to ask, ‘have you carried out a risk assessment is available here http://www.bwbllp.com/file/charity- before any such visit?’, and ‘is the first visit made by insurance-guide-july-2013-pdf two people?’.

If you are a charity or social enterprise looking for a Fundraising quote, please visit www.caseinsurance.co.uk or call Make sure that your insurer provides cover for the Huw Evans on 0333 800 9838 to discuss your issue events and activities that you undertake; if in doubt, tell over the phone. them. Not mentioning risky activities on the basis that

Charity and Social Enterprise Update | Autumn 2013 13 Features

Unlocking restricted funds

The Charities Act 2011 provides some welcome relief for charities struggling to use funds that appear to be locked away from use with out-of-date purposes or restrictions.

Laura Soley and Alice Faure Walker Changing the purposes of the fund outline some ways to release much- If the restriction affects the purposes for which needed funds the fund can be spent, this can sometimes cause difficulties. For example, the purposes may become Laura Soley out-of-date, and the charity may want to change Partner Does your charity have any restricted funds that it is T: 020 7551 7835 struggling to use? Does it have funds with out-of-date them to something more relevant to its beneficiaries. [email protected] purposes? Does it have any permanent endowment funds that produce such a small income that it is There are powers in the Charities Act 2011 that Laura advises a range of difficult to use effectively? If so – help is at hand in allow unincorporated charities to change their clients on general charity purposes. These powers will usually also apply to law matters. She has a the form of the Charities Act 2011. restricted funds, even if your charity is incorporated: particular specialism in trusts, endowments and First steps BWB can advise more on this. legacies. The first step is to establish whether the restriction The procedure depends very much on the size of really is legally binding. We often find, on closer the fund. examination, that there is no legal restriction on how the funds are used. They may simply be subject Smaller restricted funds to a ‘request’ from a donor that they be spent in a A simplified procedure applies where the gross particular way, or the trustees may have decided to Alice Faure Walker income of the charity did not exceed £10,000 in Senior Consultant ‘designate’ funds for a particular use. Sometimes funds the previous financial year. (Where the main charity T: 020 7551 7702 that have been described as permanent endowment is incorporated, our view is that the procedure will [email protected] in a charity’s accounts are not actually permanent be available if the income of the fund itself did not endowment. It is usually a good idea to take advice exceed that figure.) Provided certain criteria are Alice combines client on the circumstances of your particular fund. fulfilled (for example, the trustees are satisfied that work with more general professional support. She it is expedient in the interests of the fund for the The nature of the restricted fund has particular experience purposes to be replaced), the trustees can resolve to of constitutional issues, There are two main types of restricted fund: change the purposes of the fund, provided the Charity trusts and charity Commission agrees. The Charity Commission must be secretarial practice. n Restricted income funds – where the whole of the informed of the resolution, and given a statement of fund can be used, but must be used for particular the trustees’ reasons for passing it. The Commission purposes. For example, funds may have been then has a period to object. It may ask for more donated to a charity on the basis that they must be information, and insist that public notice is given. used for its work in a particular region.

n Restricted capital funds – where the charity can This power can be enormously useful for charities only spend the income from the fund, and not the with restricted funds. We recently helped a Royal underlying capital (called ‘permanent endowment’) Charter body to update the purposes of a large or may only access the capital in certain number of funds for specific scholarships and prizes, circumstances (called ‘expendable endowment’). and to merge them together. For example, a legacy may have been made to a charity on the condition that it should be invested Larger restricted funds to produce an income for the charity – the capital If the Charities Act 2011 provisions described above can never be spent. cannot be used, the trustees may be able to make an application to the Charity Commission asking it to change the purposes of the fund using its powers to make a cy-près scheme.

14 Charity and Social Enterprise Update | Autumn 2013 Features

“We often find, on closer examination, Permanent endowment that there is no legal restriction on There is also scope for the restriction on permanent how the funds are used. They may endowment funds to be lifted, so that the capital can simply be subject to a ‘request’ be spent as well as the income. There are powers in the Charities Act 2011 for the trustees of certain from a donor that they be spent in a permanent endowment funds to resolve to release particular way, or the trustees may the capital or part of the capital. Whether or not have decided to ‘designate’ funds Charity Commission consent is needed depends on for a particular use” the size of the fund and its income, and special rules apply where the permanent endowment is land, or a particular item, rather than cash or investments. In certain circumstances, the Charity Commission can make a scheme to change the purposes of a restricted Conclusion fund. For example, a scheme is possible where the original purposes of the fund cannot be fulfilled, or This is a broad outline of the possibilities: charities where they no longer provide a suitable and effective should take advice on their particular circumstances. method of using the fund, taking the spirit of the They will also need to be alert to the public’s reaction original gift and the current and social economic – how will donors, or their families, feel about a circumstances into account. change in the original purposes of a gift? Having said that, we have helped clients to release many When deciding on the new purposes, the Commission thousands of pounds of funding in this way, so that it must take various factors into account, including can be put to really effective use in these tough times. the desirability of securing that the fund is applied for purposes close to its original purposes, and the need for it to have purposes that are suitable and effective in the light of current social and economic circumstances.

The procedure for making a scheme is set out in detail on the Charity Commission’s website. The Commission may insist on prior consultation with beneficiaries, and public notice. We can advise on the best way of approaching an application.

The Charity Commission recently helped one of our charity clients by making a scheme to allow them to use the restricted proceeds of sale of a care home in assisting its beneficiaries in that area generally.

Charity and Social Enterprise Update | Autumn 2013 15 Features

Companies Act – opportunities and risks

Although it is now almost four years since the Companies Act 2006 was fully implemented, there are key changes that have yet to be fully exploited by some companies. Others are at risk of being caught out by changes in the rules.

Chinonso Denwigwe, a member of not be removed unless a successful application is filed BWB’s company secretarial team, to expunge the home addresses from the register. outlines some of the opportunities Accounts submission deadline shortened presented by the Act, and areas that Chinonso Denwigwe The deadline for delivery of accounts of private Senior Paralegal can give rise to practical challenges companies (i.e. not plcs) is now 21 months from the T: 020 7551 7769 [email protected] date of incorporation for the first set of accounts and AGM is optional nine months from the accounting reference date for Chinonso is a company subsequent years. Beware – your deadline may fall The requirement to hold an annual general meeting law specialist and during the weekend or on a bank holiday and some is particularly (AGM) and present accounts to a meeting is no longer Companies House offices have limited opening hours. knowledgeable on the compulsory (except for public limited companies), The date of submission of the accounts is the date workings of Companies unless the company’s Articles of Association say that of successful delivery to the registrar, not the date of House and the Charity an AGM must be held. Many companies incorporated your sending them. Some accounts can now be filed Commission. before October 2007 do require an AGM, but they electronically. See our Summer 2011 Update (http:// may wish to update their Articles to take advantage www.bwbllp.com/file/charityupdatesummer2011-pdf) of this change. for more detailed information on e-filing. Company secretary not compulsory Note also that for charitable companies required to So long as the Articles of Association do not require submit annual reports to the Charity Commission, the one, a company need not appoint a company deadline is 10 months from the financial year end date, secretary (unless it is a plc). If a company secretary is so this should not be confused with the Companies appointed, notice must be given to the registrar on the House deadline. Give yourself plenty of time! prescribed form within 14 days. At least one individual director Company secretarial responsibilities such as record Companies can continue to have corporate directors keeping and filing with the registrar (which can attract but at least one director must be a natural person. fines for non-compliance) fall solely on the directors There is a risk of prosecution and a financial penalty where there is no company secretary, so these should on conviction for non-compliance. Therefore regular be delegated specifically to one or more director(s). board reviews should be conducted and the registrar should be updated as appropriate on the prescribed Public disclosure of home addresses not form(s). compulsory

The requirement for automatic public disclosure of Register of directors’ residential addresses residential addresses of all directors who are not There is new requirement for a register of directors’ subject to confidentiality orders has been replaced. residential addresses with restricted access. The A director can now opt for a service address that single register of directors and secretaries maintained is not their home address, although directors are under previous legislation is now deemed to be two still required to disclose their home addresses to separate registers. We recommend that records of Companies House for its confidential records. directors be split accordingly.

For the company secretary, the home address is no Ten-year time limit for records of company longer required under any circumstances – only a decisions service address is required. Records of proceedings of directors and members Note, however, that any home addresses already filed must be kept for a minimum of 10 years from the on the public register for the secretary or director will date of the meeting or decisions. However, the

16 Charity and Social Enterprise Update | Autumn 2013 Features

10-year limit only applies to meetings held on or after Upcoming events 1 October 2007, so records of meetings held before then are to be kept indefinitely! 10 October 2013 – BWB and DSC Annual Managing People Conference BWB and the Directory for Social Change present the annual conference focusing on employment BWB Company Secretarial Service issues for charities and social enterprises.

BWB Secretarial Limited offers The wide range of issues covered include Facebook, discrimination law, agency workers, a comprehensive company unions, dismissals, parental rights and an secretarial service employment law update.

The service includes: To register and to select your choice of workshop topics visit: http://www.bwbllp.com/events/ n Completion and filing of Companies House forms upcoming/2013/10/10/bwb-and-dsf n Assistance with and filing Annual Returns n Maintaining statutory registers of members, 29 October 2013 – Charity Property directors, secretaries, charges, shares, and Conference 2013 directors’ interests in the company Now in its sixth year, the Charity Property n Acting as the correspondent notified to the Charity Conference has become a highlight of the Commission (if relevant) autumn calendar, acquiring an excellent reputation as a learning and networking environment. n Additional services include the preparation of Featuring a dynamic mix of charity case studies, resolutions, the provision of general legal or VAT roundtables and expert speakers, this conference advice and attendance at directors’ and members’ will help you to keep abreast of developments meetings. in important aspects of property ownership and For more information, please contact us at occupation, ensuring you are getting the maximum [email protected] or benefit from your charity’s property portfolio. +44 (0)20 7551 7748. For more information see: http://www.civilsociety. co.uk/events/conferences/content/15156/charity_ property_conference_2013

Charity and Social Enterprise Update | Autumn 2013 17 Focus on education

Focus on education

The fast-changing nature of education law and practice has meant a busy few months for the BWB Education team. In these pages, we explore some of the new developments and look at the impact they are having on our education clients.

Mary Groom Partner T: 020 7551 7760 [email protected]

Mary leads on education policy and the maintained schools sector for the Education team and previously worked for 10 years as a science teacher in comprehensive schools.

On the next two pages, we focus in particular on special educational needs and the rapid developments in this area with the new Children and Families Bill. On page 21 we introduce our new senior associate, Caraline Johnson, who outlines the issues to consider on a spin out of school services from local authority control

Education team

Our Education team is a cross-department group that has, for many years, provided specialist services to the full range of organisations and individuals within the education sector. Our education practice has developed rapidly in recent years through the implementation of education policy linked to the promotion of public service reform.

Julian Blake William Garnett T: 020 7551 7750 T: 020 7551 7720 [email protected] [email protected]

Mark Traynor Selman Ansari m T: 020 7551 7744 T: 020 7551 7784 [email protected] [email protected]

Mary Groom Caraline Johnson T: 020 7551 7760 T: 020 7551 7674 [email protected] [email protected]

18 Charity and Social Enterprise Update | Autumn 2013 Focus on education

Special educational needs

Reform – Children and Families Bill

Special educational needs (SEN) reform has moved on apace since BWB hosted its SEN Forums in January and April 2011, at the time when the government Liz Goulder first introduced its vision in the Green Paper ‘Support Solicitor T: 020 7551 7766 and Aspiration: A new approach to special education [email protected] needs and disability’.

Liz is a member of the The government’s agenda is now being taken forward firm’s Education team by the Children and Families Bill (a significant bill and works on a wide reforming not only SEN but also the systems for range of contentious matters, including student adoption, looked after children, and family justice). complaints and claims, The bill has just reached the House of Lords and and creating a plan. Despite the government’s aim student exclusions and has now entered the Committee stage where it will to create an integrated approach, a local authority appeals and special face line-by-line scrutiny. Despite concerns by some will only continue to be legally responsible for the educational needs in the sector regarding the lack of detail on some of education provision specified in the EHC plan and tribunal appeals. the changes and the rapid pace of this reform, the the SEND Tribunal will not be able to hear appeals government is working towards implementation of in respect of any health or social care provision set the bill in September 2014. down in an EHC plan.

Some of the key proposed changes to SEN under the BWB’s Education team will continue to watch the Children and Families Bill are: progression of this bill with interest.

n introduction of ‘integrated’ education, health and care plans (‘EHC plans’) to replace existing Find out more statements of SEN; The draft regulations for the new EHC plans n extending SEN provision to 25 years for those are available on the Department for Education’s children and young people who remain in website: http://www.education.gov.uk/ education; a00221161/

n replacing the school-based stages of School Action and School Action Plus provision with a single category of Additional SEN Support;

n any school, whether maintained, independent, academy, special academy or free school, can be named in the new EHC plan;

n special academies will be able to admit children/ young people without an EHC plan or statement.

It is likely that there will be a transition period for the introduction of new EHC plans so that for some time schools, parents and local authorities will be working with the old and new systems side by side.

EHC plans will not be required to be in a standard form, which is likely to require more engagement with schools, parents and local authorities when assessing

Charity and Social Enterprise Update | Autumn 2013 19 Focus on education

Free schools – East London Academy of Music BWB wins SEN appeal On 22 May 2013, the Secretary of State approved the proposals for 102 new free schools to open from BWB’s experience in advising in the area of special September 2014 onwards. BWB’s Isolde Rutherford educational needs continues to go from strength Isolde Rutherford Solicitor is a member of the proposer team behind one of to strength. Liz Goulder assisted the parents of a T: 020 7551 7751 the approved schools – The East London Academy child with significant SEN and disabilities to win [email protected] of Music (ELAM). an appeal in the SEND Tribunal against Parts 2, 3 & 4 of the Statement of SEN. Isolde works closely with ELAM will be a mainstream school for 16–19 year Mary Groom and provides olds in Tower Hamlets, East London, which will As often occurs in these appeals, the heart of advice to a large number of education and charity use music and the music industry as a platform the dispute was school placement in Part 4 and clients. to develop young people to their full potential. whether the cost of an independent special school was ‘unreasonable public expenditure’. The local Isolde’s experience of working with BWB’s free school authority defended its preferred placement at a clients was immensely valuable in helping her to special academy ranked ‘outstanding’ by Ofsted. develop ELAM. In turn, her work as a proposer has However, BWB won the appeal, obtaining a place helped her to understand the many challenges being for the child at an independent special school, faced by free school groups at pre-application stage despite the further cost to the local authority. and in pre-opening. Before reaching its decision, the tribunal requested New School Leaders’ Network legal submissions on how the new school-funding regime (which came into effect from April 2013) Earlier this year, at a BWB workshop event for free affected the costs arguments of each school schools opening in September 2013, two principals placement. Recent funding reforms changed the had a discussion that led them to realise that if way in which local authorities calculate the cost headship is the loneliest job in the world, being of different types of school placement, such as the principal of a free school is akin to living on a centrally funded academies and special schools, desert island. From this came the idea for a forum to and these calculations impact the way in which a provide an opportunity for principals to network, share tribunal will assess the cost of each placement. expertise and ideas, celebrate success and support one another. The group is open to all principals of However, the tribunal agreed with our legal new schools whether already open or preparing to submissions that the special academy, as do so. BWB has been delighted to support the group proposed by the local authority, could not meet in the early stages by providing a place for principals the child’s needs and offer the level of therapy to meet and discuss ideas. and intervention needed. As a result, the tribunal agreed that the special academy placement was unsuitable; and it did not then have to Contact Joanna Howard ([email protected]) consider whether the costs of the independent to find out more, and to join the mailing list email special school constituted unreasonable public [email protected] expenditure (which is where many of these appeals can fail).

BWB continues to offer advice and support on special educational needs to parents, academies and free schools.

20 Charity and Social Enterprise Update | Autumn 2013 Focus on education

Local authority school services – getting in a spin?

Spinning out services is seen to be a solution for many local authority-provided services, but can be a complex process for school services.

Caraline Johnson argues that spin out organisation the local authority could and should have. is not a decision to be taken lightly Each case will be different and the only right way of doing things is the one that best meets the needs of those involved in delivery and of the service users. The changing world of education provision in the last Caraline Johnson few years has resulted in a diverse and changeable Senior Associate As with any new venture, the complexities landscape for all those involved and has meant T: 020 7551 7674 involved will make the building and maintenance particular challenges for local authorities. Traditional [email protected] of relationships with potential partners and LEA models of operation are no longer proving fit for commissioners an important part of the process. The We are pleased to purpose and across the country councils are looking support and commitment of elected council members announce that Caraline strategically at how to adapt to their changing role in and an open and consultative approach to staff Johnson joined our service commissioning and delivery. Charity and Social involvement can also make a large contribution to the Enterprise team as senior success of the project. Whilst the legalities of spin One potential route is to consider the ‘spin out’ associate and a new outs can be complex, the availability of supportive of school services to a new entity, a model that is member of our Education and proactive legal advice can dispel traditional team in June 2013. becoming increasingly popular for other in-house local concerns about risk aversion rather than mitigation, authority service provision. How attractive this may as can robust financial support and modelling. Caraline comes to us with appear will vary from authority to authority, reflecting a wealth of experience the diversity of attitudes and philosophies, which may This is an exciting decade to be working in education in the public and not- or may not be party political in nature. The authority’s for-profit sectors, gained and spin outs are one of the ways in which the current commissioning arrangements will be one both through practice in challenge of continuing to ensure high quality factor that could affect both the appetite for, and house in local government services in a fast moving environment can be met. and in the private sector the complexity of, spinning out service provision. advising a range of public sector clients in local There is no set definition of what ‘school services’ Spin out guide and central government, could embrace, but some authorities have successfully The team at BWB has significant experience in education and health. spun out school improvement services, either alone advising local authorities looking to outsource and or packaged with others, in part to create a more Caraline is the treasurer organisations wishing to take on services that have sustainable bundle. of the Education Law been spun out from local authorities. In particular, Association and advisory we have recently advised several new organisations editor of the journal Any decision to spin out a service from the local that have been set up to take on a wide variety of ‘Education, Public Law authority is never taken lightly; a key element in the school support services, and the Individual’. decision will be a comprehensive risk assessment, such as music, sport, arts, School SUPPoRT alongside economic and business considerations. SERVIcES special needs and school Such things will not only be important in deciding SPIN OUTS improvement. whether to pursue spin out at all but will also QUIck GUIde influence the organisational and legal form of any Please see our spin out new entity. There is a debate to be had about whether guide for more information form should follow function or whether there should www.bwbllp.com/file/school- be an ideological element to the choice of entity, such support-services-spin-outs- as having a preference for a charity or a co-operative. BRoUghT To yoU By: DElIVERED By: quick-guide-pdf

There are a number of possible organisational forms, each with advantages and disadvantages. The choice For more information or an informal discussion of entity and governance structure needs to reflect about your particular circumstances please not just the purpose of the spin out at the point of contact Caraline Johnson on 020 7551 7674 or creation but also the needs and aspirations of wider [email protected] or Abbie Rumbold on stakeholders, the authority itself and the new entity. 020 7551 7750 or [email protected] A particular issue is how much control over the new

Charity and Social Enterprise Update | Autumn 2013 21 Charity Commission roundup

Charity Commission roundup

More Charity Commission funding cuts n The reviewer may have previous knowledge of and involvement in the case, but will not be the person In this year’s spending review, a further 6% has been who made the original decision. cut from the Charity Commission’s funding settlement, despite protestations from the Commission as to the The Charity Commission anticipates that the changes Amar Kansal potentially devastating effect this could pose for the will increase flexibility and proportionality in cases Trainee Solicitor regulator and its work. The Commission’s budget will that are suitable for review. Amar is a first year trainee be reduced in two years’ time to £20.4m, which is solicitor with BWB. almost £9m less than 2010/2011. Consultation on revised conflicts of interest guidance

There are concerns that these cuts will not only lead Over the summer, the Charity Commission has to the loss of jobs at the Commission but may also consulted on new draft guidance on managing impact its ability to regulate the sector effectively. conflicts of interest (with the consultation closing on 20 August). BWB has suggested the new guidance Changes in the Charity Commission’s could be expanded further to cover: Charlotte Tregunna review process Trainee Solicitor n situations where a trustee has a ‘conflict of loyalty’; Following a review of the Charity’s Commission’s n Charlotte is on processes, the Commission has made some key situations where all trustees have the same conflict secondment as a changes to the way it handles complaints about (for example if a board is made up of user trustees); trainee solicitor decisions that it has made. and at BWB. n whether incorporation/charity mergers give rise to n The Charity Commission has said that it may conflicts that need to be managed. decline to carry out a full review of a decision in appropriate circumstances. This may be in Rise in charity fraud instances where the decision in question has already been reviewed at a senior level, or where A recent report by the National Fraud Authority has on an initial look at the application the Commission indicated that the voluntary and community sector is is satisfied that its decision is correct. experiencing a rise in the number of reported frauds – in line with the increasing trend in most economic n The scope of decisions that are subject to review has sectors since the recession hit in 2008. been widened to include not only decisions listed in schedule 6 of the Charities Act 2011 (i.e. those The NFA’s Annual Fraud Indicator sampled charities that are ultimately subject to appeal to the Charity with incomes over £100,000 and discovered that Tribunal), but also other decisions to exercise or nearly 1 in 10 of those charities reported that they not to exercise its legal powers; for instance, where had detected fraud in the last financial year. Of even they have a significant impact on a charity or its more concern is the report that almost a quarter of beneficiaries, are likely to be challenged in the courts these have suffered insider-enabled fraud, which (e.g. through judicial review) or are of significant has particular resonance given that a jury at the public interest. This change will be reassessed Old Bailey will, this month, hear a trial involving after an initial six-month trial period. Oxfam UK’s former anti-fraud manager, charged with n It will only be in limited cases that applicants will allegedly defrauding the charity of over £62,000. be permitted to speak to the reviewer. This will be in cases where the decision directly affects the The Charity Commission, in raising awareness of this rights of an individual or an organisation (such as surge, has advised charities to take greater steps to a decision to remove a trustee or remove a charity ensure that their procedures, policies and controls are from the register) or imposes obligations on a robust enough to both prevent and detect instances of charity (such as a direction to produce documents fraud, emphasising that it is not only larger charities or attend a meeting). that are at risk, despite the focus of the NFA’s report.

22 Charity and Social Enterprise Update | Autumn 2013 Charity Commission roundup

For further information to assist in implementing such measures, charities should visit the Commission’s website, which has a wide range of guidance on applicable anti-fraud measures and compliance strategy. See in particular: http://www.charitycommission.gov.uk/about_us/ contacting_us/p_brief_charities_fraud.aspx and http://www.charitycommission.gov.uk/detailed- guidance/money-and-accounts/internal-financial- controls-for-charities-cc8/

Consultation on regulation of Common Investment Funds (CIFs)

Common investment funds are unregulated schemes established by the Charity Commission in which Oliver Lewis charities may invest property in return for a pro-rated Paralegal share of the capital and income of the fund. The T: 020 7551 7773 [email protected] Commission may make a scheme on the application of two or more charities. CIFs offer smaller charities Oliver joined BWB in in particular a means of availing themselves of a 2013. He has experience diversified range of investments. advising on corporate, regulatory and financial Following changes in European law, from July 2013 services matters for a range of clients. the Financial Conduct Authority will be responsible for the regulation of CIFs. The Charity Commission is consulting on changes to its model CIF schemes to ensure that they comply with the new regulatory regime. One of the consultation’s proposals is that CIFs should no longer require consent from the Charity Commission in making certain investment decisions.

Oliver Lewis is a member of the Charity Law Association’s working party responding to the consultation, which closes on 11 September 2013.

Charity and Social Enterprise Update | Autumn 2013 23 Bates Wells & Braithwaite London LLP 2-6 Cannon Street, London EC4M 6YH T: +44 (0) 20 7551 7777 www.bwbllp.com