Are there unexplored consequences to the trustee disqualification rules?

Posted on: August 29, 2018

Originally published by charitytimes:

Written by Gillian McKay

The revised disqualification rules for charity trustees and senior charity positions came into force on 1 August. This reflects the changes brought in by the additional powers granted under the Charities (Protection and Social Investment) Act 2016.

There have always been automatic reasons for disqualifying trustees, this revision extends the list of reasons for disqualification and extends the disqualification rules to the chief executive and chief financial officer roles. These roles are now considered ‘restricted’ under the disqualification rules.

The Commission’s guidance clearly states: “If you are disqualified you must not act in a trustee or relevant senior management position at a charity, unless and until your disqualification is waived by the Charity Commission”.

Therefore, under the new rules, any individual acting in either trustee, chief executive or finance director position, must either obtain a Charity Commission waiver or resign.

It is worth noting that it is the senior management function rather than the role title that defines whether a role is restricted or not. For smaller charities, both these functions may fall to one person, or there may be employees with split responsibilities, for example an office manager who also manages the finances, now being affected.

The penalties for continuing to act in these positions while knowingly disqualified include being asked to repay remuneration, benefits and expenses received while in post, or being referred to the police.

The list of reasons for disqualification includes unspent convictions for a number of specified criminal convictions and a list of civil court judgements. Charities are expected to review their internal procedures to accommodate these changes. For some of the criminal convictions, such as terrorist offences, bribery or fraud, there may be very few circumstances where a charity would consider such an individual suitable to remain in post. However, the list of relevant offences include those involving “deception or dishonesty”.

Annex A of the Commission’s guidance provides a list of offences, which may include dishonesty or deception, these include theft, fraud or obtaining service, by false representation or failing to disclose information. However, some convictions qualifying under this could, in some circumstances, be rather minor, for example petty shoplifting or forgetting to update insurance policy details on which there is a later claim.

Are there unexplored consequences for charities here? The Commission has been accepting applications for waivers since 1 February, encouraging early application in order to get a decision “in good time”. However, it is not clear how long it takes to obtain a waiver.

It is possible that an employee in a restricted position has been convicted of a dishonest offence, in the period after 1 August 2017, which they contested in court but lost. They are fined and the crime will be unspent a year from conviction.

The details of this were made perfectly aware to the trustees at the time. The trustees consider the offence to be suitably minor and that there are sufficient controls in place to mitigate any harm to the charity. The waiver is applied for but not received by 1 August.

Presumably this person must now resign, in which case there are several issues. What if the waiver is granted soon after, or the conviction becomes unspent shortly after? Can the individual demand to be reinstated and demand compensation and from whom?

Presumably the early application for waivers was to allow for charities to plan for such eventualities, but it is hard to see what could be concluded in this period given the uncertain nature of the outcome.

These are integral roles in the charity, expecting these individuals to now step down could have operational, legal and personal consequences for the charity and all of those involved.

Gillian McKay is head of charity and voluntary sector at the ICAEW

Author: Steering Member
Categories: News

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