Creating a more effective regulator

The Charities (Protection and Social Investment) Act 2016 gives the Charity Commission various new powers to help it act as a more effective regulator.

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Adrian Wild
Published: 26 May 2017 Updated: 13 Jun 2022

The Charities (Protection and Social Investment) Act 2016 gives the Charity Commission various new powers to help it act as a more effective regulator.

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Under the Charities Act 2011, the Commission’s powers were somewhat ‘all or nothing’. Whilst it could request information from charities and advise Trustees, its enforcement power was limited to either:

  • issuing statutory directions in limited circumstances and only after it had opened a statutory inquiry
  • appointing a Receiver Manager to take over a charity in place of the Trustees.

In some cases, these powers are simply disproportionate to the issue at hand or inadequate to address the problem. The 2016 Act sought to underline the Government’s commitment to help the Charity Commission to plug gaps in its powers, and to provide new powers to help combat misconduct or mismanagement in charities. While broadly supportive of the new measures to extend the Act, the debate goes on as to whether the Commission’s powers are still insufficient or a step too far.

Official warnings

The Commission now has the power to issue official warnings to a Trustee or to a charity when it considers that there has been a breach of trust or duty, or other misconduct or mismanagement in the charity. Such situations could arise when:

  • the Trustees fail in their duties or do not comply with the charity’s governing document
  • there is misuse of charitable assets
  • beneficiaries are put at risk

It is hoped that a warning will be sufficient to ensure that the Trustees:

  • know that the breach of trust, misconduct or mismanagement was unacceptable and that it needs to be rectified
  • know what action is needed to rectify the issue
  • take appropriate future steps to avoid future transgressions

Prior to issuing a warning, the Commission will write to the Trustees detailing why they are contemplating issuing a warning, the proposed warning, and whether the warning will be made public on the register of charities and for how long. Trustees have the opportunity to make representations to the Commission; however after it has considered the representations, the Commission can simply go ahead and issue the warning if it determines that this is still appropriate.

Trustee disqualification

This enables the Commission to disqualify, for a set period, individuals who are unfit to be Trustees. The disqualification may be from a specific charity, from a class of charities or from all charities. The individuals will also normally be disqualified from holding senior management positions within the relevant charity/ charities. The period for which this applies will be proportionate, but cannot exceed 15 years. There are six possible causes, including:

  • criminal conduct against a charity
  • misconduct or mismanagement — either perpetrated by the individual or where the individual was aware of the issue and failed to act
    conduct likely to damage public trust in charities

In assessing whether a person is unfit to be a Trustee, the Commission expects to consider whether they are honest, have integrity, they are competent, and whether they have credibility.

To disqualify an individual, the Commission will have to demonstrate that there is cause and that the disqualification will protect public trust and confidence in charities. This final condition allows the Commission flexibility in the exercise of the power.


Ongoing tightening of the regulations has been welcomed and April 2017 saw a strengthening of the criteria automatically preventing someone from being a Trustee; including unspent convictions for terrorism or money laundering, and convictions for certain sexual offences.

The automatic disqualification provisions were also extended to cover senior managers, such as CEOs and FDs.

A review of the Act and how the Commission is using its powers will be carried out after three years, enabling improvements to be made more quickly than previously.

If the Commission can be a more effective regulator, preventing abuse and reducing actual or perceived mismanagement of charities, the sector will benefit enormously.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.