OG42 Waiver of disqualification from acting as a charity trustee

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Policy Statement/Overview

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OG 42 A1

 

OG 42 A1 The Law - 24 July 2012

 

1.  Our powers of waiver

The various circumstances under which a trustee may be disqualified for acting as a charity trustee or trustee for a charity are set out in OG 41.  There are two provisions in the Charities Act which empower us to waive trustee disqualifications, which give rise to two separate regimes which are described in section 1.1 and 1.2 below.

The differences between these two provisions lie in:-

  • who may apply for the waiver; and
  • the degree of discretion we have to grant or refuse a waiver.

 

1.1    Powers under s.181(1), (2), (5) and (6) of the Charities Act

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S.181 of the Charities Act empowers us on the application of a disqualified person, to waive the disqualification either generally or in relation to a particular charity or a particular class of charities.

Although there are some limits on who may apply for a waiver (see 2 below), it is wider in scope than s.181(3).  We have absolute discretion as to whether we grant the waiver or not – this is in contrast with s.181(3) which requires us to grant the waiver unless there are special circumstances which mean that we should not to do it.

 

1.2    Powers under s.181(3) of the Charities Act

S.181(3) of the Charities Act provides that we must grant an application for a waiver from disqualification to trustees who have been removed from office more than five years previously on the grounds of misconduct and mismanagement in the administration of the charity, either under England and Wales or Scots law, unless they are:-

  • disqualified as a company director;
  • an undischarged bankrupt;
  • have defaulted under a county court administration order,

or unless the Commission is satisfied, on account of special circumstances that this should be refused.

 

Although s.181(3) creates a presumption that a waiver will be granted,  the Commission retains the discretion to refuse a waiver, but must use this discretion in a way which can be shown to be fair, reasonable and proportionate. When we might wish to use this discretion to refuse a waiver is discussed in more detail at 4.3 below.

 

1.3    Statutory duty to notify person of waiver

We have a statutory duty to notify in writing any waiver to the person concerned (s.181(4)).

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2.  Limitations on power of waiver

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2.1 Prohibition in governing documents

Any provisions in the charity’s governing document regarding automatic determination of trusteeship are paramount and may not be overridden by any waiver we may grant.

For instance, if the governing document of a charity stipulates that a person who is an undischarged bankrupt shall cease to be a trustee, a waiver under s.181 would be ineffective in respect of that particular charity.

However, the situation is different if the governing document refers to a statutory provision, that is the relevant section of the Charities Act or any statutory re-enactment.

For example, if the governing document states that a person shall cease to be a trustee of the charity if he/she is disqualified under section 178 of the Charities Act, we would be able to grant a waiver (but see also sections 2.3 and 2.4 below).

 

2.2 Unable to rescind waivers once granted

Waivers cannot be rescinded once granted (though a waiver granted on the basis of fraud or misrepresentation by the applicant would have no effect). If there is a justification for doing so, we can, however, remove a trustee who has been granted a waiver, under s.69 or s.76 of the Charities Act (power to act for the protection of charities)

 

2.3  Disqualification under other legislation

Our power of waiver does not extend to trustees disqualified under legislation other than s.181 of the Charities Act. This includes the Safeguarding Vulnerable Groups Act 2006  which specifically disqualifies individuals with convictions for certain offences against children from being trustees of children’s charities.  See OG 41 A1.

 

2.4 Ineffective waivers because of bankruptcy

Any waiver granted under s.181 in respect of a director of a charitable company would be ineffective if the individual in question has become bankrupt during the period of disqualification and has not been discharged from that bankruptcy, unless he or she has been granted leave under section 11 of the Company Directors Disqualification Act 1986 to act as a director of any company, charitable or otherwise. 

If the Official Receiver considers that granting leave is contrary to the public interest then he will oppose the application for leave.  If leave has been granted for a trustee to act as director of a charitable company, he or she is not disqualified for being a charity trustee of that charity.  If leave has not been obtained by a disqualified person to act as a director of any company, then we cannot grant a waiver which applies to the administration of a charitable company.  But if the disqualified person has obtained the leave of the court to act as director of any company, then we may grant a waiver in relation to the administration of any  charitable company not already affected by the leave granted by the Court (see OG 42 B1 section 4.2).

If someone is an undischarged bankrupt or the subject of a disqualification order under the Company Directors Disqualification Act 1986 (as amended), we can however give a waiver which allows him or her to act as a charity trustee of a charity which is not a company.

We may wish to impose conditions on a waiver.  For more information on this see OG 42 B1 section 4.1

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3.  Further disqualifying conditions

Any waiver granted by us applies only to the disqualifying condition(s) which exist at the time when the waiver is granted. It will not waive disqualification in relation to any later event.  If, say, a person is adjudged bankrupt or is convicted of (another) relevant offence after the grant of a waiver, he is disqualified again and would need to apply for the grant of a further waiver if he wished to act as a trustee.

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4.  The Commission’s policy

 

4.1 General approach

The approach we take depends on whether the application for waiver is within the scope of s.181.

 

4.2   Applications for waivers under s.181(1), (2), (5) and (6)

In most cases, the Commission’s starting position on waivers of disqualification is that any trustee who is disqualified for acting as a charity trustee or a trustee of a charity in the circumstances set out in OG 41, should normally remain disqualified until those circumstances no longer prevail.

 

Although a disqualified person may apply, with the support of the charity trustees, for his or her disqualification to be waived, the onus is entirely on the applicant and the trustees to convince us that it is in the best interests of the charity (and will not undermine public confidence in charity) for us to grant a waiver.

 

Our policy on the granting of waivers reflects, as far as possible, those criteria that the Court would take into account when considering the disqualification of directors. An analysis of relevant cases shows that:

  • The underlying principle appears to be that the Court would do what was in the best interests of the company.  For instance, in the case of Re Barings plc and others (No 3) [1999] All ER 1017, the court recognised a range of blameworthiness in the failure to discharge the duties of a director, so that the more culpable the failure, the greater the risk to the public in allowing the disqualified director to act. The greater that risk, the stronger the evidence of the importance of that disqualified director’s involvement in a particular enterprise which would be necessary to tilt the balance in favour of waiver.
  • Although the disqualification in the Barings case was not the result of bankruptcy, this idea of a balancing act between the risks and rewards of granting a waiver seems equally applicable to a situation where the disqualification of a trustee is the result of bankruptcy, or the other insolvency-related regimes referred to in s.178 of the Charities Act.

In s.181 of the Charities Act there are no specific criteria laid down for when we consider an application for a waiver of disqualification, whether this is general or specific and whether or not any conditions apply. We must, however, act in the best interests of the charity and the criteria we apply when we deal with applications are discussed more fully in OG 42 B1.

 

4.3    Applications for waivers under section s.181(3)

The situation is different in the case of a person disqualified under s.178(1) Case D or Case E. These clauses deal with persons who have been removed from office because of misconduct or mismanagement in the administration of the charity. This will typically be in cases where we have used our powers under s.76 of the Charities Act as part of a statutory inquiry. 

 

S.181(3) requires the Commission to grant a waiver from disqualification to persons who were removed from office more than five years previously because of mismanagement or misconduct, unless they are:-

  • disqualified as a company director; or
  • an undischarged bankrupt; or
  • have defaulted under a county court administration order; or

unless the Commission is satisfied that there are special circumstances to refuse the waiver. No distinction is made between a general or specific waiver.

 

This discretion must be exercised in a way which is consistent with administrative law principles and our own stated regulatory stance, ie that we must act in a way that is fair, reasonable and proportionate.

 

The general intention of s.181(3) is to ease the path back into charitable work for persons who may have acted wrongly, but not fraudulently or with personal gain in mind.

 

Therefore, we must start from the basis that any waiver applied for in these circumstances should be granted unless we can show that it is in the public interest and/or the charity’s interest not to do so. The circumstances referred to below may have a greater impact if the waiver applied for is general rather than either general (with conditions) or specific.

 

The issues which are likely to persuade us that there are special circumstances and it is advisable to refuse the application are as follows:-

  • the original disqualification was because there was malicious or criminal intent on the part of the trustee;
  • there is evidence to suggest that there is a real risk of the person in question repeating the behaviour which led to the original disqualification;
  • there is evidence of the person’s unsuitability as a trustee;
  • there is opposition from the other trustees (if there is simply lack of support rather than actual opposition this would need to be considered).

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OG 42 B1

OG 42 B1 Processing applications - 7 August 2012

1.   Form of application

Any application for a waiver of disqualification must be submitted by the individual concerned.

While there is no specific form for an application, there are certain factors which should be addressed by the applicant in his or her application. These are set out in the checklist at OG 42 X1. This should be sent to the applicant at the point of the first enquiry, or if not previously sent and the application does not cover everything that it should, when the application is received. See section 3 below for more information on the treatment of applications.

The checklist should only be taken as an indication of the information we require. Every case will have specific factors which may mean we need more, or less, information. 

It must be clear from the application that it has come from the individual concerned, and he or she should have signed it.  It must also be clear (or this information obtained at the point of the first enquiry) whether the waiver he or she is seeking is general or specific to certain charity or charities.

We will not accept applications from bodies of trustees on behalf of an individual, although we may well wish to see evidence of their support for his or her disqualification to be waived, and their views on some of the factors mentioned in the checklist.

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2.  Divisional responsibility

Applications will be assessed using the risk framework. If further information is required caseworkers should obtain this before forwarding as appropriate. Staff should use the criteria set out in OG42 B1 when making the decision of whether or not to grant a waiver. Staff should take decisions in accordance with our Authorised Officer policy – see OG 702.

lawyer_referIf there is doubt as to whether a waiver should be granted after considering all the issues outlined below which are relevant to the case, it should be referred to a lawyer for advice.

 

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3.  Initial action

 

3.1  Treatment of cases

The order of the initial steps in dealing with a case will depend on the initial contact.  It is more usual for us to consider applications for waivers of disqualification in respect of a particular charity or even a group of charities with similar characteristics.  An application for a general waiver of disqualification requires closer scrutiny and is generally more difficult to accept, unless the applicant was removed from trusteeship as a result of misconduct or mismanagement and it has been at least 5 years since they were removed  where we can only refuse for special circumstances – see OG 42 A1 section 5.2. 

 

3.2  General enquiry or insufficient application

Any person who enquires about our policy regarding waivers or who submits an application which is not sufficiently comprehensive should be sent a suitably adapted version of one of the model letters noted below together with the list of factors we are likely to take into account (OG 42 X1).

Although the form of an application and its contents are matters entirely for the applicant and his or her legal advisers, it is important that they know the factors which we are likely to take into account.  This will enable the applicant to deal with the issues which we consider relevant and thus ensure an informed and fair consideration of his or her case on its merits; it will also avoid any subsequent suggestion that this opportunity was denied to him or her.

These model letters together with the accompanying list of factors, then, list the main points likely to be taken into account in considering an application and invite the applicant’s observations on these and any other relevant matters.

One model letter should be used where the applicant is an undischarged bankrupt or has made a composition or arrangement with his or her creditors (OG 42 L1).  The other (OG 42 L2) should be used where the disqualification stems from trustee misconduct or management.

 

3.3  Enquiry or application relating to a particular charity or charities

Most contacts will probably be general enquiries at this initial stage, but where an enquiry or application is received regarding a waiver from disqualification for acting as trustee of a particular charity or charities (i.e. a specific waiver), the attention of the applicant should be drawn particularly to the point in the model letter dealing with the provisions of the governing document(s) of the particular charity/ies.  Where it is clear at the outset that there is a provision in the governing document which will make any waiver in respect of a particular charity ineffective, the applicant should be informed accordingly. There would usually be no purpose in the applicant pursuing his or her application in respect of that charity in these circumstances (although an application for a waiver in respect of any other charities without such a provision would be unaffected).

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4.  Action following issue of model letter

 

4.1 No reply

If no reply is received within four weeks of the issue of an L1 or L2 letter, a suitably adapted form of the model letter at OG 42 L3 should be issued reminding the applicant that it is a criminal offence for a person to act as a trustee of a charity whilst disqualified to do so.

 

4.2 Application not proceeded with or withdrawn

If an applicant notifies his or her intention to withdraw an application or not to proceed with one not yet formally made, this should be acknowledged and, unless it is clearly unnecessary, a reminder issued on the lines of the last paragraph of the model letter at OG 42 L3 as to the consequences of acting as a trustee whilst disqualified.

 

4.3 Examination of governing document

Where an application is received, following the issue of the model letter, and it is in respect of a particular charity or charities, the governing document(s) should be examined (this should already have been done in the case of applications received before issue of the model letter – see 3.3 above to check that there is no provision for the disqualification or determination of trusteeship in the circumstances of the applicant.  If there is such a provision, a waiver of disqualification would not be effective in respect of that particular charity and the applicant should be informed accordingly.

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5.   Disqualification stems from undischarged bankruptcy

This section deals with undischarged bankruptcy. An individual voluntary arrangement (IVA) is not the same as bankruptcy. However, someone with an IVA is disqualified from being a charity trustee (unincorporated or corporate charity) under s178(1) of the Charities Act. However, that person may be a director of a non-charitable company as they are not disqualified from being a director under s11 of the Company Directors Disqualification Act 1986. In either case we have the power to waive disqualification under s181 of the Charities Act as long as there is no prohibitive clause in the charity’s governing document.

 

5.1  General principles applying to undischarged bankrupts

We have no powers to grant waivers to undischarged bankrupts to act as trustee of a charitable company, unless the Court has already granted them an order under section 11 of the Company Directors Disqualification Act to act as a director of a company, charitable or otherwise.

We can however grant a waiver to such a person to act as a trustee of a non-company charity.

 

5.2 Is there a provision in the governing document that would override any waiver we may grant?

As previously stated, any provisions in the charity’s governing document regarding disqualification for, or determination of, trusteeship are paramount and may not be overridden by any waiver granted by us.  If, therefore, the governing document of a charity stipulates that a person who is an undischarged bankrupt may not be a trustee, a waiver under s.181 would be ineffective in respect of that particular charity.

 

5.3 Is a waiver actually necessary for being a trustee of a charitable company?

A person is disqualified from being a charity trustee or trustee for a charity if he or she:

  • has been adjudged bankrupt; or
  • has had their estate sequestrated;
  • and in either case he or she (a) has not been discharged or (b) is the subject of a bankruptcy restrictions order or an interim order.

 

But where he or she is director of a charitable company, if that person has been granted leave under section 11 of the Company Directors Disqualification Act 1986 for him or her to act as director of the charity then they are not disqualified from being a charity trustee (director) of that charity.

If no such leave has been granted, then, if the person concerned has the leave of the court to act as the director of any other company, we may consider granting a waiver in the usual way.  If the person concerned does not have the leave of the court to act as the director of any other company, then we cannot grant a waiver, and an application to the court will be necessary.

 

5.4 What factors will we consider when assessing an application for a waiver in such a case?

When considering an application for a waiver, where the disqualification originally stems from a bankruptcy, composition or arrangement we must act in the best interests of the charity.

A list of factors we should take into account when considering an application for a waiver are listed in the checklist in OG 42 X1. The sections below look at some of these factors in more detail.

 

5.5 What led to the bankruptcy in the first place?

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Before considering waivers in bankruptcy cases, staff are strongly advised to read OG 41 C1, and to take legal advice on the provisions of the Enterprise Act, and any effect it might have on the case in hand.

Briefly, the Enterprise Act provides for the automatic discharge of most bankrupts after one year. It reduces the number of restrictions automatically placed on undischarged bankrupts.  However, where the conduct of the bankrupt is considered by the Court to be culpable, it can place a bankruptcy restriction order on them, which among other things, prevents them from acting as trustee of a charity.

In cases where the bankruptcy is still in force, we must assess the circumstances and the seriousness of the bankruptcy:-

  • Is the bankruptcy of the trustee the result of deliberate or reckless disregard of the interests of creditors? ; or
  • Was it the result of financial mismanagement?;  or
  • Were matters largely out of the hands of the trustee, and is it fair to say that circumstances beyond his or her control led to the bankruptcy?

Before a waiver is granted, it must be established clearly that the financial difficulties of the applicant are not the result of his or her own recklessness or dishonesty.

There are a number of instances where the applicant’s bankruptcy could have been brought about by influences largely outside his or her control.  For example, an applicant could have been a shopkeeper in a community where most of the inhabitants work for a single large employer, such as a car assembly plant or coal mine.  If the plant or mine closed, the subsequent unemployment could easily affect the shopkeeper’s business to the extent that the shopkeeper becomes bankrupt.

As a general rule, partners are jointly and severally liable for the debts of the partnership. Where one partner secretly dissipated partnership property, the creditors of the partnership could require other partners to settle the partnership debts out of their own pockets, and make them bankrupt if they failed to pay.  In such a case bankruptcy might well be said to be the result of misfortune.

Care will need to be taken when assessing the primacy of the part played by external factors in the bankruptcy, so as to ensure that factors which might reasonably be expected to be within the applicant’s control are not overlooked.

 

5.6  Balancing risks against the rewards of granting a waiver

In the case of Re Barings plc and others (No 3) [1999] All ER 1017, the basic principle which commended itself to the judge was that, when considering whether to misapply a statutory prohibition against acting as the director of a company, the Court had to balance two competing policy objectives.

On the one hand, the success of a particular enterprise might depend on the leadership or participation of the disqualified person.

On the other hand, there was the need to protect shareholders, creditors and the public from people whose failure to discharge the fiduciary duties associated with the direction of companies had in the past damaged their interests.

The court recognised a spectrum of culpability or range of blameworthiness in the failure to discharge those duties. The more culpable the failure, the greater the risk to the public of allowing the disqualified director to act.  The greater that risk, the stronger the evidence of the importance of the disqualified director's involvement in a particular enterprise which would be necessary to tilt the balance in favour of non-disqualification. (Where a director had deliberately exploited the immunity from personal liability which is normally associated with the position of company director, and had effectively lived at the expense of the company's creditors, the question of waiver would not arise at all.)

The disqualification in the Barings case was not the result of bankruptcy, but this idea of a balancing act between the risks and rewards of granting a waiver seems equally applicable to the situation where the disqualification of a trustee is the result of bankruptcy, or the other insolvency-related regimes referred to in s.178.

 

5.7  Applying the "risk against reward" test when considering whether to grant a waiver

In applying the risk/reward test, each situation, of whether to grant a waiver or not, will need to be considered individually. It may seem more clear cut in some cases than others. For example:

  • If a particular bankruptcy is the consequence of a deliberate or reckless disregard of the interests of creditors, then it would seem appropriate never to grant a waiver.
  • At the other end of the spectrum, if bankruptcy really is simply a matter of misfortune, it can (subject to the point discussed below) be no indication of unsuitability for trusteeship, and a waiver should normally be granted.

When the bankruptcy is the result of some form of financial mismanagement, then the risk/reward factors need to be balanced.

  • What was the nature of the financial mismanagement?
  • What would be the impact of a repetition on the charity/ies which the bankrupt will be authorised to manage by the waiver?
  • How high is the risk of such repetition?
  • What is the risk to the charity of not granting the waiver?
  • Is the waiver sought general or specific to a particular charity or charities?
  • What conditions, if any, should be attached to the waiver?

All this is considered in more detail below.

 

5.8  Statutory restrictions on undischarged bankrupts and potential implications for trustees

There are a number of statutory restrictions on the activities of undischarged bankrupts. Even if we are otherwise content to grant a waiver, we will need to be satisfied that the effect of these restrictions will not be to damage the charity or charities which the bankrupt is to be authorised to manage. For example, section 360 of the Insolvency Act 1986 makes it an offence for the bankrupt - without making certain prescribed disclosures - to obtain credit. If a bankrupt was to act as the trustee of an unincorporated charity there could be difficulties as regards the collective relationship of the trustees with their bankers.

We are not, of course, ourselves in any position to judge the impact of these restrictions on the operation of a particular charity, but this is a point which we need to put to the trustees in a case where we are otherwise minded to give a waiver. The concern does not extend to the management of charitable companies.  In those cases where we are able to give a waiver in the case of the management of such a company, it is, of course, the company, rather than the individual directors, which is in the contractual relationship with the charity's bankers.

 

5.9  Demonstration of need for the trustee to be granted a waiver to continue to act

Where the bankruptcy is in the middle range of the culpability spectrum, the applicant will need to show that the risks which his involvement in the administration of the charity/ies poses to the public interest are outweighed by the benefits to the charity or charities concerned which are expected to come from a waiver. The applicant will need to demonstrate that he or she has qualities, skills or commitment which, if lost to the charity, would render it less effective.

Reference will therefore need to be made to:

  • special qualities which the applicant is able to bring to the trustee body;
  • particular skills or services he or she is able to render as a trustee;
  • an inability to provide these skills or services other than as a member of the trustee body; and
  • other special factors which render it in the interests of the charity that he or she remains a trustee.

In evaluating these factors, the case officer will need to consider how important it is that the applicant remains as a trustee. The applicant may, for instance, be the driving force behind a particular organisation, with potential jeopardy to the future of the charity if a waiver is not granted.

Alternatively, the applicant may possess expertise which would be beneficial in offering advice or counselling to the beneficiaries of the charity. In that event, it may not be essential for the applicant to continue to act as trustee, since the service could still be offered in an advisory capacity.  But it may be considered that as this advice would be so readily available, there is little point in refusing a waiver on this issue if the other factors in the case all indicate that the waiver would be in the best interests of the charity.

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6.  Disqualification unconnected with bankruptcy

OG 41 A1 sets out the circumstances under which a charity trustee will be disqualified. The list (other than bankruptcy cases) includes conviction of any offence involving dishonesty or deception, removal by the Commission from being a charity trustee on the grounds of misconduct or mismanagement, and disqualification from being a company director.

6.1 S.181(3) cases

S.181(3) of the Charities Act provides for persons disqualified for charity trusteeship because of misconduct or mismanagement to be granted  waivers, unless there are special circumstances which mean that the Commission would be unwilling to do so.

There is therefore a presumption that a waiver will normally be granted in such cases. Nevertheless we should still act with caution and take account of all relevant factors including the following:-

  • the original disqualification was because there was malicious or criminal intent on the part of the trustee;
  • there is evidence to suggest that there is a real risk of the person in question repeating the behaviour which led to the original disqualification;
  • there is evidence of the person’s unsuitability as a trustee;
  • there is opposition from the other trustees (if there is simply lack of support rather than actual opposition this would need to be considered).

 

lawyer_referIn these most serious cases, we should consider refusing to grant a waiver, but caseworkers should always take legal advice before doing so.

 

 

6.2 Factors to consider in cases other than s.181(3) cases

By the very nature of the circumstances giving rise to the disqualification in the first place, we should be cautious about agreeing to a waiver. The Act makes no distinction between a general waiver or a waiver for a particular charity or charities. We should consider very carefully the following:

  • the factors set out in the checklist in OG 42 X1;
  • what led to the disqualification in the first place;
  • the length of time that has elapsed since the events giving rise to the disqualification;
  • evidence of “good conduct” in the meantime and why it is considered that there is no risk of history repeating itself;
  • balancing risks against the rewards of granting a waiver – see section 5.5;
  • applying the risk against reward test when considering whether to grant a waiver – see section 5.6. Although this sets out a position in relation to bankruptcy disqualifications the same underlying principles are of general application.  Consideration should also be given as to whether there is a higher threshold in assessing the impact of the special circumstances and the risk against reward test if the waiver applied for is general or specific to particular charities;
  • demonstration of the need for the trustee to be granted a waiver to continue to act – see section 5.9;
  • whether there is evidence that there are no reasonable alternatives who could be appointed;
  • can we place conditions on a waiver? Again consideration should be given as to whether there is a higher threshold in assessing the impact of the special circumstances and the risk against reward test if the waiver applied for is subject to conditions; and

if we grant a waiver after considering these points what would it cover?

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7.  Views of the other trustees

In the case of any application for a waiver, we would normally expect all the other trustees to support the application to waive disqualification in relation to one or more specific charities. We need to know from trustees:

  • why they believe the charity and the charitable beneficiaries need to have this person appointed as a trustee;
  • they should indicate what steps they have taken to find alternatives;
  • what special skills does this individual possess which are not otherwise available;
  • why the individual cannot advise rather than be a trustee;
  • what reassurance they can provide that they will be no risk to the charity or its assets; and
  • their views on the impact on the standing of the charity and the integrity of charity generally if the person is free to become a trustee of this charity.

It is for the applicant to ensure that the written views of his or her co-trustees are made available to us either by being attached to the application or by letters being sent direct to us.

It is also important that the other trustees should realise that the trustees are jointly responsible for the charity’s property and that, depending on the reason for disqualification, there could be an increased risk of loss if the individual was granted a waiver.  In these circumstances the other trustees must be content to have the bankrupt trustee acting with them.  We should advise them that they might wish to ensure that, if they are otherwise content, such a trustee should not: be the Chairman or Treasurer of the charity;

  • be a signatory to the charity’s cheques or have access to the charity’s accounts at banks, building societies etc; or
  • have any of the charity’s property vested in him or her.

This is for the other trustees to decide; although we may impose conditions on a waiver.

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OG 42 B2

OG 42 B2 Decisions on applications - 14 March 2012

 

1.  Levels of authority

Decisions on applications should be made in accordance with our Authorised Officer policy– see OG 702.

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2.  Format for submission to Head of Function

The caseworker dealing with the application may consider it useful to record the following information on CRM:

 

A: Recommendation

  • whether or not the waiver should be granted.

 

B: General background

  •  details of the applicant and circumstances of the application.

 

C: Details of the charity   

(a) the charity’s name;

(b) the date it was established;

(c) the date it was registered;

(d) a summary of its objects and activities;

(e) a summary of its property.

D: Assessment of application  

  • evaluation of application;
  • the value of the applicant’s contribution to the charity;
  • consideration and evaluation of supporting material supplied by the trustees.

 

E: Qualifying factors and risk assessment  

  • an evaluation of the circumstances leading to the bankruptcy – only to be completed if it is recommended that a waiver is granted;
  • an assessment of possible risk to charity property if the person is granted a waiver (relevant factors here may be the circumstances behind the bankruptcy, the nature of the charity property and the office which the applicant would occupy).
  • an assessment of risk to the reputation of the charity (and to the reputation of charity generally) if it is recommended that a waiver should be granted.
  • If it is recommended that an application under s.181(3) be rejected, a summary of the special circumstances for doing so.

 

F:  Special conditions to be attached

  • any conditions to be attached to the grant of a waiver, legal advice having been taken (relevant factors here may be the nature of the charity property, and the degree of risk to the charity’s funds or property if the trustee remains in office)

 

G: Reasons for recommendation

  • a conclusion based on the assessments made at D and E above.

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OG 42 B3

OG 42 B3 Notifying applicants and maintaining records -  26 June 2013

 

1.  Notification of grant of waiver

lawyer_refer

We have a statutory obligation under s.181(4) of the Charities Act to notify an applicant in writing of the granting of a waiver.

 

This should take the form of the model letter at OG 42 L4 and should be addressed to the applicant personally even though the application may have been submitted on his or her behalf by a solicitor or other person. The reasons for our decision should be given in a separate covering letter.

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2.  Notification of refusal of waiver

There are no statutory requirements regarding notification to the applicant of the refusal of a waiver. However, this should also be in writing and addressed to the applicant personally: it should include concise reasons for the refusal to grant a waiver and a warning of the consequences of a disqualified person continuing to act as a trustee.

There is a model letter of refusal (OG 42 L5) for caseworkers to use. In all cases, the reasons for the refusal should be set out in detail on the file.

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3.  Press Office

At the same time as the applicant is notified of the success or otherwise of the application, the caseworker should consider if the decision is likely to attract media attention. In such cases the Press Office should be informed. Care should be taken with the timing of this, to ensure that there is no press comment until we are sure that the applicant has received our notification.

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4. Review of refusal to waiver

Whenever we refuse a waiver, the applicant should be informed that they have a right for the decision to be reviewed by us and/or appeal to the Tribunal.

Any decision to reject an application for a waiver may be reviewed in accordance with our Decision Review procedures.

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5.  Central record

A central record of the outcomes of applications for waivers is kept by Operations. Outcomes, whether granted or refused, should be recorded in this chart.

Where a waiver is granted in the case of a person removed by us or the High Court, the public register of disqualified people must be noted.  Where the application is refused, a record should be kept of the reasons for doing so.

keypoints

A record of the waiver granted or rejected should be forwarded to the Intelligence Unit. The Intelligence Unit will record the details of the waiver granted or rejected on the Intelligence Database.

 

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OG 42 G1

OG 42 G1 Glossary  

Applicant

An applicant, for the purposes of this OG, is the disqualified person who is seeking the waiver. Correspondence may be through his or her legal or other advisers.

Arrangement

Agreement made between a debtor and his creditors, whereby the creditors accept an agreed sum in settlement of their claim rather than make the debtor bankrupt, or in the case of the company, force it into insolvency.

Composition

Agreement between a debtor and creditors to settle a debt immediately by repaying only a part of it.

 

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OG 42 L1

OG 42 L1  Model letter response to application for or inquiry concerning a waiver under section 181 of the 2011 Act where disqualification is a result of bankruptcy, composition or arrangement

 

Dear

 

Thank you for your letter of [                    ] applying for/inquiring about a waiver from disqualification for being a charity trustee/trustee for a charity generally/in relation to [(charity)]/in relation to [(class of charities)].

 

Any decision of the Commission as to whether or not to grant a waiver will have particular regard to the best interests of charity generally or of the particular charity or class of charity referred to in the application: they will consider what, if any, benefit to the charity or charities is likely to result from the applicant acting as trustee.  Each application will be decided on the particular facts and issues pertaining to it but there are a number of factors which the Commission has agreed will generally be relevant to their considerations.  I attach a list of such factors but there may be other additional factors which may be relevant to your application.

 

Before submitting an application for a waiver, it is advisable that you ascertain from the governing document(s) of the charity or charities concerned whether there is anything within it which prevents the applicant from acting as a trustee. If there is a provision for the determination of trusteeship in your circumstances, a waiver of disqualification would not be effective in respect of that particular charity.

 

The submission of sufficient and relevant evidence to support an application is a matter for the applicant but, generally, the Commission will require:

(1) a statement of the ground(s) for disqualification;

(2) an account of the circumstances and events which led to the disqualification;

(3) documentary evidence to show the seriousness of the bankruptcy/composition/arrangement;

(4) confirmation that (i) on the checklist does not apply or full details, with copies of supporting documents, if it does apply;

(5) the name and registration number of any charity involved in the events which led to disqualification, the application for a waiver (in the case of an application in respect of a particular charity or charities) or as in (k) on the checklist; and

(6) written support for a waiver from all of the other trustees of the charity or charities concerned, including any special qualities they feel only you can bring to the administration of the charity, and any other information which they feel would be useful, with regard top the factors listed in the checklist..

Again, this is not an exhaustive list and you may put before the Commission any other matter you feel is relevant to the application.

Finally you will need to state clearly under which section of the 2011 Act you are applying for a waiver.

 

Enc: copy of checklist in OG 42 X1

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OG 42 L2

OG 42 L2  Model Letter: response to inquiry concerning a waiver, or application for a waiver under section 181(3) of the 2011 Act where disqualification is a result of removing a trustee because of misconduct or mismanagement in the administration of the charity

 

Dear

 

Thank you for your letter of [                    ] applying for/inquiring about a waiver from disqualification for being a charity trustee/trustee for a charity generally/in relation to [(charity])/in relation to [(class of charities)].

 

The Commission has determined a general policy regarding waivers and the criteria which will be taken into account in considering applications.  It may be helpful if I outline this policy for you.

 

Any decision of the Commission as to whether or not to grant a waiver will have particular regard to the best interests of the particular charity or charities concerned in the application or, where the application is for a general waiver, of charity generally.  They will consider primarily whether there were any special circumstances attaching to the original disqualification which mean that it is not in the interest of the charity or charities for the applicant to act as trustee.  They are likely to take into account all or any of a series of factors which are relevant.  I attach a list of such factors, but there may be other additional factors which may be relevant to your application.

 

Before submitting an application for a waiver,  it is advisable that you ascertain from the governing document(s) of the charity or charities concerned whether there is anything within which prevents the applicant from acting as a trustee. If there is a provision for the determination of trusteeship in your circumstances, a waiver of disqualification would not be effective in respect of that particular charity.

 

The submission of sufficient and relevant evidence to support an application is a matter for the applicant but, generally, the Commission will require:  

(1)  documentary evidence, particularly copies of any Court judgement relating to the disqualification (we may ask for further Court documents later if we feel it necessary);

(2)  confirmation that (k) on the checklist does not apply or full details with copies of supporting documents if it does apply;

(3)  the name and registration number of any particular charity involved:

(i)  in the events that led to disqualification;

(ii)  in the application for a waiver; or

(iii)  as in (k) on the checklist; and

(4)  written support for a waiver from all the other trustees of the charity or charities concerned, including any special qualities they feel only you can bring to the administration of the charity, and any other information they feel may be useful with regard to this application.

 

Again, this is not an exhaustive list and you may put before the Commission any other matter you feel is relevant to the application.

 

[If, having read this letter and the accompanying list of factors to be considered, you have/the applicant has any further comments to make or any other documentation to submit in support of your  application, I should be glad to receive them.]

 

Finally you will need to state clearly under which section of the 2011 Act you are applying for a waiver.

 

Enc: copy of checklist in OG 42 X1

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OG 42 L3

OG 42 L3  Model letter: no reply to original letter responding to application or enquiry

 

Dear

 

Following your enquiry of [               ] regarding disqualification for acting as a charity/trustee for a charity, I wrote to you setting out the views of the Commission with regard to the granting of a waiver for disqualification and the information and evidence which would be required in support of an application for such a waiver.

 

As I have heard nothing further from you/you or [     name of trustee     ] it is now assumed that you/[     name of trustee     ] do/does not wish to proceed with an application.

 

Please let me know within seven days of the date of this letter if this is not the case.  I must remind you that to continue to act as a charity trustee/trustee for a charity whilst disqualified would constitute a criminal offence.

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OG 42 L4

OG 42 L4 Model letter: notification of grant of waiver

Dear

 

I am writing to let you know that the Charity Commission has agreed to grant you a waiver of disqualification from trusteeship under Section 181 of the Charities Act 2011 in respect of [charities generally]/ [ name of charity]/[class of charities].

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OG 42 L5

OG 42 L5  Model letter: notification of refusal of waiver

 

Dear

 

I refer to your application for a waiver of disqualification from trusteeship in respect of [charities generally / [name of charity] / [     class of charities   ].

 

I have given careful consideration to your application and to the evidence submitted but, for the reasons given below, I do not consider there are sufficient grounds for exercising our power under section 181 of the Charities Act 2011 to authorise the waiver:

 

[concise statement of reason(s) for refusal]

 

If you think our decision is wrong, you can ask us to review it by writing to the Litigation & Review Manager at litigationandreview@charitycommission.gsi.gov.uk  or by using our online application form.

 

Alternatively, you may be able to challenge the decision in the First-tier Tribunal (Charity) if you are a person entitled to appeal and the decision falls within the schedule of decisions that can be challenged in that way. If you wish to appeal against our decision you may find it helpful to visit the Tribunal's website for more information about time limits, form of notice of appeal and how to make an application: 

 

There are time limits to requesting a Decision Review or making an application to the Tribunal. We ask that you tell us within 3 months if you want to challenge one of our decisions.  Your application to the Tribunal should be made within 42 days of the date on which the notice of our decision was sent to you. If you are not the subject of the decision you have 42 days from the date when the decision was published. In both cases weekends and bank holidays are included in the 42 days.

 

Further details about our decision review procedure and the First-tier Tribunal (Charity) can be found on our website.

 

I have to remind you that to continuing to act as a charity trustee/trustee for a charity whilst disqualified constitutes a criminal offence.

 

 

Yours

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OG 42 X1

OG 42 X1  Checklist of factors which may be relevant when considering whether or not to grant a waiver

 

The following is a checklist (not an exhaustive one) of factors we will take into account when considering a case where a waiver of disqualification is being requested.

 

In the first place we shall need to establish whether the governing document of the charity otherwise contains provisions disqualifying or determining trusteeship in any of the circumstances covered by the statutory disqualification, because waiver would extend only to the statutory provision: it would not override the trust provisions.

 

Following this, these factors will be considered.  

(a)  In relation to a conviction, the specific nature of the offence in respect of which the disqualification arises.  

 

(b)  The gravity of the offence and the sentence passed by the Court.  

 

(c)  The circumstances and seriousness of the bankruptcy or composition or the circumstances of any removal by the Court or the Commission as the case may be.  

 

(d)  The nature of the trust property, for instance:  

whether it consists only of land used for the purposes of the charity; or

whether there are investments and money which would or might pass through the trustee’s own hands.  

(e)  The degree of risk to the funds or property of any charity concerned if the person returns to office.  Factors which may be relevant are:    

whether the applicant is likely to receive or have custody of charitable funds or property; and  

the applicant’s personal circumstances.  

(f)  Whether, in the case of a relevant offence or bankruptcy or composition with creditors, the nature and extent of any misconduct relating to the administration of any charity would itself warrant removal from office as a trustee.  

 

(g)  Whether and, if so, how seriously, the reputation of charity in general or of a particular charity would be damaged by the grant of a waiver.  

 

(h)  Where relevant, the purposes and interests of the charity or class of charity, for instance, the rehabilitation of offenders through charitable works.  

 

(i)  Whether the applicant is prohibited from acting as a director of any company by a disqualification order under the Company Directors Disqualification Act 1986; and if so, whether leave has been granted under that Act for him or her to act as a director of any other company.  Also whether the applicant is similarly disqualified as a result of proceedings under the Insolvency Act 1986. 

 

(j) If a disqualification order as in (i) above has not been made in circumstances where the applicant has been convicted of a criminal offence involving dishonesty or deception in the course of company administration, the reason why no such order was made.  

 

(k)  Whether the applicant has ever been associated with any other charity which has been the subject of a formal Charity Commission inquiry as a result of which a report critical of the applicant’s involvement has been made.  

 

(l)  The view of the other trustees of the charity or charities concerned, especially as to any particular benefit to the charity or charities it is considered would result from the applicant acting as a trustee.  

 

(m)  The length of time that has elapsed since the events giving rise to the disqualification.  

 

(n)  Evidence of “good conduct” in the meantime and why it is considered that there is no risk of history repeating itself.  

 

(o)  Whether or not the waiver sought is a specific waiver in relation to a charity or charities or a general waiver in respect of all charities.  

The documentary evidence required is listed in the model letters OG 42 L1 and OG 42 L2 to which this list should be attached.

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