Casework Guidance

Please read the IMPORTANT NOTE on the front page 

OG117 D3 - 17 June 2019

OG117 D3 Using Temporary Protective Powers in Relation to Individuals 

 

1. Introduction

The powers highlighted in this part of the guidance are those where we have concerns about the conduct or likely conduct of individuals. Our action may be to suspend people from their office or charity membership, or appoint an interim manager to undertake specific duties or to run the charity in place of the trustees on a temporary basis. Occasionally we might appoint additional trustees as a temporary measure (for example, until fresh elections can be held) but their appointment is considered in OG117-9 on the basis that such appointments are usually a more permanent measure. 

Whilst these measures are considered as temporary arrangements we nevertheless recognise that they are in response to a higher level of risk to charity beneficiaries or assets.

Although the Act states 'misconduct or mismanagement', when setting out the Commission's findings, we should normally use the phrase 'misconduct and/ or mismanagement' so as not to tie us to one or both. 

 

1.1 Section 2.2 Charities (Protection and Social Investment) Act 2016

Prior to the Charities (Protection and Social Investment) Act 2016, to use a protective power under s.76(3) of the Charities Act 2011, the Commission had to be satisfied that there had been misconduct or mismanagement in the administration of the charity, or that it was necessary/ desirable to act to protect the charity's property/ secure a proper application of the property.

This remains the case, but now, as a result of s.2.2 of the Charities (Protection and Social Investment) Act 2016, failure to comply with a Commission Order or Direction, or failure to remedy any breach specified in a warning under s.75A is itself regarded as misconduct and/ or mismanagement under section 76(1), and so allows the Commission to use these s.76(3) powers. In effect, this means that the gateway to s.76(3) is now clarified and enlarged. 

 

1.2 Using wider conduct to decide on appropriate powers

Where misconduct and/ or mismanagement has been established by a particular person in a charity we can (under s.76A(2) of the 2011 Act), also take into account the wider conduct of an individual:

• who was responsible for;
• who knew of or failed to take reasonable steps to oppose; or
• whose conduct contributed to

the misconduct and/ or mismanagement when deciding whether or how to exercise any of the temporary powers under s.76 of the 2011 Act.

 

The wider conduct that we can take into account of any such individual is:

• that person's conduct in relation to any other charity; or
• their conduct more generally if it appears to be damaging, or likely to be damaging to public trust and confidence in charities. This could be damaging to charities generally, particular charities or classes of charity.

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2. Charities Act 2011 s.76(3)(a) - Suspension of any trustee, charity trustee, officer, agent or employee

 

2.1 Using this power

What this power allows us to do

As part of a section 46 statutory inquiry the Commission can suspend trustees, charity trustees, officers, agents or employees from office/ employment pending consideration being given to their permanent removal.

Initial considerations

We can use this power only where we are satisfied that misconduct and/ or mismanagement has occurred or where it is necessary or desirable to act to protect the property of the charity.

Whilst both grounds do not need to be satisfied at the time of suspension we must have reason to believe that both grounds may be satisfied. An example may be where there is an immediate risk to charity assets or property but the extent of alleged misconduct and/ or mismanagement has yet to be fully established.

The minimum criterion is that we must be satisfied that one or other ground in section 76(1) is met.

When using this power equality and diversity must be considered. When communicating with charities caseworkers should offer to translate documents into another language, another format, e.g. Braille or Audio or to try to meet any other requirements needed.

Where misconduct and/ or mismanagement by a particular person in relation to a charity has been established, we can consider that persons conduct more widely when deciding whether to use the power to suspend a trustee, charity trustees, officers, agents or employees from office or employment. 

Proportionality

We should consider the extent to which the risk may be mitigated by the use of other powers such as a restriction on transactions or the appointment of additional trustees. Generally (although there may be exceptions) the longer the delay in exercising the power the more difficult it may be to justify the action to suspend in proportion to the risk of allowing the individual to continue in post. This is unless the concerns are so serious or additional evidence of action/inaction comes to our attention during the inquiry. That said, the fact that the charity is under close scrutiny may be a relevant factor. We should also consider the impact on the charity of suspending the individual (eg - are there sufficient trustees left to act?) which may require us to take additional steps. The impact of human rights issues and the use of our powers are considered at section 3 of OG117-1. Where caseworkers have uncertainties or concerns about engagement of human rights or the proportionality of our action, legal advice must be taken. 

Careful consideration is required where suspending one person and not others in similar positions. Where for example it is proposed that a trustee is to be suspended, consideration must be given as to why it is appropriate and reasonable to isolate that individual, as opposed to the other trustees, from the charity. That individual's particular involvement in the action that has resulted in a ground being satisfied is likely to be a relevant factor. We should question why the other trustees have not taken action themselves.

Specific Legal advice should be taken where 

• our considerations are in relation to agents, employees or charity trustees who are paid for their work as trustees (our action may involve interfering with contractual rights) 
• we wish to consider the suspension of a volunteer who might be considered to be acting as an agent

Suspension may happen at any time during the statutory inquiry providing the evidence supports the action. It is an issue that may be kept on the agenda at each case review unless it has already been ruled out as an option.

The question of removal should be actively considered as soon as is practical and once we have received any additional information or evidence we require.

 

2.2 Decision points and Authorised Officer powers

The Order must be signed by a PB4 or above (having taken legal advice unless agreed by a PB5 Deputy Head or above). If the PB5 acts as both the decision maker and authorising officer, then there is no need for further counter-signature on the Decision Log. Whoever signs the Order must ensure that its content properly represents what has been authorised. 

 

2.3 Key issues

An Order cannot be made under this section unless:

• A Statutory Inquiry is open under section 46 of the Charities Act 2011; and
• One of the limbs of the statutory grounds in section 76(1) is met
• When suspension takes place we should explain in writing to the suspended individual why the suspension was made. This is done by the inclusion of a Statement of Reasons which accompanies the Order.
• Section 86 of the Act states that we must also send to the charity (if a company) or to each of the charity trustees a copy of the Order and a Statement of Reasons (SoR). These should be sent as soon as practical after making the Order.
• In most cases "as soon as practical" means at the time the Order is made. However, section 86 allows that where the sending of the Order and SoR would prejudice the statutory inquiry or not be in the interests of the charity we can delay this process. However, once the justification for doing so no longer applies we should provide the copy documents and SoR as soon as possible. Legal advice must be taken where we have doubts as to whether the Order or SoR should be sent.  

Following the implementation of section 2(3) and section 2(4) of the Charities (Protection and Social Investment) Act 2016, while an initial suspension cannot last for more than 12 months, before the Order expires, it may be subject to an extension of up to 12 months making a maximum total suspension period of two years. It is possible for a suspension to be made up of shorter periods (eg, an initial suspension of 10 months with an additional extension of 12 months which equals a total of 22 months, but it is not possible to have an initial suspension of 10 months followed by an extension of 14 months because no one suspension period can exceed 12 months). If in any doubt, seek legal advice.  

• A suspension Order should only be used as a temporary protective measure. Where we proceed to remove an individual from their role or post we need not discharge the suspension Order as this would fall away automatically once removal takes place.
• Under s76(3)(a) we may suspend only pending consideration being given to removal, not for any other purpose. But it is not necessary to conclude at the time of suspension that a case for permanent removal exists but it should be a possibility.
• Suspension is most likely to be used in cases where there has been misconduct and/ or mismanagement that is of a serious nature so as to create an evident risk to charity beneficiaries or charity property. In that case it would be a proportionate action to isolate a particular individual from the charity temporarily, while we consider whether he or she needs to be removed permanently.
• The circumstances in which we are able to remove a trustee, etc are set out in OG117-9.
• When deciding whether or not to suspend consideration must be given to what further lines of statutory inquiry need to be pursued in order to reach a decision on removal.
• The Order must not remain in place once it is clear that we will not be proceeding to removal. Section 76(6) provides the requirement to review the suspension Order at such interval as the Commission sees fit. Most Orders are reviewed on a six monthly basis by the Commission as part of good case working practice. The decision to discharge the Order as a result of a review under section 76(6) is itself a reviewable decision and can be appealed at the Tribunal, as can the decision not to discharge the Order. The trustees should be notified of the review and be told of their rights to appeal. The time limits are the same as those for when we notify the making of the Order.
• A request for a review of the original decision to make the Order should be made within 3 months of being notified about the Order and, provided it is within the time limit, the request will take precedence over the our first six monthly review. Our six monthly reviews of these Orders mean that even where the 3 month limit has passed there remains an option for a decision review or appeal against these subsequent section 76(6) reviews. 
• Where, on the review of the original decision, we decide that the Order should stand then the Order will fall back into the pattern for regular review under section 76(6).
• The individual concerned can appeal to the First-tier Tribunal (Charity) against our Order to suspend them. An appeal from the charity can be made by any of its trustees or any other person who is or may be affected by the decision. The individual has 42 days from the date on which we sent notice of the decision to make their appeal. Other people affected have 42 days from the date the decision was published. In each case 42 days includes weekends and bank holidays.
• Suspension is a serious interference with the administration of a charity and with the rights of the individual and consideration of whether to proceed to removal must be conducted as expeditiously as possible.
• The effect of a suspension Order is that the individual is prevented from acting in the office from which they have been suspended. For example, in the case of a suspended trustee, once the Order is in place that individual is still a trustee but is prevented from acting as a trustee or representing themselves to third parties as a trustee.
• Power to suspend should not usually be exercised if the effect is to leave the charity with no active trustees.  Where such a course is unavoidable, careful consideration must be given to the question of how to secure the long-term future of the charity and the steps needed to protect the interests of the charity in the meantime. This may involve appointing additional trustees under s.76(3)(b), or a person to act in the absence of a suspended trustee under s.76(5) or the appointment of an interim manager under 76(3)(g).
• It may be necessary to include a provision under section 76(5) to adjust the rules of governance for the charity which will "take account of the reduction in the number [of trustees] capable of acting."  This may be used to allow remaining trustees to act where one or more of their number has been suspended, where they would not otherwise have power to act (either because the total number of trustees falls below the total required by the governing document or because the trustees are unable to form a quorum).
• We cannot enforce a suspension Order by contempt proceedings in the High Court. If a suspended trustee contravenes an Order under s.76(3)(a) we have to make a further Order under s.335, directing him or her to make good the default.

 

2.4 Notice requirements

The attached table gives notice requirements for all section 76 Orders before and after publication.

The criteria for decisions to give notice and publicity for Schemes and Orders made under section 76 of the Charities Act 2011 can be found in section B8 of OG 500 Schemes and{section B6 of OG 501 Orders.

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3. Charities Act 2011 s.76(3)(g) and s.78 - Appointment of an interim manager

3.1 What this power allows us to do

Orders under this section of the Act allow for the appointment of an interim manager to act as receiver in respect of the property and affairs of the charity. Staff should refer to OG 5 for more information about interim manager appointments.

 

Initial considerations

Cases involving these appointments will need to be carefully considered in terms of risk and proportionality as in effect we are committing charity expense to pay for the appointment. These considerations are outlined at sections 1 and 2 of OG 5 B1. The impact of human rights issues and the use of our powers are considered at section 3 of OG117-1. Where caseworkers have uncertainties or concerns about the engagement of human rights or the proportionality of our action legal advice must be taken.

Another consideration is equality and diversity. When communicating with charities caseworkers should offer to translate documents into another language, another format, e.g. Braille or Audio or to try to meet any other requirements needed.

An interim manager can only be appointed as part of a s.46 statutory inquiry. Section 4 of OG 5 B1 highlights why charities might run into difficulties and Section 3 of OG 5 B1 considers the way an interim manager might have a part to play in remedying those difficulties.

Where misconduct and/ or mismanagement by a particular person in relation to a charity has been established, we can consider that persons conduct more widely when deciding whether to use the power to appoint an interim manager.

 

3.2 Decision points and Authorised Officer powers

The decision to appoint an interim manager will be made in accordance with OG 5 B2. 

Legal officers will usually have been involved in the case planning process but where they have not, written legal advice must be taken before we proceed to appointment of an interim manager.

The Order must be signed by a PB4 or above having taken legal advice and must be authorised by a PB5 Deputy Head or above. Whoever signs the Order must ensure that its content properly represents what has been authorised.

 

3.3 Key issues

• OG 5 provides guidance on circumstances in which an interim manager appointment might be appropriate.

Written legal advice is required before an interim manager is appointed. Advice should be sought as soon as the appointment becomes a serious possibility if this has not already been done. It should include advice on whether the evidence that the statutory grounds have been met is sufficient on the assessment of proportionality and the human rights impact of the proposed action. 

• The tendering process for the recruitment of the interim manager will need to be followed. See OG 5 for information on the tendering process.

Accountancy input may be necessary with regard to negotiating fees and what is required by the appointment.

 

• It is possible to appoint an interim manager to carry out a specific task within the charity, leaving the trustees responsible for administering and running the charity generally.
• Under section 86 of the Charities Act we must send a copy of the Order and a Statement of Reasons (SoR) for making the Order to the charity (if a company) or to each of the charity trustees as soon as practical after making the Order. We must complete an Order, SoR and decision log for each appointment for each different charity. Accordingly, if a decision is made to simultaneously appoint an interim manager to two different charities, we would need two orders, two SoRs and two decision logs to accurately record each appointment to each charity. The two sets of documents are likely to be very similar but any differences between the charities should be clearly reflected in them.
• In most cases "as soon as practical means" means at the time the Order is made. However, section 86(5) allows that where the sending of the Order and SoR would prejudice the statutory inquiry or not be in the interests of the charity we can delay this process. However, once the justification for doing so no longer applies we should provide the copy documents and SoR as soon as possible. Legal advice should be taken where we have doubts as to whether the Order or SoR should be sent. 
• The trustees or any other person who is or may be affected by the making of the Order can appeal to the Charity Tribunal.
• Section 76(6) provides the requirement to review the above Orders at such interval as the Commission sees fit. Orders for interim managers are reviewed on a six monthly basis by the Commission as part of good case working practice. The decision to discharge the Order as a result of a review under section 76(6) is itself a reviewable decision and can be appealed at the Tribunal, as can the decision not to discharge the Order. The trustees will be notified of the review and be told of their rights to appeal. The time limits are the same as those when we notify the making of the Order.
• A request for a review of the original decision to make the Order should be made within 3 months of being notified about the Order and, provided it is within the time limit, the request will take precedence over the our first six monthly review. Our six monthly reviews of these Orders mean that even where the 3 month limit has passed there remains an option for a decision review or appeal against these subsequent section 76(6) reviews. 
• Where, on review of the original decision, we decide that the Order should stand then the Order will fall back into the pattern for regular review under section 76(6).
• The charity or charity trustees can appeal to the Tribunal our appeal to appoint the interim manager. They or anyone else who is or may be affected by the Order has 42 days from the date on which we sent the notice of the decision. The 42 days includes weekends and bank holidays.
• Where we appoint an interim manager for a charitable company there is no provision in the Companies Acts allowing for the appointment to be recognised by the Companies Registrar. In order to assist the interim manager in his/her dealings with banks etc it may be necessary for the case officer to set out the position in a letter which can be produced by the interim manager. 
• Further Orders may be made from time to time varying the original Order of appointment.
• You should consider what land the charity has, and whether that land should be vested in the interim manager or the OCC by the Order (legal advice should be sought if you are in any doubt). The advantage of vesting in the OCC is that upon termination of the appointment the land can remain vested in the OCC; if the land had been vested in the interim manager we have the additional action of divesting that land on the interim manager discharge from office.
• Any proposal by the interim manager to dissolve the charity should be brought to the attention of the Director of Investigations, Monitoring and Enforcement.

 

3.4 Notice requirements

The attached table gives notice requirements for all section 76 Orders before and after publication.

The criteria for decisions to give notice and publicity for Schemes and Orders made under section 76 of the Charities Act 2011 can be found in section B8 of OG 500 Schemes and section B6 of OG 501 Orders.

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4.  Charities Act 2011 s.83 - Power to suspend or remove trustees etc from membership of a charity

4.1 Using this power

What this power allows us to do

The purpose of this power is to prevent those who are suspended or removed from office or employment from reinstating themselves by virtue of their membership of the charity. It is intended to prevent harm to charity property, reputation or beneficiaries; it is not a device to sideline individuals whose behaviour might be viewed by others as inconvenient or a nuisance.

Charities which have members can be corporate bodies or unincorporated organisations. The corporate charities may be charitable companies, chartered charities or charitable incorporated organisations. The membership may usually comprise a body of persons who exercise an administrative role in the governance of the charity. This administrative role might include electing directors or committee, and/or setting policy, and/or receiving reports and approving accounts.

An Order to suspend from membership can be made after a statutory inquiry has been opened where we have made an Order under section 76(3)(a) of the Act to suspend a trustee, charity trustee, officer, agent or employee from that office or employment. The length of suspension from membership must not exceed and must mirror the length of the suspension from office or employment (allowable for an initial period of up to 12 months). For example, if there is an Order suspending a trustee for 7 months, the person must also be suspended for 7 months as well from being a member. It cannot be longer. If this primary suspension is extended, it is possible for the suspension of membership also to be extended by up to an additional 12 months making a maximum total suspension period of two years, using the same principles as above. If in doubt, seek legal advice 

An Order to remove from membership can be made after a statutory inquiry has been opened where we have made an Order under section 79(1)&(2) to remove an officer, agent or employee from that office or employment. However, charity trustees cannot be removed from membership even where we have taken action to remove them as trustees under section 79(1)&(2). That is because such a person could not be reinstated to their previous position as trustee without committing an offence under section 178(1) of the Act.

Orders to suspend or remove from membership cannot be made without an underlying Order suspending or removing an individual from office or employment.

 

A person removed from membership can approach us at any time to request resumption of membership which may or may not be granted. However, where the Order was made five or more years ago we must grant the application unless there are special circumstances for that membership to remain withheld. In practice this is likely to mean we would require compelling reasons for doing so.

Initial considerations

Having established the reasons for suspending or removing a person from an office or employment, an analysis needs to be made of the risk to the interests of the charity if the person remains a member. One risk might be that the person will use his or her membership rights to be reinstated to that position but the risk to the charity might take other forms.

In analysing the situation we need to know:

• The range of powers exercised by the membership and, in particular, whether the membership is involved in the election of people to positions of responsibility in the charity.
• If the appointment in question is made by the trustees how much influence is the membership likely to have?
• Whether there are grounds to believe that the person as a member will actively impede the administration or work of the charity, or otherwise act against its interests.

Where the members make the appointment or have significant influence:

• How often do members meet?
• How easy is it for the person in question to call or arrange for a meeting to be called?
• What powers does the membership have to review or compel the actions of the trustees?
• How have the trustees and members behaved in the past?
• Are the roles of members and trustees clearly defined and understood or, are they in practice confused or merged?
• What systems and controls does the charity operate to ensure quality of management decisions?

In considering how much influence the person concerned is likely to have over the membership and what risk that poses to the charity we would need to know:

• How many members are there and how many are active?
• Whether members have used their position to influence decisions above and beyond their remit as members?
• Is there any evidence that the person concerned would seek reinstatement by virtue of their membership and involvement of other members?

Suspension or termination of membership (and prohibition from readmission to membership must be a proportionate action to take in the circumstances.  In taking a decision to suspend or remove from membership it is important to set out:

• the reasons and evidence to show why it is in the interests of the charity to take this action;
• how the individual's continued membership will affect the charity’s property, the conduct and management of its administration or its beneficiaries;
• why the action proposed is a proportionate response to the risks posed by the individual remaining in place or regaining their prior position;

Whether the action to suspend or remove from membership has a direct effect on benefits that individual receives through membership and if the withdrawal of such benefits engages questions of human rights. The impact of human rights issues and the use of our powers are considered at section 3 of OG117-1. Where caseworkers have uncertainties or concerns about the engagement of human rights or the proportionality of our action legal advice must be taken

Consideration of use of this power should take place usually at the same time as we consider suspension or removal from office or employment under sections 76(3)(a) & 79(1)&(2). Use of the power will not be automatic; in some instances it will not be used at all. In other instances it may not become apparent until after we have suspended or removed someone from office or employment that we need to take further action to suspend or remove from membership.

Proportionality of action is essential in terms of the threat posed to the charity by continued membership which must be balanced against the rights and freedoms of the individual and what in essence that person may lose by exclusion from membership. Some charities may provide financial benefits through memberships in the forms of insurances or preferential terms on use of facilities; others may provide benefits in personal terms such as support groups. Such benefits may be more difficult to measure than where membership is simply a mechanism for governance in terms of electing officials. Legal advice should be taken particularly where there may be a loss of benefits to an individual. It may be possible to achieve a situation where an individual retains the charitable benefits of membership, while no longer exercising the administrative function of membership.

Section 86 of the Act requires us to provide a statement of reasons where we make such an Order.

There is no requirement to give prior notice to the individual, the charity or the public or for them to make representations relating to the proposal to suspend or remove from membership. However, we are unlikely to want to terminate membership without giving the individual concerned an opportunity to say why we should not do so. Moreover, once an Order suspending an individual from membership is made the subject of that Order and any other person affected by the Order have a right to decision review and subsequently an appeal to the Charity Tribunal. An Order for removal from membership carries no such right and any challenge to such an Order will be by judicial review or by appealing against the underlying Order to remove as an officer, agent, or employee. 

In practice the individual concerned will usually be notified of the suspension or removal from membership in the same letter informing them of suspension or removal from office or employment.

If the underlying Order is discharged then the Order to suspend or remove from membership will fall without the need to discharge that Order. For avoidance of doubt Orders suspending or removing and preventing readmission to membership should be expressly drafted to be dependent upon the continued existence and validity of the underlying Order.

Another consideration is equality and diversity. When communicating with charities caseworkers should offer to translate documents into another language, another format, e.g. Braille or Audio or to try to meet any other requirements needed.

 

4.2 Decision points and authorised officer powers  

• The Order to remove from membership of a charity must be made by a PB4 or above (following legal advice unless agreed by a PB5 Deputy head or above), and authorised by a PB5 or above. Whoever signs the Order must ensure that its content properly represents what has been authorised.

 

4.3 Key issues

• This power can be used only in conjunction with a statutory inquiry and where we have used powers under sections 76(3)(a) to suspend a trustee, charity trustee, officer, agent or employee or under section 79(1)&(2) to remove an officer, agent or employee of a charity.

Written legal advice is required before use of this power. It should include advice on whether the evidence that the statutory grounds have been met is sufficient on the assessment of proportionality and the human rights impact of the proposed action. 

 

• The Order suspending or removing the individual from membership should be accompanied by a Statement of Reasons (SoR). If this is done at the same time as suspending or removing a person from office or employment the accompanying letter and SoR can incorporate both Orders.
• Section 86 states that we must also send the Statement of Reasons to the charity (if a corporate body) or otherwise to each of the trustees along with a copy of the Order as soon as practical after making the Order. The charity should update its membership list on receipt of this information. We recommend that the charity keeps a copy of the Order with their membership records.
• In most cases "as soon as practical" means at the time the Order is made. However, section 86(5) of the Act allows that where the sending of the Order and SoR would prejudice the statutory inquiry or not be in the interests of the charity we can delay this process. The Order and SoR must be sent once these factors cease to apply.
• The Order to suspend from membership must not remain in place where we discharge the Order to suspend from trusteeship or other office under section 76(3)(a). This must be taken into consideration where the six monthly review of the section 76(3)(a) Order takes place.
• The individual concerned can appeal to the Tribunal against our decision to suspend from membership (although not against the removal). They have 42 days from the date on which we sent notice of the decision to make the appeal. The 42 days includes weekends and bank holidays.
• An appeal to the Tribunal made by the trustees or any other person who is or may be affected by the Order has 42 days to appeal from the date on which we sent notice of the decision. Again, the 42 days includes weekends and bank holidays. 

 

4.5 Notice requirements

The attached table gives notice requirements for Orders under sections 76, 79, 83, 85 and 86 before and after publication.

The criteria for decisions to give notice and publicity for Schemes and Orders made under section 76 of the Charities Act  can be found in section B8 of OG 500 Schemes and section B6 of OG 501 Orders.

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