OG 525 Charities Act 2011 s.181A - Power to disqualify from being a trustee

Last reviewed:
Last updated:
24 March 2017

Policy Statement/Overview

Before reading this OG, please ensure that you have read the Explanatory Statement on this power which sets out in detail our approach to making decisions about using this power and which must be followed when considering using this power. You may also find it helpful to look at the Q and A we have produced for the website.

Summary of the guidance

B Casework Guidance

B1 Using this power

B1.1 What this power allows us to do

This power allows us to make an order disqualifying a person from being a trustee in certain circumstances. While a person is disqualified under this power they are also (unless we order otherwise) disqualified from holding positions with senior management functions within the charity or charities concerned. The power:

  • can be used to disqualify someone whether or not they are currently a trustee
  • can be exercised without the need for a s.46 inquiry. However, it is most likely to be used when we have a compliance case, and often but not always, in an inquiry (until further notice, if you are considering using this power outside of a s.46 inquiry, you should discuss whether or not this is appropriate with your line manager. If the line manager thinks the matter is a possible case for disqualification, an early "heads up" conversation with the Head of Legal Compliance and relevant Director should take place).
  • is exercisable only if we are satisfied that each of the following three statutory criteria are met:
    • one of the six conditions listed in s.181A(7) is met in relation to the person to be disqualified;
    • the person is unfit to be a charity trustee or trustee for a charity (either generally or in relation to the charities or classes of charities described in the order); and
    • making the order is desirable in the public interest in order to protect public trust and confidence in charities generally or in the charities or classes of charities described in the order
  • allows us to suspend the person if we have given them notice of our intention to disqualify them
  • will enable us to disqualify the person for a proportionate period up to a maximum of 15 years from the day on which the order takes effect
  • will enable the person to be disqualified from being a trustee of a particular charity, class of charity, or charities generally
  • prevents the disqualified person from being a trustee. It does not have the effect of removing them from any trustee positions they may hold: this is achieved either by their resignation or by their removal by the other trustees (if they have the power to do so) or by our order under s.79A of the 2011 Act
  • as well as disqualifying the person from trusteeship, also has the effect of disqualifying them from holding positions with a senior management function (whether paid or unpaid) within the charity or charities from which they have been disqualified as a trustee (although we can specify in the order that the person is not disqualified generally from senior management functions or in relation to a specific office or employment or description of office or employment) (see section 1.4).
  • is subject to notice requirements
    • before we make the order we must give at least one month’s notice to the person we are intending to disqualify, inviting representations within a specified period (which will normally be one calendar month plus two days from the date of our letter)
    • if that person is known or believed to be a trustee we must also
      • give notice to the other charity trustees of our proposals, and
      • give public notice of our intention to make an order, inviting representations within a specified period (normally one month) unless we are satisfied that for any reason it is unnecessary to give public notice
  • is subject to appeal to the Tribunal  
  • takes effect
    • only after the time for an appeal in the Tribunal has elapsed i.e. 42 days after the order has been sent to the person disqualified, or
    • where an appeal is lodged, after that appeal is concluded or withdrawn. This could be an indefinite period of time as it depends how long the Tribunal needs to make a final decision on the making of the order. You will therefore need to consider the points in section 3.2 regarding the maximum length of any suspension.

 

B1.2 The policy intention behind the power

This is set out in the Explanatory Statement :

 … in broad terms the Commission considers that this power is aimed at disqualification of persons from being a trustee when their conduct, whether in relation to a charity or more generally, is such that there is a public interest in making a disqualification order so as to protect public trust and confidence in charity. The power will aim to ensure that charities are protected from persons who are not fit to run a charity and who pose a risk of damage or loss to its activities, beneficiaries and public trust and confidence. Whilst providing protection, in some instances it may also serve as a deterrent for further or wider improper conduct in the sector.’

The Explanatory Statement provides further policy context for the exercise of the power:

‘For the most part, trustees are unpaid volunteers who give up their personal time to do something for social good. The Commission supports and encourages voluntary participation in charities, in accordance with its statutory duties, and does not want to penalise a person simply because they made a mistake or misjudgement, particularly if the impact is low or minimal.

However, the Commission also has statutory objectives to promote trustees’ compliance with their legal obligations and increase public trust and confidence in charities. It therefore needs to ensure that charities and other trustees are protected from those whose involvement with charity poses a risk to the charity, is damaging to the charity or to the sector. One aim of this power is to reduce the risk of and enable the Commission to act before any misconduct or mismanagement by the person is committed in a charity.’

 

B1.3 Application of the power to trusteeship

The power disqualifies a person from both charity trusteeship and trusteeship for a charity. A trustee for a charity is a person who is not a charity trustee (for example holding, bare or custodian trustees) but who may hold property on behalf of the charity: this will include those who are formally appointed as holding trustees as well as those who have not been formally appointed but who, for example, hold money that they have raised for a charity. The power also applies to bodies corporate in these capacities.

When section 12 of the Charities Act 2016 comes into force (which is not expected to be before October 2017 (participation in corporate decisions whilst disqualified – s.184A of the 2011 Act), a person who is disqualified from being a trustee but who participates as an officer in the decisions of a corporate charity trustee will be liable to the same criminal and civil consequences that apply to acting while disqualified as a charity trustee.

In cases where the person we are proposing to disqualify is not currently a trustee, case officers may need to gather and consider evidence to show how the use of the power addresses a regulatory concern in the charitable sector specifically.

 

B1.4 Application of power to senior management functions

The power to disqualify is used to directly prevent someone from being a charity trustee or trustee for a charity: where we use it, the individual concerned will as a consequence also be disqualified from holding an office or employment with "senior management functions" (whether paid or unpaid) in the charity or charities from which they have been disqualified as a trustee.

A senior management function is defined as

  • a position that relates to the management of the charity and the person holding that position is not responsible to another officer or employee of the charity (other than a trustee), or
  • a position involving control over money and the only officer or employee (other than a trustee) to whom the person in that position is responsible is a person with senior management functions other than ones involving control over money.

Examples of senior management functions are the Chief Executive and Finance Director. They will often be employed directly by the charity. However, it is not necessary for the person to be employed directly by the charity or to occupy a role with only these titles – the test is whether or not the person is carrying out the functions and is accountable, in the ways described in the above two bullet points.

lawyer_referLegal advice must be obtained on whether the person is caught by this provision where it is thought that they provide these functions to a charity under a consultancy or other contract for services and in other cases where there may be doubt whether the definition applies to a particular position.

Section 181A(5) provides that an order can contain exceptions from disqualification either:

  • generally in respect of senior management functions, or
  • in relation to a specific office or employment

Given the potentially substantial impact a disqualification order might have on an individual holding employed or paid positions, in every case, the case officer must specifically consider

  • the human rights implications
  • any consequences for a person who is currently employed under a contract of employment in a charity or in a position which carries out these functions, or by way of a contract for services
  • other likely consequences or implications from disqualifying the particular individual from all or some senior management function
  • whether or not the disqualification order should contain an exception to cover any of the above identified issues

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B2 Key considerations when using this power

B2.1 How to decide whether to use this power

In considering whether to use this power, case officers must ensure they have read the Explanatory Statement which details the three statutory criteria that must be met for using this power and our approach to making decisions on using this power.

Particular points to note are:

  • as part of the consideration of whether or not to use this power, the case officer should be satisfied that using this power, as opposed to one of our other powers, will provide an appropriate regulatory outcome in the case or circumstances. For example, if the person we are considering disqualifying is presently a charity trustee of a charity which is in inquiry and the misconduct or mismanagement relates to the issues under investigation, we will normally consider if a more suitable route is to exercise the power of removal under section 79. However, there may be cases where we are unable to meet the test needed for removal under section 79 (for example, it is difficult to establish a risk to charity property) or it is more appropriate to use this power, which is limited to a 15 year period.
  • it is not the Commission’s intention to make a finding of unfitness in relation to well-meaning persons who have made an honest mistake in good faith or who were well-meaning in what they did but made an error in judgment, whether whilst administering a charity or charitable funds or in the context of their work or personal life
  • someone is not considered unfit simply because they took a trustee role or applied for one without any prior knowledge or experience of acting as a trustee or the regulatory requirements for charities, but we make clear to all trustees that they must before or on appointment have read and ensure they understand the key duties of being a trustees, as set out in The Essential Trustee (CC3)
  • check to see if the person holds themselves out as, or is or has been, a professional trustee, where on unfitness around competence, we have made clear it is reasonable to expect them to demonstrate a higher standard of care and skill as reflects the profession or expertise they profess to have. If so, check if they have been remunerated for any special skill they have
  • where the person we propose to disqualify is not currently a trustee, in light of the statutory criteria (in particular the public interest test and the need to act proportionately) we should specifically consider what relationships the person has had with charities in the past and any likely relevant relationship with charity in the future.
  • whilst a person should not be able to avoid disqualification by simply undertaking not to have anything to do with a charity in the future, the fact they say they will avoid any charity cannot be ignored - as the Explanatory Statement says it is one of the balancing mitigating features we will consider.
  • when deciding whether or not to make a disqualification order as a result of a caution in Condition A or a conviction in Condition B, the case officer should consider:
    • the seriousness of the offence and circumstances in which it was committed
    • any relevant circumstances as to why a caution was offered or accepted
    • relevant concerns raised about any court or other legal processes, or compliance with the right to a fair trial
    • as regards overseas convictions, whether the standards of evidence and justice would be likely to be accepted in a UK or European court
    • principles of rehabilitation and the Rehabilitation of Offenders Act 1974.

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Legal advice should be obtained in cases where overseas or spent convictions are involved

 

  • if we are proposing to disqualify a person under either condition D or E of section 181A(7) then the case officer needs to first make a finding or misconduct or mismanagement: if the power is being used in the course of an inquiry then this finding will usually already have been made
  • Orders made under this power have a direct effect on individuals. The case officer should consider the circumstances of the case in line with the Commission’s duties as a public authority and the duties which may arise under the Equality Act 2010 and the Human Rights Act 1998.

 

B2.2 Key case handling points to remember when using this power

There are a number of key case handling points to check when using this power:


Establishing the facts

  • if the power is being used in the course of an existing compliance or monitoring case or inquiry then a sufficient fact finding exercise about the conduct of concern may have already taken place. The interviews and meetings with the individual, other trustees and other witnesses as part of that case, may be some or all of the evidence being relied on for the disqualification. Be clear as to what forms part of the evidence and what does not.
  • in some cases once disqualification is considered to be a regulatory option, a specific meeting may be necessary or desirable either for us to clarify the facts of what has happened or to give the person an opportunity to respond specifically to the regulatory concerns raised before we issue notice of our intention to disqualify, particularly if we have had no previous engagement with the individual

In other cases where we have had little or no previous engagement with the person and we are proposing to disqualify them because on the face of it the conduct warrants disqualification or the circumstances are sufficiently clear, the case for disqualification is likely to be made stronger if you offer the person an opportunity to be formally interviewed on the conduct of concern. In these scenarios, you must issue a letter raising concerns about the conduct, and making clear it raises issues about their fitness to act, and asking them to a meeting to discuss it. If they do not respond or choose not to take this opportunity, we need not pursue this before issuing the notice.

Scope of order and exceptions

  • should the disqualification be in relation to a particular charity, class of charity or all charities?
  • are there grounds for the order to except the person from disqualification either generally in respect of positions with senior management functions or in relation to a specific office or employment?
  • how long should the period of disqualification be? – guidance on how we decide the scope and period of disqualification is contained in the Explanatory Statement. In deciding what is a proportionate period of time, the case officer should have regard to the following three principles which will underpin any decision made regarding the period of disqualification. No one principle should be more important than any other and in practice they may all be relevant to a greater or lesser degree in any individual case:
  • Protection: the need to provide protection to charities and the public to prevent persons, whose past or ongoing actions mean they are unfit to be a trustee
  • Rehabilitation: the possibility of reform and rehabilitation of the person and re-integration into the sector
  • Deterrence: the deterrent effect on both the person being disqualified and on the extent of unfit conduct in the management of charities

Process

  • authorisation must be obtained at the right level for the use of the power (see section 4)
  • In all cases where we are considering using this power, whether in an inquiry or not, the case officer must inform the Director of Investigations, Monitoring and Enforcement and the Head of Legal (Compliance) of their proposals to use this power.

 

lawyer_referCase officers must obtain written legal advice on the legal justification of the proposal to disqualify - covering the sufficiency of the evidence that the three tests are met and the length of the disqualification in terms of

 

    • application and consistency of our published policy approach
    • the level of risk of successful legal challenge
    • assurance that the specific proposals are in compliance with our obligations on human rights, equality and public administrative decision making - see section 3 of OG117-1 for more guidance.
  • once the disqualification order is effective (see 1.1), the name of the disqualified person must be included on the register of removed persons (see section 3.5)

Case officers should complete the decision log to evidence the proposal. It is important case officers ensure they have provided text in the decision log to address the issues above before seeking legal advice.

Suspension

  • If the person is a serving trustee, case officers should also consider suspension pending disqualification – this power can be used only where notice of intention to disqualify has been given. This is a new and separate power from the suspension power under section 76 (see section 3.2)

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B3. Process for making orders to suspend and disqualify

When we have decided, based on the factors set out in the Explanatory Statement and with authorisation that the three statutory criteria for the use of this power have been met, and have decided to proceed with making the order, it is important that the statutory process is followed to proceed with the proposal to make the disqualification order and, if needed, the suspension order.

 

B3.1 Notice requirements before deciding to make the disqualification order

There are three different types of notice to be considered and sent (where appropriate) before we make can proceed with making a disqualification order:

A.  In all cases we must, under section 181C (1), give the person we propose to disqualify at least one month’s prior notice of our intention to disqualify, with reasons, and invite representations within a specified time, which will usually be one calendar month plus two days from the date on which we send the letter giving notice of our intention to disqualify. We are not required by the Act to send the person we are intending to disqualify a draft Statement of Reasons (section 181C(1)(a) provides that we must give them notice of our proposals which is "to contain such particulars of the proposals, or such directions for obtaining information about them as the Commission thinks sufficient and appropriate"). However, our policy is to give them notice of the proposals by means of a provisional Statement of Reasons. This will include details of the period for which we are proposing to disqualify them. This document will be updated to become the final Statement of Reasons once the order is made.

The requirement to send this notice does not apply if the person cannot be found or has no known address in the United Kingdom.

Notice should to be validly sent be sent by post or hand delivered if it is an address in the UK and should additionally be sent by email where we hold a current email address. The case officer should check that the postal and email addresses they are using for the person are the most up to date before sending the documents.

 

B.  If we know or have reason to believe that the person we are proposing to disqualify is a trustee (whether charity trustee or holding trustee) then under section 181C (2) we must give notice of our proposals to each of the charity trustees, which we will do by sending them a copy of the provisional Statement of Reasons. Although the Act does not require us to invite representations from those trustees, the model letter offers this opportunity to the trustees.

We will normally send notice to the person we are disqualifying the day before we send notice to the other charity trustees. If the case officer considers that there is a particular reason why notices to the person being disqualified and the other charity trustees should be sent on the same day they should discuss this with their manager.

 

C.  If we know or believe that the person we are proposing to disqualify is a trustee then under section 181C (3) we are also required to give public notice unless the Commission is satisfied that for any reason such public notice is unnecessary. The criteria for considering public notice are set out in section B6 of OG 501 Orders. If public notice is not given, we must record in writing in the decision log the decision and the reasons for the decision not to give public notice. Any public notice must invite representations to be made on the proposals within a time limit which must be specified in the notice and which will usually be one full month from the date of the public notice.

The case officer must arrange for public notice to be given – this will be done by notice on our website if the person is currently a trustee. The case officer should also consider whether we should require a notice to be put on the charity’s website and or/ whether notices should be displayed on the charity’s premises or in the local area of operation to draw the matter to the attention of the beneficiaries, funders etc.

Seek advice from your manager or legal where there is doubt about what would be reasonable.

 

 

B3.2 Suspension pending disqualification

Section 181B (4) provides that we can make an order to suspend a person if we have given notice of our intention to make an order to disqualify a person under section 181A. Where we decide to suspend, our policy is that we will send the order to suspend immediately after we send the notice of our intention to disqualify. The order (with the model covering letter) should be sent in a separate envelope to the notice of our intention to disqualify and if we are also sending the order by email, in a separate email sent just after the email with notice of our intention to disqualify.

  • The initial suspension order must be for no longer than 12 months, although at any time before the expiry of the order (i.e. before the 12 months) we can extend the suspension by a further order, provided that the suspension is not extended for more than 12 months and the total period of suspension is not more than 2 years.
  • There are no specific criteria in legislation for considering a suspension order under section 181B(5) and this is not to be confused with the criteria under section 76. If there are clear grounds to consider giving notice of our intention to disqualify then this will be sufficient to make the grounds for suspension. We can only suspend someone from being a trustee or charity trustee, which will generally cover those who are already in such a position.

lawyer_refer

However, there may be exceptional cases where this is not the case and, if so, the case officer should seek legal advice.

 

  • As there are no specific statutory criteria for suspension the case officer should consider the following issues and what evidence there is to support these. However the case for suspension is not restricted to these areas. If in doubt please seek legal advice as to whether a case for suspension is justified:
    • does the person represent a risk of ongoing or immediate harm to the charity or its assets? This could include funds or reputation as well as commercial relationships.
    • is there evidence of misconduct or mismanagement by that person which would be temporarily addressed by a suspension order?
    • what evidence is there either to support the person remaining in post or not remaining in post?
    • is the suspension in line with best regulatory practice and the Commission’s duties as a public body e.g. in relation to equalities and human rights issues?
    • consider whether, if making the order, the order needs to make provision,
      • (a) for enabling any person to execute any instrument in the suspended person’s name or otherwise act for that person, and
      • (b) in the case of a charity trustee, for adjusting any rules governing the proceedings of the charity trustees to take account of the reduction in the number capable of acting
  • Suspension ceases to have effect at the end of the period of suspension specified in the suspension order: it will cease before then if and when we:
    • notify the person that we will not proceed with the proposal to disqualify
    • make the order to disqualify, and the order takes effect (that is, after a 42 time day period from when the order is made or after an appeal has been determined or withdrawn)
  • We must keep the order to suspend under regular review (which should be detailed in the covering letter) and if we decide it is appropriate to discharge the order in whole or in part then we must do so.
  • While a suspension order is in place the person we have suspended must not take up any appointment as charity trustee or trustee for another charity without our written approval. We should aim to respond within 14 days of a request for approval being made. Our decision must be made on the facts of the case and whether these are sufficiently strong to satisfy us that, pending our decision on disqualification, it is unnecessary for the protection of charities generally or specific charities to continue with the suspension.
  • The person we have suspended has a right of appeal to the Tribunal (see section 3.4). If they lodge an appeal within the 42 day limit we should take into account the reasons they have submitted in their appeal on the suspension order and consider whether it impacts on our proposal to disqualify.

Case officers should also consider the impact of any suspension of a person on the administration of a charity and whether any further provisions need to be made to facilitate its operation. There is power under 181B (9) to make provision under any suspension order for matters affected by that suspension which affect the charity, in particular:

  • the Commission can enable another person to execute documents in the suspended person’s name or otherwise act for that person
  • in the case where the person suspended is a charity trustee, the Commission can adjust the rules governing the proceedings of charity trustees to take into account the reduction in the number of those capable of acting.

 

B3.3 Considering representations in response to a notice of intention to disqualify

Representations from individuals are requested and will usually be made in writing although in appropriate circumstances it may be possible for them to be given orally if for some reason the individual in question is unable to make representations in writing (for example, a disability).

Any representations we receive within the specified time limit must be considered before we decide whether to make the order to disqualify.

We will normally consider any representations in line with the decision review process for representations made in response to a draft order as set out in OG 736-1.

If, following consideration of any representations, we decide to make the order we can proceed (either with or without such modifications as we think fit) without the need for further notice.

If, following consideration of any representations, we decide not to make the order, in addition to informing the individual that we are not proceeding to make the order we should also inform the other trustees.

 

B3.4 After we make the disqualification order

  • The order should be sent to the individual and be accompanied by the final Statement of Reasons and a letter confirming the disqualification order has been made, explaining when it will take effect, and setting out the individual’s rights to appeal.
  • If we know or believe that the person we are proposing to disqualify is a trustee then under section 181C (9) a copy of the order and the final Statement of Reasons (SoR) for making the order must be sent to the charity (if a corporate body) or to each of the charity trustees.

lawyer_refer

Legal advice must be taken where we have doubts as to whether, and to whom, the order or SoR should be sent.

 

  • As a matter of policy the order should always be served in accordance with section 339 of the Charities Act because of the criminal sanctions on acting as a trustee whilst disqualified under section 183 of the Act. This means that if the order is being served on a person (i.e. not a body corporate) it can be delivered to that person by post or hand delivered at that person’s last known address in the United Kingdom. Where an order is served on a body corporate, this can be done by delivering it by hand or sending it by post to the registered or principal office of the body in the United Kingdom or, if it has no such office in the United Kingdom, to any place in the United Kingdom where it carried on business or conducts activities (as the case may be).
  • An appeal can be made to the First-tier Tribunal (Charity):
    • by the person being disqualified against:
      • the order to suspend
      • the order to disqualify
      • the decision not to revoke or vary an order to disqualify 
    • by the person being disqualified, the trustees of the charity (or the charity) to which the order relates, or any other person who is or who may be affected by the order, against a decision to:
      • discharge, or not discharge, a suspension order following review under s.181B(7)

The disqualification order takes effect at the end of the 42 days, if no proceedings are started within that time, or (subject to the decision on appeal) when any proceedings started within the 42 days are withdrawn or finally determined.

 

B3.5 Variation or discharge of the disqualification order

A person who has been disqualified under s.181A and in respect of whom an order is in force, can apply at any time for the order to be discharged or varied under section 181D.

Our policy approach is that we will only make a discharging or varying order if there has been a significant change in the circumstances that show that the grounds for originally making the order have been entirely removed.

 

B3.6 Register of removed persons

Under s182 (1) of the 2011 Act we have a statutory duty to keep a register of all persons removed from the office of charity trustee or trustee for a charity. This includes people:

  • removed by an order under section 79 and
  • people who have been disqualified by an order under s.181A of the 2011 Act, .or
  • removed by an order of the High Court since 1 January 1993.

This register must be available for public inspection in legible form at all reasonable times (s182).

This register is maintained by the Intelligence team in Investigations and Enforcement and is searchable on our website. If a member of staff comes across a case where someone has been disqualified by us from being a trustee whose name is not on the register, this information should be passed to the Intelligence team to rectify the position.

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You must inform the Intelligence team once you have made an order disqualifying a person.

 

 

B3.7 Consequences of acting while disqualified

Criminal consequences

Section 183(1) of the Charities Act 2011 provides that It is a criminal offence for any person to act as a charity trustee or trustee for a charity while disqualified from being a trustee by virtue of section 181A of the 2011 Act. However s.183(1) does not apply if the charity concerned is a company or a CIO or if the disqualified person is disqualified by virtue only of case B, F or G in s.178

Civil consequences

Section 184(1) of the Charities Act 2011 provides that any acts done as a charity trustee or trustee for a charity by a person disqualified from being such a trustee by virtue of section 178 or an order under section 181A are not invalid merely because of that disqualification.

If we are satisfied that any person has acted as a charity trustee whilst disqualified by s.178 or s.181A has received any remuneration, expenses or benefits in kind in connection with acting as a charity trustee we can direct by order that the person repay to the charity the whole or part of any remuneration or expenses or the whole or part of the monetary value (as determined by the Commission) of any benefit in kind.

 

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B4 Decision points and authorised officer powers

The decision to make an order under s.181A must be authorised at PB6A level (Head of Unit).

These are the key stages and decisions:

  • Deciding to give notice of our intention to disqualify
  • If the person we are proposing to disqualify is a serving trustee deciding whether to suspend pending disqualification
  • Following the notice period deciding whether to make the disqualification order, taking into account any representations that may have been made.
  • The decision log will normally explain and set out why the grounds for using the power have been met and why it is a proportionate action in the context of the case. This explanation will provide evidential analysis, setting out the facts that are relied upon and those that have been discounted in reaching the decision to use the power.

lawyer_refer

Legal advice must be taken on the grounds for using the power and the content of the provisional statement of reasons and order.

 

  • Use of this power allows for representations to be made following notice before the order is made. In cases where no representations are received, the decision maker on making notice of intention to disqualify can proceed to decide whether to make the order.
  • Where representations are received, the decision review process will normally take effect, and the litigation and review team should be notified. Any representations received will provide an opportunity to look again at the circumstances for making the order and whether there is any new information that would cause us to reconsider. The person(s) carrying out the decision review will decide whether or not to make the order.
  • Ideally the order will be signed by the person who authorised the decision. However, where they are not available the order can be signed by another Head of Unit (with appropriate powers) on the basis of the authority already given.
  • Whoever signs the order must ensure that its content properly represents what has been authorised.

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