The findings of a major review of the legal and regulatory framework for charities and the wider not-for-profit sector has led to proposals for comprehensive reform. Published by the Strategy Unit of the Government?s Cabinet Office in a consultation document entitled ?Private Action, Public Benefit?, the reform, if implemented, would modernise charity law and status to provide greater clarity and a stronger emphasis on the delivery of public benefit, and to enable charitable organisations to become more effective and entrepreneurial.
Central to the recommendations in the report is the re-definition of ?charitable purposes? activity, which are currently characterised as relief of poverty, advancement of education, advancement of religion and other purposes beneficial to the community. The review has recommended a new definition comprising ten purposes of charity, including ?the advancement of culture, arts and heritage?, sets out a clearer framework and the flexibility to evolve as society changes.
In future individual charities would have to demonstrate public benefit, whereas this is currently assumed for some categories of activity. The Charity Commission will undertake an on-going review to check the ?public character? of charities which charge fees that tend to exclude large sections of the public, and would issue guidelines as to the level of access appropriate in particular circumstances.
Another key issue likely to affect arts organisations is the proposal to provide greater freedom for entrepreneurial activity by removing the requirement for trading charities to establish separate trading subsidiaries. Currently charities are only permitted to undertake substantial trading that is directly connected to their charitable purpose, including theatres which charge for tickets. But all other trading must be done through subsidiaries, including theatre cafés and restaurants that cater for both audiences and the general public. Allowing charities to undertake all trading within the charitable organisation itself would, according to the report ?remove the burdensome complexity in the current system?.
Improving the range of corporate legal forms available to charities and social enterprises, including the establishment of a Charitable Incorporated Organisation, is also seen as a priority. Many charities, including arts organisations, choose to incorporate as Companies Limited by Guarantee, but this legal form can be problematic as it fails to differentiate clearly the requirements of company law and charity law.
The Directory of Social Change (DSC), a major provider of information and support for voluntary organisations, has strongly welcomed the report?s recommendations: ?This remarkable report sets out the most comprehensive, thorough and authoritative programme of reform for charity law and practice in the lifetime of any of its readers ? and it comes with a strong commitment to implementation, including new legislation.? A period of consultation is now to take place, and the DSC will be using its website (http://www.dsc.org.uk) to draw attention to what it sees as issues needing further attention. The consultation document is at w: http://www.cabinet-office.gov.uk