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Governance 5 min read Published Updated Credibility 40/100

Governance Briefing — February 15, 2022

The UK Charities Act 2022 reshapes trustee powers, Commission enforcement, and fundraising compliance, demanding governance updates, refreshed risk controls, and new supplier terms before phased commencement dates through 2023.

Zeph Tech Research Lead

Research lead, Zeph Tech

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Executive briefing: The Charities Act 2022 received Royal Assent on 24 February 2022, implementing a raft of Law Commission recommendations to simplify regulations, expand Charity Commission powers, and improve trustees’ ability to manage resources. Commencement will occur in stages through 2023, meaning charity boards must track multiple effective dates covering constitution amendments, fundraising, property disposal, and permanent endowment rules. Operating models, governance frameworks, and supplier agreements all require updates so that charities maintain compliance while taking advantage of new flexibilities.

Legislative overview

The Act updates the Charities Act 2011 and related legislation to reduce administrative burdens while closing loopholes identified by the Charity Commission for England and Wales. Key reforms include easier charity name changes, simplified amendment procedures for governing documents, wider use of permanent endowment, and expanded Commission powers to resolve trustee disputes. It also codifies the Commission’s ability to confirm trustee appointments, orders charities to remedy defective decisions, and clarifies rules around fundraising and ex gratia payments. The Department for Digital, Culture, Media & Sport (DCMS) is coordinating phased implementation, with the first tranche commencing in autumn 2022.

Operational priorities

  • Governing document review: Operations and legal teams should inventory constitutions, trust deeds, and articles of association. The Act simplifies amendment requirements for charitable companies and CIOs, but trustees must still follow the Commission’s consent process for changes affecting purposes or benefits. Document revised procedures and train administrators on new filing requirements.
  • Permanent endowment flexibility: The Act allows trustees to borrow up to 25% of the value of permanent endowment without Commission consent, provided the sum is repaid within 20 years. Finance teams must adjust investment and liquidity policies, implement monitoring controls for repayments, and update risk registers for endowment drawdowns.
  • Ex gratia payments: Trustees gain power to delegate ex gratia payment decisions to staff within limits. Draft delegated authorities, approval workflows, and documentation templates to evidence that payments meet the “moral obligation” test and remain within financial thresholds.
  • Fundraising compliance: Revisit agreements with professional fundraisers and commercial participators. The Act clarifies information to be shared with donors, requiring refreshed scripts, marketing materials, and compliance monitoring to meet Fundraising Regulator standards and Consumer Protection Regulations.
  • Property disposals: The Act replaces Qualified Surveyor Reports with more flexible “designated adviser” reports. Estates teams should update disposal checklists, maintain registers of eligible advisers, and ensure valuations consider best-value obligations under the Charities (Qualified Surveyors’ Reports) Regulations 1992 (as amended).

Governance and oversight actions

  • Board education: Schedule workshops explaining new powers, Commission expectations, and phased commencement. Provide scenario-based guidance on making moral-obligation payments, delegating decisions, and leveraging endowment flexibility responsibly.
  • Trustee appointments and removals: The Act clarifies automatic disqualification rules and allows the Commission to confirm appointments. Boards must strengthen due diligence on prospective trustees, including criminal record checks and conflict-of-interest disclosures, to avoid disqualification issues.
  • Serious incident reporting (SIR): Reassess SIR procedures to reflect expanded Commission enforcement powers. Ensure reporting thresholds and escalation routes cover breaches linked to new provisions—such as improper property disposals or misuse of endowment borrowing.
  • Internal controls assurance: Audit committees should expand assurance maps to include new risk areas (endowment borrowing, ex gratia delegations, adviser reliance). Commission internal audits or external reviews to test control effectiveness before commencement milestones.
  • Stakeholder engagement: Communicate with donors, beneficiaries, and regulators about how the charity will implement the Act. Transparency supports public trust and reduces reputational risk.

Technology and data considerations

  • Document management: Update governance document repositories to track versions, approvals, and Commission consents. Configure access controls to ensure trustees and executives can retrieve authoritative documents quickly during regulatory reviews.
  • Financial systems: Modify accounting software to monitor permanent endowment borrowing, repayment schedules, and restricted-fund compliance. Implement alerts when borrowing approaches the 25% ceiling or repayment deadlines.
  • Fundraising platforms: Adjust online donation flows and customer relationship management (CRM) systems to display required information about professional fundraisers or commercial participators. Capture donor consent for communications in line with UK GDPR and Privacy and Electronic Communications Regulations.
  • Risk and incident tracking: Update risk management systems to flag incidents related to property transactions, delegated ex gratia payments, or trustee eligibility. Integrate with reporting dashboards used by governance committees.
  • Training delivery: Deploy e-learning modules covering Act provisions, with completion tracking to evidence compliance. Tailor content for trustees, senior management teams, fundraisers, and finance staff.

Sourcing and partner management

  • Professional advisers: Review engagement letters with surveyors, legal counsel, and investment managers to confirm they qualify as “designated advisers” under the Act. Update scopes of work to include compliance attestations and clear reporting responsibilities.
  • Fundraising agencies: Amend contracts to include updated disclosure requirements, training obligations, and performance monitoring. Incorporate clauses requiring timely reporting of complaints and regulatory interactions.
  • Technology vendors: Ensure CRM, finance, and governance software providers support necessary changes (e.g., new data fields for endowment borrowing, trustee declarations). Negotiate service-level agreements covering change implementation timelines and support.
  • Partnership agreements: For collaborative projects or federated charities, review joint working arrangements to ensure decision-making and property disposals comply with the new regime. Clarify responsibilities for Commission interactions and incident reporting.
  • Insurance cover: Discuss with insurers whether policy updates are needed to reflect new trustee powers or extended liabilities. Provide evidence of enhanced controls to maintain coverage terms.

Implementation roadmap

  1. Phase 1 (0–3 months): Establish a transition task force, map commencement dates, and perform gap analysis on governance documents, policies, and systems. Brief trustees and senior managers.
  2. Phase 2 (3–6 months): Update policies on ex gratia payments, fundraising, property disposals, and trustee appointments. Configure systems, revise templates, and begin training rollouts.
  3. Phase 3 (6–12 months): Implement monitoring controls for endowment borrowing, launch revised fundraising agreements, and conduct mock audits or reviews to ensure readiness for Commission scrutiny.
  4. Phase 4 (12+ months): Review implementation effectiveness, gather feedback from trustees and operational teams, and refine procedures as subsequent commencement regulations take effect through 2023.

Strategic outlook

The Charities Act 2022 seeks to deliver regulatory flexibility while protecting public confidence. Charities that modernize governance, integrate digital tools, and strengthen relationships with advisers can leverage new powers to unlock capital, accelerate service delivery, and respond to crises more effectively. Proactive communication with the Charity Commission and stakeholders will position organizations to navigate future regulatory updates, including potential reforms to fundraising regulation and digital safeguarding guidance.

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