Charities Bill (HC Bill 257)

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(3) Money payable by a member to the CIO under the constitution is a debt due
from that member to the CIO, and is of the nature of an ordinary contract debt.

218 Third parties

(1) Subject to subsection (3), the validity of an act done (or purportedly done) by a
5CIO is not to be called into question on the ground that the CIO lacked
constitutional capacity.

(2) Subject to subsection (3), the power of the charity trustees of a CIO to act so as
to bind the CIO (or authorise others to do so) is not to be called into question
on the ground of any constitutional limitations on their powers.

(3) 10Subsections (1) and (2) apply only in favour of a person who gives full
consideration in money or money’s worth in relation to the act in question, and
does not know—

(a) in a subsection (1) case, that the act is beyond the CIO’s constitutional
capacity, or

(b) 15in a subsection (2) case, that the act is beyond the constitutional powers
of its charity trustees,

and (in addition) subsection (2) applies only if the person dealt with the CIO in
good faith (which the person is presumed to have done unless the contrary is
proved).

(4) 20A party to an arrangement or transaction with a CIO is not bound to inquire—

(a) whether it is within the CIO’s constitutional capacity, or

(b) as to any constitutional limitations on the powers of its charity trustees
to bind the CIO or authorise others to do so.

(5) If a CIO purports to transfer or grant an interest in property, the fact—

(a) 25that the act was beyond its constitutional capacity, or

(b) that its charity trustees in connection with the act exceeded their
constitutional powers,

does not affect the title of a person who subsequently acquires the property or
any interest in it for full consideration without actual notice of any such
30circumstances affecting the validity of the CIO’s act.

(6) In any proceedings arising out of subsections (1) to (3), the burden of proving
that a person knew that an act—

(a) was beyond the CIO’s constitutional capacity, or

(b) was beyond the constitutional powers of its charity trustees,

35lies on the person making that allegation.

(7) In this section and section 219—

(a) references to a CIO’s lack of constitutional capacity are to lack of
capacity because of anything in its constitution, and

(b) references to constitutional limitations on the powers of a CIO’s charity
40trustees are to limitations on their powers under its constitution,
including limitations deriving from a resolution of the CIO in general
meeting, or from an agreement between the CIO’s members, and the
references to constitutional powers are to be read accordingly.

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219 Limits to s.218

(1) Nothing in section 218 prevents a person from bringing proceedings to restrain
the doing of an act which would be—

(a) beyond the CIO’s constitutional capacity, or

(b) 5beyond the constitutional powers of the CIO’s charity trustees.

(2) But no such proceedings may be brought in respect of an act to be done in
fulfilment of a legal obligation arising from a previous act of the CIO.

(3) Subsection (2) does not prevent the Commission from exercising any of its
powers.

(4) 10Nothing in section 218(2) affects any liability incurred by the CIO’s charity
trustees (or any one of them) for acting beyond their (or that charity trustee’s)
constitutional powers.

(5) Nothing in section 218 absolves the CIO’s charity trustees from their duty to
act within the CIO’s constitution and in accordance with any constitutional
15limitations on their powers.

220 Duty of CIO members

Each member of a CIO must exercise the powers that the member has in that
capacity in the way that the member decides, in good faith, would be most
likely to further the purposes of the CIO.

221 20Duties of charity trustees

(1) Each charity trustee of a CIO must exercise the powers and perform the
functions that the charity trustee has in that capacity in the way that the charity
trustee decides, in good faith, would be most likely to further the purposes of
the CIO.

(2) 25Each charity trustee of a CIO must in the performance of functions in that
capacity exercise such care and skill as is reasonable in the circumstances,
having regard in particular—

(a) to any special knowledge or experience that the charity trustee has or
purports to have, and

(b) 30if the charity trustee acts as such in the course of a business or
profession, to any special knowledge or experience that it is reasonable
to expect of a person acting in the course of that kind of business or
profession.

But this is subject to any provision of a CIO’s constitution permitted by virtue
35of regulations made under subsection (3).

(3) CIO regulations may permit a CIO’s constitution to provide that the duty in
subsection (2)—

(a) does not apply, or

(b) does not apply in so far as is specified in the constitution.

(4) 40Regulations under subsection (3) may provide for limits on the extent to which,
or the cases in which, a CIO’s constitution may disapply the duty in subsection
(2).

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222 Personal benefit and payments

(1) A charity trustee of a CIO may not benefit personally from an arrangement or
transaction entered into by the CIO if, before the arrangement or transaction
was entered into, the charity trustee did not disclose to all the charity trustees
5of the CIO any material interest (whether direct or indirect) which the charity
trustee had in it or in any other person or body party to it.

(2) Nothing in subsection (1) confers authority for a charity trustee of a CIO to
benefit personally from any arrangement or transaction entered into by the
CIO.

(3) 10A charity trustee of a CIO

(a) is entitled to be reimbursed by the CIO, or

(b) may pay out of the CIO’s funds,

expenses properly incurred by the charity trustee in the performance of that
charity trustee’s functions as such.

223 15Regulations about procedure of CIOs

(1) CIO regulations may make provision about the procedure of CIOs.

(2) Subject to—

(a) any such regulations,

(b) any other requirement imposed by or by virtue of this Act or any other
20enactment, and

(c) anything in the CIO’s constitution,

a CIO may regulate its own procedure.

(3) But a CIO’s procedure must include provision for the holding of a general
meeting of its members, and the regulations referred to in subsection (1) may
25in particular make provision about such meetings.

CHAPTER 3 Amendment of constitution

224 Amendment of constitution and procedure

(1) A CIO may by resolution of its members amend its constitution (and a single
resolution may provide for more than one amendment).

(2) 30Such a resolution must be passed—

(a) by a 75% majority of those voting at a general meeting of the CIO
(including those voting by proxy or by post, if voting that way is
permitted), or

(b) unanimously by the CIO’s members, otherwise than at a general
35meeting.

(3) The date of passing of such a resolution is—

(a) the date of the general meeting at which it was passed, or

(b) if it was passed otherwise than at a general meeting, the date on which
provision in the CIO’s constitution or in regulations made under
40section 223 treats it as having been passed (but that date may not be
earlier than that on which the last member agreed to it).

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225 Amendment of constitution and charitable status

The power of a CIO to amend its constitution is not exercisable in any way
which would result in the CIO’s ceasing to be a charity.

226 Amendment of constitution and Commission’s consent

(1) 5Subject to section 227(5), a resolution containing an amendment which would
make any regulated alteration is to that extent ineffective unless the prior
written consent of the Commission has been obtained to the making of the
amendment.

(2) The following are regulated alterations—

(a) 10any alteration of the CIO’s purposes,

(b) any alteration of any provision of the CIO’s constitution directing the
application of property of the CIO on its dissolution, and

(c) any alteration of any provision of the CIO’s constitution where the
alteration would provide authorisation for any benefit to be obtained
15by charity trustees or members of the CIO or persons connected with
them.

(3) Sections 248 (meaning of “benefit”) and 249 (meaning of “connected person”)
apply for the purposes of this section.

227 Registration and coming into effect of amendments

(1) 20A CIO must send to the Commission a copy of a resolution containing an
amendment to its constitution, together with—

(a) a copy of the constitution as amended, and

(b) such other documents and information as the Commission may
require,

25by the end of the period of 15 days beginning with the date of passing of the
resolution (see section 224(3)).

(2) An amendment to a CIO’s constitution does not take effect until it has been
registered.

(3) The Commission must refuse to register an amendment if—

(a) 30in the opinion of the Commission the CIO had no power to make it (for
example, because the effect of making it would be that the CIO ceased
to be a charity, or that the CIO or its constitution did not comply with
any requirement imposed by or by virtue of this Act or any other
enactment), or

(b) 35the amendment would change the name of the CIO, and the
Commission could have refused an application under section 207 for
the constitution and registration of a CIO with the name specified in the
amendment on a ground set out in section 208(2).

(4) The Commission may refuse to register an amendment if—

(a) 40the amendment would make a regulated alteration, and

(b) the consent referred to in section 226(1) had not been obtained.

(5) But if the Commission does register such an amendment, section 226(1) does
not apply.

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CHAPTER 4 Conversion, amalgamation and transfer

Conversion of certain bodies to CIO

228 Application for conversion by charitable company

(1) A charitable company may apply to the Commission to be converted into a
5CIO, and for the CIO’s registration as a charity, in accordance with this section.

(2) But such an application may not be made by—

(a) a company having a share capital if any of the shares are not fully paid
up, or

(b) an exempt charity.

(3) 10The company must supply the Commission with—

(a) a copy of a resolution of the company that it be converted into a CIO,

(b) a copy of the proposed constitution of the CIO,

(c) a copy of a resolution of the company adopting the proposed
constitution of the CIO,

(d) 15such other documents or information as may be prescribed by CIO
regulations, and

(e) such other documents or information as the Commission may require
for the purposes of the application.

(4) The resolution referred to in subsection (3)(a) must be—

(a) 20a special resolution of the company, or

(b) a unanimous written resolution signed by or on behalf of all the
members of the company who would be entitled to vote on a special
resolution.

(5) Chapter 3 of Part 3 of the Companies Act 2006 (resolutions and agreements
25affecting a company’s constitution) does not apply to such a resolution.

(6) In the case of a company limited by guarantee which makes an application
under this section (whether or not it also has a share capital), the proposed
constitution of the CIO must (unless subsection (8) applies) provide—

(a) for the CIO’s members to be liable to contribute to its assets if it is
30wound up, and

(b) for the amount up to which they are so liable.

(7) That amount must not be less than the amount up to which they were liable to
contribute to the assets of the company if it was wound up.

(8) If the amount each member of the company is liable to contribute to its assets
35on its winding up is £10 or less—

(a) the guarantee is extinguished on the conversion of the company into a
CIO, and

(b) the requirements of subsections (6) and (7) do not apply.

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229 Application for conversion by registered society

(1) A charity which is a registered society may apply to the Commission to be
converted into a CIO, and for the CIO’s registration as a charity, in accordance
with this section.

5“Registered society” has the same meaning as in the Co-operative and
Community Benefit Societies and Credit Unions Act 1965.

(2) But such an application may not be made by—

(a) a registered society having a share capital if any of the shares are not
fully paid up, or

(b) 10an exempt charity.

(3) The registered society must supply the Commission with—

(a) a copy of a resolution of the registered society that it be converted into
a CIO,

(b) a copy of the proposed constitution of the CIO,

(c) 15a copy of a resolution of the registered society adopting the proposed
constitution of the CIO,

(d) such other documents or information as may be prescribed by CIO
regulations, and

(e) such other documents or information as the Commission may require
20for the purposes of the application.

(4) The resolution referred to in subsection (3)(a) must be—

(a) a special resolution of the registered society, or

(b) a unanimous written resolution signed by or on behalf of all the
members of the registered society who would be entitled to vote on a
25special resolution.

(5) In subsection (4), “special resolution” has the meaning given in section 52(3) of
the Co-operative and Community Benefit Societies and Credit Unions Act
1965.

230 Commission to consult appropriate registrar and others

(1) 30The Commission must notify the following of an application for conversion—

(a) the appropriate registrar, and

(b) such other persons (if any) as the Commission thinks appropriate in the
particular case,

and must consult those notified about whether the application should be
35granted.

(2) In subsection (1) and sections 231 to 233, “the appropriate registrar” means—

(a) in the case of an application by a charitable company, the registrar of
companies;

(b) in the case of an application by a registered society, the Financial
40Services Authority.

(3) In this section and sections 231 to 233, “application for conversion” means an
application under section 228 or 229.

231 Cases where application must or may be refused

(1) The Commission must refuse an application for conversion if—

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(a) it is not satisfied that the CIO would be a charity at the time it would be
registered,

(b) the CIO’s proposed constitution does not comply with one or more of
the requirements of section 206 (constitution of CIOs) and any
5regulations made under that section, or

(c) in the case of an application for conversion made by a company limited
by guarantee, the CIO’s proposed constitution does not comply with
the requirements of section 228(6) and (7).

(2) The Commission may refuse an application for conversion if—

(a) 10the proposed name of the CIO

(i) is the same as, or

(ii) is in the opinion of the Commission too like,

the name of any other charity (whether registered or not),

(b) the Commission is of the opinion referred to in any of paragraphs (b) to
15(e) of section 42(2) (power to require charity’s name to be changed) in
relation to the proposed name of the CIO (reading paragraph (b) as
referring to the proposed purposes of the CIO and to the activities
which it is proposed it should carry on), or

(c) having considered any representations received from those whom it
20has consulted under section 230(1), the Commission considers (having
regard to any regulations made under subsection (3)) that it would not
be appropriate to grant the application.

(3) CIO regulations may make provision about circumstances in which it would
not be appropriate to grant an application for conversion.

(4) 25If the Commission refuses an application for conversion, it must so notify the
appropriate registrar.

232 Provisional and final registration of converting body

(1) If the Commission grants an application for conversion, it must—

(a) register the CIO to which the application related in the register of
30charities, and

(b) send to the appropriate registrar a copy of—

(i) each of the relevant resolutions of the converting company or
registered society, and

(ii) the entry in the register relating to the CIO.

(2) 35In subsection (1)(b), “the relevant resolutions” means—

(a) in the case of a converting company, the resolutions referred to in
section 228(3)(a) and (c), and

(b) in the case of a converting society, the resolutions referred to in section
229(3)(a) and (c).

(3) 40The registration of the CIO in the register is provisional only until the
appropriate registrar cancels the registration of the company or society as
required by subsection (4)(b).

(4) The appropriate registrar must—

(a) register the documents sent under subsection (1)(b), and

(b) 45cancel the registration of the company in the register of companies, or
of the society in the mutual societies register,

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and must notify the Commission that this action has been taken.

(5) The entry relating to the charity’s registration in the register must include—

(a) a note that it is constituted as a CIO,

(b) the date on which it became so constituted, and

(c) 5a note of the name of the company or society which was converted into
the CIO.

(6) But the matters mentioned in subsections (5)(a) and (b) are to be included only
when the appropriate registrar has notified the Commission as required by
subsection (4).

(7) 10A copy of the entry in the register must be sent to the charity at the principal
office of the CIO.

233 Effect of registration becoming final

(1) Upon the cancellation by the appropriate registrar of the registration of the
company or of the registered society, the company or society is converted into
15a CIO, a body corporate—

(a) whose constitution is that proposed in the application for conversion,

(b) whose name is that specified in the constitution, and

(c) whose first members are the members of the converting company or
society immediately before the moment of conversion.

(2) 20If the converting company or society had a share capital—

(a) upon the conversion of the company or society all the shares are by
virtue of this subsection cancelled, and

(b) no former holder of any cancelled share has any right in respect of it
after its cancellation.

(3) 25Subsection (2) does not affect any right which accrued in respect of a share
before its cancellation.

(4) The conversion of a company or society into a CIO does not affect, in particular,
any liability to which the company or society was subject by virtue of its being
a charitable company or registered society.

234 30Conversion of community interest company

(1) CIO regulations may make provision for—

(a) the conversion of a community interest company into a CIO, and

(b) the CIO’s registration as a charity.

(2) The regulations may, in particular, apply, or apply with modifications
35specified in the regulations, or disapply, anything in—

(a) sections 53 to 55 of the Companies (Audit, Investigations and
Community Enterprise) Act 2004, or

(b) sections 228 to 233.

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Amalgamation of CIOs

235 Application for amalgamation of CIOs

(1) Any two or more CIOs (“the old CIOs”) may, in accordance with this section,
apply to the Commission to be amalgamated, and for the incorporation and
5registration as a charity of a new CIO (“the new CIO”) as their successor.

(2) The old CIOs must supply the Commission with—

(a) a copy of the proposed constitution of the new CIO,

(b) such other documents or information as may be prescribed by CIO
regulations, and

(c) 10such other documents or information as the Commission may require
for the purposes of the application.

(3) In addition to the documents and information referred to in subsection (2), the
old CIOs must supply the Commission with—

(a) a copy of a resolution of each of the old CIOs approving the proposed
15amalgamation, and

(b) a copy of a resolution of each of the old CIOs adopting the proposed
constitution of the new CIO.

(4) The resolutions referred to in subsection (3) must have been passed—

(a) by a 75% majority of those voting at a general meeting of the CIO
20(including those voting by proxy or by post, if voting that way is
permitted), or

(b) unanimously by the CIO’s members, otherwise than at a general
meeting.

(5) The date of passing of such a resolution is—

(a) 25the date of the general meeting at which it was passed, or

(b) if it was passed otherwise than at a general meeting, the date on which
provision in the CIO’s constitution or in regulations made under
section 223 treats it as having been passed (but that date may not be
earlier than that on which the last member agreed to it).

236 30Notice of application for amalgamation

(1) Each old CIO must—

(a) give notice of the proposed amalgamation in the way (or ways) that in
the opinion of its charity trustees will make it most likely to come to the
attention of those who would be affected by the amalgamation, and

(b) 35send a copy of the notice to the Commission.

(2) The notice must invite any persons who consider that they would be affected
by the proposed amalgamation to make written representations to the
Commission no later than a date determined by the Commission and specified
in the notice.

237 40Cases where application must or may be refused

(1) The Commission must refuse an application for amalgamation if—

(a) it is not satisfied that the new CIO would be a charity at the time it
would be registered, or

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(b) the new CIO’s proposed constitution does not comply with one or
more of the requirements of section 206 and any regulations made
under that section.

(2) In addition to being required to refuse it on one of the grounds mentioned in
5subsection (1), the Commission must refuse an application for amalgamation if
it considers that there is a serious risk that the new CIO would be unable
properly to pursue its purposes.

(3) The Commission may refuse an application for amalgamation if—

(a) the proposed name of the new CIO

(i) 10is the same as, or

(ii) is in the opinion of the Commission too like,

the name of any other charity (whether registered or not), or

(b) the Commission is of the opinion referred to in any of paragraphs (b) to
(e) of section 42(2) (power to require charity’s name to be changed) in
15relation to the proposed name of the new CIO (reading paragraph (b)
as referring to the proposed purposes of the new CIO and to the
activities which it is proposed it should carry on).

(4) The Commission may refuse an application for amalgamation if it is not
satisfied that the provision in the constitution of the new CIO about the matters
20mentioned in subsection (5) is—

(a) the same, or

(b) substantially the same,

as the provision about those matters in the constitutions of each of the old
CIOs.

(5) 25The matters are—

(a) the purposes of the CIO,

(b) the application of property of the CIO on its dissolution, and

(c) authorisation for any benefit to be obtained by charity trustees or
members of the CIO or persons connected with them.

(6) 30Sections 248 (meaning of “benefit”) and 249 (meaning of “connected person”)
apply for the purposes of this section.

(7) In this section and sections 238 and 239, “application for amalgamation” means
an application under section 235.

238 Registration of amalgamated CIO

(1) 35If the Commission grants an application for amalgamation, it must register the
new CIO in the register of charities.

(2) The entry relating to the registration in the register of the charity constituted as
the new CIO must include—

(a) a note that it is constituted as a CIO,

(b) 40the date of the charity’s registration, and

(c) a note that the CIO was formed following amalgamation, and of the
name of each of the old CIOs.

(3) A copy of the entry in the register must be sent to the charity at the principal
office of the new CIO.