Determining charitable status and the challenges it brings for the CRA

One of the key challenges facing the CRA will be to “police” the definitions of charitable organisation and of charitable purpose. The interpretation of these definitions by the CRA will undoubtedly become the subject of judicial interpretation at some stage in the near future given that a refusal to register gives rise to an appeal to the newly established Charity Appeals Tribunal (the “Tribunal”) and onwards to the High Court on a point of law. Our Regulatory team examines the Charities Act’s key provisions.

Key provisions commenced on 16 October 2014

Regulation of Charitable Organisations - Part 3 of the Act

The initial priority of the Charities Regulatory Authority (the “CRA”) will be the registration of charitable organisations. The initial register will comprise of approximately 8,500 charitable organisations that already have a charitable tax exemption (a CHY number) from the Revenue Commissioners and are therefore automatically deemed to be registered. Among the challenges for the CRA will be the task of obtaining up to date information in respect of these “deemed” registrants. Separately, the CRA must assess applications for registration from those charitable organisations who did not have a CHY number as of establishment day. One of the key challenges facing the CRA will be to “police” the definitions of charitable organisation and of charitable purpose. The interpretation of these definitions by the CRA will undoubtedly become the subject of judicial interpretation at some stage in the near future given that a refusal to register gives rise to an appeal to the newly established Charity Appeals Tribunal (the “Tribunal”) and onwards to the High Court on a point of law. Existing registrants will not escape the application of the definitions of charitable organisation and charitable purpose, as the CRA is given the power to apply to the High Court for a declaration that a registered body is not a charitable organisation, which if granted would result in removal of the body from the Register. Indeed, existing registrants can be removed from the Register without reference to the High Court on a number of grounds, including if:

1. The CRA determines that the charity has become an “excluded body” which may arise if, for example, the charity begins to promote purposes which are contrary to public policy.
2. A corporate charity is convicted of an indictable offence.
3. A charity fails to meet its annual reporting requirements.

Ministerial regulations will in due course be published setting out more detail of what will be required from different classes of charitable organisation. The CRA is also vested with power to prosecute a multitude of offences committed by registered organisations, trustees and indeed organisations that in effect purport to be charities without being registered.

Charities Appeals Tribunal - Part 5 of the Act

The Tribunal is comprised of five members appointed by the Minister (two of whom will have experience and expertise relating to charities) and will be entirely independent of the CRA, with its own separate executive. It is of interest to note that, in addition to the entitlement on the part of a charitable organisation to appeal a decision to refuse registration, the Minister for Justice and Equality also has the right to appeal a decision of the CRA to grant registration to a charitable organisation. Also of interest, is the fact that hearings will be held in public but with the caveat that the Tribunal may direct that the identities of one or more parties to the appeal may not be disclosed.

Dissolution of Commissioners of Charitable Donations and Bequests for Ireland – Part 6 of the Act

The functions of the Commissioners of Charitable Donations and Bequests for Ireland (the “CCDB”) are now vested in the CRA. The CRA is responsible for any ongoing cases before the CCDB as of 16 October 2014.  It will be of interest to see the extent to which the CRA decides to approach the performance of those functions in a different manner to the CCDB. Given that the new era of regulation in the charities sector has only just commenced and many charities are now carrying out internal audits of their activities and affairs, it will also be interesting to see whether this results in a large volume of applications to the CRA, for it to exercise the powers that it has inherited from the CCDB. One of the inherited powers is the authority to provide advice to charities in respect of their administration. In addition to the transfer of the CCDB’s functions under Part 6 of the Act, the CRA also inherits the Attorney General’s role as protector of charities. This role will involve the CRA becoming involved in legal proceedings where the rights and interests of charities are affected. The CRA must be notified of such proceedings and may be joined to represent the interests of charities or the public interest.

Key provisions awaiting commencement

Protection of Charitable Organisations - Part 4 of the Act

Commencement of Part 4 of the Act, which is largely devoted to the vesting of powers of inspection in the CRA, is awaited. This hiatus should provide the CRA with the opportunity to provide training to investigators in advance of the commencement in relation to conducting on-site inspections in charitable organisations. This will be an important part of instilling public confidence in the charities sector. The CRA will have the power to impose sanctions regarding breaches of the Act which are identified in the inspector’s reports. Where the CRA is of the opinion that it is proportionate in the circumstances not to bring proceedings for breaches of section 47, 48, 50 or 52 or a direction under section 51(2), an intermediate sanction as set out in section 73 can be imposed.  Alternatively, the CRA can apply to the High Court for interlocutory or permanent orders.

Conclusion

There are a number of challenges and priorities facing the CRA in the coming months and years ahead but the guiding principle will probably be that enunciated recently by the Chair who commented that he hoped that the CRA’s work will result in “…a system of regulation for charities that encourages and supports high standards and so helps to increase public trust and confidence in our charities”[1] [1] Department of Justice and Equality press release, 16 October 2014.