ANALYSIS:ALTHOUGH CHARITIES are often described as being registered, at present that means only that the Revenue Commissioners have agreed that the charity is entitled to be exempt from taxation and have designated, or registered, it as such, writes John Olden
Significant changes for charities operating in Ireland will come when the Charities Bill, 2007, which is before the Oireachtas, becomes law.
The Charities Act will make provision for a new body, the Charities Regulatory Authority (CRA), and for registration and regulation of charities. Under the Act, it will be an offence for a person to advertise, solicit money for, or accept money on behalf of, a charity or charitable body that has not been registered by the CRA. Existing charities will not be registered automatically by the CRA but will be obliged to apply for registration.
Not all organisations that regard themselves as charities will necessarily be eligible for registration. What the Bill refers to as an "excluded body" will not be eligible. This is defined as a body that promotes purposes that are unlawful, contrary to public morality, in support of terrorism or terrorist activities or for the benefit of an illegal organisation. A political party or a body whose principal object is to promote a political party, candidate or cause will also come within the definition of an excluded body.
While the first category might be regarded as uncontroversial, the inclusion of organisations that promote a political cause has already occasioned considerable concern. Almost by definition, charitable organisations can be said to have a political cause: the alleviation of poverty is a political as well as a social aim. In view of controversies concerning Tibet and Sudan, one can see how charitable organisations that support human rights or promote the rights of ethnic or sexual minorities could be regarded as promoting a political cause.
In the Oireachtas debate at committee stage, some Opposition deputies sought the removal of the reference to a "cause" so that a charitable organisation would not be excluded from the possibility of being registered as a charity because its principal aim was considered by the CRA to be the achievement of a political cause.
The Minister indicated that he could not accept this amendment because advice had been received that to do so might result in bodies engaged in political lobbying successfully claiming charitable status. There will be a right to appeal to a new entity, the Charity Appeals Tribunal, and from there to the High Court.
A registered charity may be deregistered by the CRA where it, after consultation with An Garda Síochána, is of the opinion that the charity has become an excluded body by reason of promoting purposes that are unlawful, contrary to public morality, in support of terrorism or terrorist activities or for the benefit of an illegal organisation. Interestingly, the CRA will not have a similar power to unilaterally deregister a registered charity which it considers to be promoting a political cause although, where the CRA forms the opinion that a registered body has ceased to be a charitable organisation either because it is, or has become, an excluded body or because it has ceased to promote a charitable purpose, it will be obliged to seek a High Court declaration to that effect. If such a declaration is made, the CRA is obliged to deregister the body.
The decision of the CRA to deregister a charity will be capable of being appealed to the Charities Appeals Tribunal, except where deregistration is on foot of a High Court declaration.
The Act will introduce a new statutory concept of charity trustee. In the case of a charity which is structured as a company, the directors and other officers of the company will constitute its charity trustees. In the case of a charity which is established as an unincorporated body, its officers, and in the case of a charity established as a trust, its trustees, will constitute its charity trustees.
The Act will impose significant statutory obligations on charity trustees. Broadly speaking, where a charity commits an offence under the Act, then the charity trustees can be held liable in the same manner as the charity itself. Offences under the Act will expose a charity trustee to a fine of up to €5,000 or an imprisonment for not more than 12 months where the offence is regarded as relatively minor. If a charity is convicted of a more serious offence, then fines of up to €300,000 and imprisonment for up to five years, or both, are provided for in the Act.
A charity trustee will cease to be qualified to act as a trustee if he is adjudicated bankrupt, enters into a formal arrangement with his creditors, is convicted on indictment of an offence or is sentenced to prison. A charity trustee acting as such when not qualified will commit an offence.
The Act will require charities with a gross income or total expenditure of more than €100,000 to have their accounts audited by an auditor qualified under the Companies Acts and to file an annual report and their accounts with the CRA.
The Act will include detailed provisions protecting whistle-blowers within a charity who are concerned about alleged breaches of the Act. The Act will also impose a statutory obligation on what are termed "relevant persons" to report suspected offences to the CRA. Failure to make such a report will itself be an offence. A "relevant person" will be a charity trustee, the auditor of the charity, any investment firm dealing with the charity and any person involved in preparing its annual report.
The CRA will have a statutory power to appoint an inspector to investigate the affairs of a charity and will have a right to apply for a warrant to enter and search the premises of a charity.
The Act will also make explicit provision for the CRA to share information in respect of suspected offences committed by a charity trustee or a charitable organisation with An Garda Síochána, the Director of Corporate Enforcement, the Revenue Commissioners and (in an interesting recognition of the economic and business significance of charities) the Competition Authority. The CRA will also have statutory power, having obtained the consent of the Minister, to enter into arrangements with foreign statutory bodies to share information in respect of Irish-registered charities.
• John Olden is a partner with LK Shields Solicitors