I invite the Minister of State, Deputy Joe O'Brien, to make his opening statement.
Charities (Amendment) Bill 2023: Committee Stage
I thank the Leas-Chathaoirleach and members of the committee. I am delighted to be here today, alongside officials from my Department, as we commence Committee Stage of the Charities (Amendment) Bill 2023. The purpose of this Bill is to strengthen the charities sector, ensuring greater transparency, clarity and fairness, which will serve to enhance public confidence in the sector. The Bill will consolidate the existing legal framework for the Charities Regulator to conduct its statutory functions.
The Bill delivers on a programme for Government commitment to ensure that the Charities Regulator has the necessary powers to carry out its duties, and to increase trust and confidence in the management and administration of charities. Throughout this legislative process my officials and I have actively engaged with the charities sector to listen and take on board the observations of a wide number of stakeholders.
During pre-legislative scrutiny, Deputies raised a number of issues which I have sought to address in the published Bill where feasible. Members will note the changes around removing the statutory requirement to report significant events, moving instead to non-statutory guidelines, and the inclusion of a definition of "significant event". I have also introduced amendments regarding removal procedures that adhere to the principles of natural justice and due process and which include recourse and appeal to the Charity Appeals Tribunal and a High Court determination.
The published Bill proposes to introduce a new charitable purpose of "the advancement of human rights". A key part of this process will be the introduction of guidelines in relation to this proposed charitable purpose. These guidelines will be developed in consultation with experts in this area, including representatives from the sector.
In view of observations raised since publication of the Bill, I am seeking to introduce certain amendments to provide greater clarity and ensure operational efficiency. A number of these amendments are technical and of a drafting nature. In addition, there are proposals to clarify and strengthen existing provisions. Amendments Nos. 3 to 10, inclusive, seek to update the definition of “charity trustee”. The references to "officer" and "office" contained in the definition of "charity trustee" in the published Bill may lead to unintended consequences in practice. If the wording is not changed, there is a real possibility that certain people who the definition is not intended to cover may inadvertently be recognised as trustees, due to the application of company law. One such example would be statutory auditors. It is also proposed to include a reference to a de facto director under the definition of “charity trustee” to reflect this recognised position under company law and to ensure all persons with the requisite control and management over a charity are correctly covered in this important definition.
Amendment No. 11 proposes the insertion of an additional general charitable purpose. This amendment recognises there may be instances where a charitable purpose proposed by an applicant does not exactly match the description of any of the 13 purposes established under the Bill but is nonetheless of benefit to the community. It is essential for both the regulator and potential applicants that our legislation provides flexibility in these instances.
Amendment No. 12 deals with annual audit of accounts. It is proposed to increase the financial limit that can be set out in regulations in respect of the requirement for charities to carry out an audit from €500,000 to €1 million. Further to consideration of observations received from stakeholders, it is my intention to set the threshold for audit in the regulations at €500,000, which I note is more in line with neighbouring jurisdictions. This amendment will future-proof the legislation, allowing for any increase as considered appropriate in the years ahead in line with industry practice.
Amendments Nos. 13 to 25, inclusive, concern section 34 and refer to charities entering into agreements and appointments with relevant persons. Revised wording in this section includes clarification of the responsibilities of trustees in respect of entering agreements and appointments.
Amendment No. 20 will allow for regulations under section 34 to include those instances in which an employee can become a trustee of the same organisation. However, the general principle that trustees are not paid remains, and payments to board members can only be made in very limited circumstances and will not become or be considered standard practice.
Amendment No. 26 includes provision to allow for the appointment of an interim chairperson of the Charities Regulator. This amendment will ensure full functionality of the regulator until such time as a permanent chairperson is appointed. I advise members that there are certain matters still under consideration in relation to declarations from the High Court about certain removals from the register, entering agreements and appointments with relevant persons, and bankruptcy and insolvency provisions contained in the published Bill.
It is likely that amendments will need to be introduced on Report Stage. I welcome the opportunity to discuss the Bill with the committee and look forward to hearing from committee members. Go raibh maith agaibh.
Sections 1 and 2 agreed to.
SECTION 3
Amendments Nos. 1 to 10, inclusive, are related and may be discussed together.
I move amendment No. 1:
In page 6, lines 6 and 7, to delete “section 88B” and substitute “Part 6A”.
Amendments Nos. 1 and 2 update the definition of "charitable organisation" and "charitable trust" respectively. These amendments are technical and of a drafting nature. They clarify that none of the property of a charitable organisation or charitable trust, respectively, can be paid out to members unless it is in accordance with Part 6A. They are necessary in order to update references in these definitions to Part 6A, which relates to the approval of agreements and appointments.
Amendment No. 3 updates section 3 by removing the reference to "officer" in the definition of "charity trustee" with respect to charities that are companies. This is deemed necessary as retaining this reference could inadvertently lead to certain individuals, such as statutory auditors, being considered trustees due to the application of Companies Act provisions.
Amendment Nos. 4 and 5 update section 3 by facilitating the introduction of reference to a de facto director in the definition of "charity trustee". That is within the meaning of section 22 of the Companies Act 2014.
Amendment No. 6 provides clarity in relation to the definition of "charity trustee", that a secretary to the board is not considered a charity trustee unless he or she is also director of the board or a de facto or shadow director.
Amendments Nos. 7 to 10, inclusive, update the definition of "charity trustee" in respect of a charitable organisation that is unincorporated or is incorporated but not a company. Amendments Nos. 7 to 9, inclusive, facilitate the introduction of a reference to a de facto board member in the definition of "charity trustee" and amendment No. 10 clarifies that a secretary to the board is not considered a charity trustee unless he or she is also member of the board or governing body or a de facto board member.
These amendments mirror amendments Nos. 4 to 6, inclusive, in ensuring all persons who have the requisite control and management of a charity are accurately captured. This will ensure all necessary persons are held accountable to the members, the public and the Charities Regulator in their role as charity trustees.
Amendment agreed to.
I move amendment No. 2:
In page 6, line 8, to delete “section 88B” and substitute “Part 6A”.
Amendment agreed to.
I move amendment No. 3:
In page 6, line 14, to delete “or officer of the company, and” and substitute “of the company,”.
Amendment agreed to.
I move amendment No. 4:
In page 6, line 19, after “capacity,” to insert “and”.
Amendment agreed to.
I move amendment No. 5:
In page 6, between lines 19 and 20, to insert the following:
“(iii) any other person who occupies the position of director of the company but who has not been formally appointed as such, unless the person only gives advice in a professional capacity to the company or any directors of it,”.
Amendment agreed to.
I move amendment No. 6:
In page 6, to delete lines 20 and 21 and substitute to following:
“but does not include a person who is the company secretary, unless he or she is also a person referred to in subparagraph (i), (ii) or (iii),”.
Amendment agreed to.
I move amendment No. 7:
In page 6, to delete lines 25 to 30 and substitute the following:
“(I) a member of the board, or
(II) a member of the governing body,”.
Amendment agreed to.
I move amendment No. 8:
In page 6, line 35, after “capacity,” to insert “and”.
Amendment agreed to.
I move amendment No. 9:
In page 6, between lines 35 and 36, to insert the following:
“(iii) any other person who occupies the position of member of the board or member of the governing body but who has not been formally appointed as such, unless the person only gives advice in a professional capacity to the charitable organisation or any members of the board or members of the governing body,”.
Amendment agreed to.
I move amendment No. 10:
In page 6, to delete lines 36 and 37, and in page 7, to delete lines 1 and 2 and substitute the following:
“but does not include a person who performs the functions of a secretary to the board or to the governing body, unless he or she is also a person referred to in subparagraph (i), (ii) or (iii), and”.
Amendment agreed to.
Section 3, as amended, agreed to.
SECTION 4
I move amendment No. 11:
In page 9, to delete line 4 and substitute the following:
“(q) the advancement of human rights;
(r) any other purpose that is of benefit to the community, where that purpose is similar to any of those listed in paragraphs (a) to (q).”,”.
The amendment relates to section 4 and inserts a reference to a general open-ended charitable purpose after “(q) the advancement of human rights". It provides for a charitable purpose of benefit to the community and similar to the 13 other purposes set out in section 4. The amendment is necessary to ensure flexibility in the application process for both the Charities Regulator and an applicant by allowing for instances where a charitable organisation does not exactly match the description of any of the 13 purposes set out but is still of benefit to the community.
That is important and I agree with it.
On the deletion of "any other purpose that is of benefit to the community" where that purpose is similar to those listed, I consulted with Dóchas, which has concerns and believes this is a significant and necessary inclusion in terms of human rights. There are concerns a move from a non-exhaustive list of charitable grounds to an exhaustive list through the deletion of 3(1)(d) "any other purpose that is of benefit to the community" in the principal Act is unwelcome and may result in unforeseen circumstances. A static understanding of charitable purposes would be restrictive and at odds with how the sector and social change evolves over time. This static approach has been avoided in many comparable jurisdictions. Dóchas asks that the "any other purpose that is of benefit to the community" provision is retained in the legislation, along with the addition of "advancement of human rights". Will the Minister of State comment on that?
I thank the Deputy for making that point. This amendment responds to that critique of the published Bill. We are making sure that the definition is broad and that it facilitates what Dóchas is looking for. I will not say this is a direct response, but it is in response to a number of issues and concerns that were raised about how having specific lists would narrow things down. There was also the previous deletion that the Deputy mentioned. We have broadened it out again in this amendment.
Is that okay?
That is okay.
Amendment agreed to
Section 4, as amended, agreed to.
Sections 5 to 17, inclusive, agreed to.
SECTION 18
I move amendment No. 12:
In page 24, between lines 16 and 17, to insert the following:
“(a) by the substitution, in subsection (2), of “€1,000,000” for “€500,000”,”.
The amendment will allow for the maximum threshold that can be set out and regulations under which a charity has to conduct an audit to be increased to a maximum of €1 million. While the proposed amendment would provide for a threshold of the amount of up to €1 million, it is my intention to set the threshold in regulations at €500,000. This amendment is on the foot of observations from stakeholders, including the regulator, that increasing the amount that can be prescribed from €500,000 to €1 million is more in keeping with international levels. This amendment will allow for the threshold to be increased by ministerial order. If it were to be decided in the future that a further increase is appropriate in line with industry best practice.
In the past, we had social amendments to the primary legislation, even on small issues such as these. Time erodes money, as we saw in the past few years. When there is a sudden hike in inflation, it erodes money very fast. Since the beginning of Covid there has been a 20% decrease in the value of money. It is therefore good to have the provision. I understand that the Minister of State is setting the threshold at €500,000, but it could be made €600,000, €700,000, €800,000, €900,000 or €1 million accordingly, in order to keep the real value the same over time. Then the Minister would only have to come back when €1 million was reached.
Yes.
Amendment agreed to.
Section 18, as amended, agreed to.
Sections 19 to 33, inclusive, agreed to.
SECTION 34
Amendments Nos. 13 to 15, inclusive, are related and will be discussed together.
I move amendment No. 13:
In page 35, line 32, to delete “or charter”.
Following the publication of the Bill, it was brought to my attention that the inclusion of organisations established by charter in the definition of "public bodies" was inadvertently capturing organisations that do not have the requisite financial oversight by the relevant Departments and the Office of the Comptroller and Auditor General.
Amendment No. 13 is necessary to ensure that the section does not unintentionally capture organisations it was not intended to, namely, those that do not have the requisite oversight that is in place. Amendment No. 14 inserts definition of the term “remuneration”. This amendment is necessary to provide greater clarity in respect of the requirements under Part 6A so that anyone who reads the legislation knows exactly what is meant by “remuneration” itself.
Amendment No. 15 clarifies that an agreement under Part 6A has a specific meaning, which is set out in section 88C. This is intended to ensure that there is no ambiguity in respect of how an agreement is interpreted by anyone reading the legislation.
Amendment agreed to.
I move amendment No. 14:
In page 36, between lines 17 and 18, to insert the following:
“ ‘remuneration’ means consideration, whether in cash or in kind, paid out of the property of the charitable organisation, and includes a contribution to a pension plan;”.
Amendment agreed to.
I move amendment No. 15:
In page 36, line 23, after “agreement” to insert “in accordance with section 88C”.
Amendment agreed to.
I move amendment No. 16:
In page 37, line 8, after “appointment’)” to insert “, which appointment shall be in accordance with any requirements prescribed under section 88D(6)(b).”.
The amendment clarifies that a charity may only appoint an employee as a trustee in accordance with requirements that are set out in ministerial regulations. Such appointments are only intended in exceptional circumstances and the ministerial regulations will set out these specific circumstances in detail.
Amendment agreed to.
Amendments Nos. 17 to 19, inclusive, are related and may be discussed together.
I move amendment No. 17:
In page 37, to delete lines 9 to 11 and substitute the following:
“(4) A charitable organisation shall not enter into an agreement or make an appointment—
(a) in contravention of the express provisions of its constitution,
(b) unless the charity trustees of the charitable organisation (not counting a charity trustee who is a party to the agreement or appointment or a charity trustee who has a personal connection with a party to the agreement or appointment) are satisfied that the agreement or appointment would be in the best interests of the charitable organisation, and
(c) subject to subsection (6), without the prior approval of the Authority further to an application under section 88D.”.
Charity trustees are the people who exercise control over and are legally responsible for the management of the charity. The amendment provides clarity that charity trustees in the first instance must satisfy themselves that the agreement or appointment which it proposes to enter into is in the best interests of the charity. This includes that the agreement or appointment is not in contravention of its constitution.
Amendment No. 18 is a technical amendment of a drafting nature and is necessitated by amendment No. 17. It allows that the aforementioned principle, namely, that a charitable organisation shall not enter into an agreement or make an appointment in contravention of the express provisions of its constitution, is now contained in amendment No. 17.
Amendment No. 19 is also a technical amendment or drafting nature required to renumber a subsection due to the deletion of 88C(6) in amendment No. 18.
Amendment agreed to.
I move amendment No. 18:
In page 37, to delete lines 16 to 18.
Amendment agreed to.
I move amendment No. 19:
In page 37, line 19, to delete “(7)” and substitute “(6)”.
Amendment agreed to.
Amendments Nos. 20 to 25, inclusive, are related and will be discussed together.
I move amendment No. 20:
In page 38, between lines 8 and 9, to insert the following:
“(b) the circumstances in which a charitable organisation (other than a charitable organisation referred to in section 88C(6)) may make an appointment having regard to the requirements of different charitable organisations,”
Amendment No. 20 allows for ministerial regulations to prescribe those specific instances where an employee can become a trustee of the same organisation. As previously outlined, such appointments are only intended for exceptional circumstances and these regulations will set these out in detail.
Amendments Nos. 21 to 25, inclusive, are all technical in nature and are necessary due to the insertion of amendment No. 20, which required an amendment for each subsequent paragraph.
Amendment agreed to.
I move amendment No. 21:
In page 38, line 9, to delete “(b)” and substitute “(c)”.
Amendment agreed to.
I move amendment No. 22:
In page 38, line 11, to delete “(c)” and substitute “(d)”.
Amendment agreed to.
I move amendment No. 23:
In page 38, line 16, to delete “(d)” and substitute “(e)”.
Amendment agreed to.
I move amendment No. 24:
In page 38, line 17, to delete “paragraph (c)” and substitute “paragraph (d)”.
Amendment agreed to.
I move amendment No. 25:
In page 38, line 18, to delete “(e)” and substitute “(f)”.
Amendment agreed to.
Section 34, as amended, agreed to.
Sections 35 to 37, inclusive, agreed to.
NEW SECTION
I move amendment No. 26:
In page 39, between lines 23 and 24, to insert the following:
“Amendment of Schedule 1 to Principal Act
38. Schedule 1 to the Principal Act is amended—
(a) by the insertion, in paragraph 2, of the following subparagraph after subparagraph (3):
“(3A) Where the office of the chairperson is vacant, an interim chairperson may be appointed by the Minister from among the members of the Authority for the duration of the vacancy and where the Minister does so, the interim chairperson shall perform all the functions assigned to the chairperson by or under this Act and references in this Act to the chairperson shall be construed as including references to the interim chairperson.”,
and
(b) by the substitution, in paragraph 3(3), of the following clauses for clauses (a) and (b):
“(a) is adjudicated bankrupt and such bankruptcy has not been annulled or discharged,
(b) is an individual who is party to an insolvency arrangement that has not ceased to have effect,”.”.
The existing provisions of the Charities Act 2009 only allows for the appointment of a temporary chairperson from among the membership of the authority for meetings of the authority. The amendment will ensure that an interim chairperson can be appointed by the Minister, should the role of chairperson become vacant for a period of time. The second part of this amendment is technical and of drafting nature and has not changed the policy intent as contained in the published Bill with respect to persons who have been discharged from bankruptcy or exited insolvency arrangements.
Amendment agreed to.
Section 38 deleted.
Sections 39 and 40 agreed to.
Title agreed to.
Bill reported with amendments.
Do members wish to put final questions to the Minister of State or comment on the Bill before we conclude our consideration of this Bill?
I thank the Minister of State for taking on board the recommendations of the committee.
I thank the Minister of State and his officials for this interesting exchange and a lot of the comments by the committee were taken on board.
This has been a very constructive process all along the way.
I take the opportunity to record my thanks to the members of the committee, the Charities Regulator and, indeed, all the stakeholders who have engaged with me and my officials, and have made very valuable submissions and observations as part of this wider deliberative process. I look forward to Report Stage.
I thank the Minister of State and his officials for assisting the committee with our consideration of the Bill.