Changes to governing documents by scheme
Your charity’s governing document is likely to have a section that says its trustees have power to make certain types of changes (‘a power of amendment’). Even if it doesn’t, the law may give you legal power to change some things yourself, depending on your charity’s size and type. For example, provided that you tell the commission, if:
- your charity isn’t a company, you can change rules on how it is run (‘administrative provisions’)
- your charity isn’t a company and its income is £10,000 or less, you can change its purposes yourself
- your charity is a company, you can change administrative provisions in its articles of association yourself
However, you may not have legal power to, for example:
- change your charity’s purposes (unless its income is under £10,000 or it’s a company charity or charitable incorporated organisation)
- merge with or transfer property to another charity
- change or add rules on disposing of land your charity holds which must be used to help it meet its purposes (‘designated land’), including how any proceeds of the disposal can be used
Read the commission’s guidance How to make changes to your charity’s governing document.
If there’s no other way of making the changes required, you can ask the commission to make a ‘scheme’; a formal legal document that makes these changes for you.
The commission won’t make a scheme if you:
- can make the changes yourself (by a power in your governing document or in law)
- haven’t met the criteria for the making of a scheme (below)
Schemes to change the purpose for which charity property is used
Although there are some exceptions, most schemes that the commission makes change the purpose for which the property of a charity is used by, for example:
- changing the charity’s purposes
- merging one or more charities (usually by transferring the property between them), or
- enabling the disposal of designated land without replacement and/or adding or changing the purpose for which the proceeds of the disposal can be used
Criteria for making a scheme
You can ask the commission to make a scheme to change the purpose for which the property of a charity is used if at least one of the following criteria applies to the charity’s purposes:
- they can’t be carried out any more, or not in line with the rules in your governing document
- they have been fulfilled or are now met in other ways
- they don’t allow for the use of all of your charity’s income or property
- they refer to outdated definitions of areas, places or groups of people
- they aren’t charitable in law any more
- they have stopped being a useful way of using the charity’s income or property (for example, if they limit the size of a payment), or
- where two or more charities with similar purposes want to merge but do not have the legal power to do so
The new purposes for which the charity property is used need to take account of:
- the spirit (or underlying intention) of the original purposes for which the property was used
- the desire for the new purposes to be close to the original purposes
- the need for the new purposes to be effective in the current social and economic circumstances
The commission applies the above principles (known in law as ‘cy-près’) when it decides whether or not to make a scheme of this type.
Schemes for church halls
The commission sometimes make schemes to enable charities that provide church halls to lease their property to another charity for use for other charitable purposes.
The conditions set out in the previous section must be met before the commission can make a scheme in these cases but there is some additional information required and this is explained in Use of church halls for village hall and other charitable purposes.
Proceeds of sale of designated land
Where a scheme will be enabling the sale of designated land, it is important to be aware that the proceeds of sale will usually be permanent endowment. This means that only the income obtained from the proceeds (eg through investment) will be available to further the new purposes of the charity.
If you would like to be able to spend the proceeds, rather than just the income, the commission may enable this within the scheme if this is in the interests of the charity. This would normally be where being able to spend the proceeds would:
- be consistent with the spirit of the original gift; and
- allow the charity to carry out its new purposes more effectively
How to decide if a scheme is needed
First, consult anyone who will be affected by or have an interest in the changes. You can take professional advice to help you decide if:
- the change is necessary
- the change meets the criteria for a scheme
- where applicable, the proposed new purposes for which the charity property will be used are appropriate
How you consult and the extent of the consultation depends on the significance of the changes being proposed. The commission won’t usually make a scheme if you haven’t consulted anyone, unless the changes are minor or there are other reasons why a consultation isn’t needed.
Once you complete your consultation, consider any responses and decide whether a scheme is still needed and, if so, if any changes to the proposals should be made. If a scheme is needed, formally agree to apply for one at a charity meeting. Enough trustees must be present and voting to make the decision.
Record the decision in the meeting’s minutes and tell any trustee who didn’t attend the meeting about it.
Ask the commission to make a scheme
Complete the commission’s online form. You should:
- set out the changes you want to make, with the full text of your new purposes (if applicable)
- confirm that the decision to apply for the scheme was made correctly including confirmation of the date of the decision, that it was made in accordance with the governing document and that all trustees are aware of it
- give details of how you meet the criteria for a scheme, explaining which of the criteria are met and why
give full details of the consultation carried out and any responses to it, including an explanation of how this informed the trustees’ decision-making and details of any potential opposition to the scheme or controversy about it, and
if you would like the scheme to enable proceeds of sale that would otherwise be permanent endowment to be spent, explain how this would be in the interests of the charity
What happens if the commission agrees to make a scheme
If the commission is satisfied that the criteria for making a scheme have been met and the other necessary information has been provided, it will consider drafting a scheme. The commission will let you have a copy of the draft scheme to allow you to comment on it.
The commission may also require you to give public notice of the scheme and invite comments (‘representations’) from the public. This will usually be where the scheme may be controversial. If public notice is given, the commission considers any representations about the proposed scheme before deciding whether to make it.
Complex schemes which need publicity can take several months to complete. The commission does not charge for making a scheme but your charity may incur other costs, such as the cost of publicity or professional advice.
What happens once a scheme is made
The commission brings the scheme into effect and publishes a copy online for at least 3 months after it’s made. Keep a copy with your charity’s important papers and give a copy to each trustee.
You or anyone affected by the scheme can apply to the Charity Tribunal to review the commission’s decision to make it within 3 months of it being made.
Read the NCVO’s guide to the Charity Tribunal for more information.