The new social investment power introduced by the Charities (Protection and Social Investment) Act 2016 came into force on 31 July 2016.
The power confirms charities’ ability to make social investments. According to the Act, “social investment” means investing resources with a view to both directly furthering the charity’s purposes and achieving a financial return for the charity. The power will be particularly relevant for charities wishing to make social investments, as well as for potential recipients of social investment from charities.
When making any social investments, whether or not under the statutory power, the Act requires trustees to:
- consider whether in all the circumstances they should obtain any advice about the proposed social investment;
- obtain and consider any advice they decide ought to be obtained; and
- satisfy themselves that it is in the interests of the charity to make the social investment, having regard to the benefit they expect to achieve for the charity (by directly furthering the charity’s purposes and achieving a financial return).
The Act also requires the trustees of a charity to review any social investments made from time to time.
The Charity Commission has produced a supplement to its guidance on investment matters, with further detail on how trustees should comply with their duties.
The introduction of the power was recommended by Lord Hodgson in his review of charity law in 2012, and by the Law Commission in its 2014 report on social investment. BWB originally proposed the idea of a new statutory power of social investment to Lord Hodgson.
A number of other provisions of the Act also came into force on 31 July, including in relation to the powers of the Charity Commission. Further changes relating to trustee disqualification, official warnings and fundraising will come into force on 1 October and 1 November 2016. For more information see our “is it in force” page here and our detailed briefing on the Act here. If you have any questions please contact your usual BWB contact or call 0207 551 7777.
Posted on 21/11/2016 in Legal UpdatesBack to Knowledge