The consultation into the proposed changes to the Code ended on 3rd February, and the Charity Commission has issued a response to this, stating that instead of using CC10, it proposes instead to refer charities to the Code as setting out relevant standards of good practice.
The Charity Commission has also said that it will consider further how it can take account of charities’ consideration and application of the Code in its regulatory interactions with charities and in the requirements and expectations for reporting.
The overhaul to the Code was announced in November last year during Trustees Week 2016, with proposals for more detailed guidance and a greater focus on delivering organisational purpose and direction.
The draft Code proposals
Proposed new features include recommendations that:
- Boards will use the code as a tool for continuous improvement, rather than simply as an aide to meet minimum standards
- Boards promote a culture of prudence with resources but also understand that being overcautious and risk averse is itself a risk.
- Boards take account of wider voluntary sector in making sure that their charity operates responsibility and ethically
- Boards regularly review the external environment and assess whether the charity is still relevant. The code recommends trustees consider partnership working, merger or dissolution if others are seen to be fulfilling similar purposes more effectively.
The code also proposes higher standards in a number of areas, including:
- Increased expectation in relation to aspects of board composition, dynamics and behaviours with explicit good practice recommendations about board size, frequency of board performance reviews, and trustees’ terms of office.
- A new emphasis on the chair’s role in promoting good governance.
- Emphasis on board diversity, supporting its leadership and decision-making with a recommendation that larger charities publish an annual statement of the steps they have taken to address the board’s diversity.
- A presumption that charities should be open in their work, including a public register of trustees’ interests, unless there is good reason not to.
- Recommending that charities use their annual report to say how they apply the code and an explanation of any aspects that they do differently.
Mark Lewis, partner and head at Lodders’ charity law team, commented on the changes:
“The Hallmarks was a key document which set out guidance on standards to help trustees to improve the effectiveness of their charity, and the principles that the Commission’s regulatory framework exists to support.
“The Commission very much endorses the greater emphasis on values and behaviour within the new Code but has also conveyed the need for the Code to remain relevant to charities of all sizes through achieving the right balance of rigour, challenge, flexibility and proportionality.
“The new Code has an overarching focus on organisational purpose and direction supported by an emphasis on key factors including leadership and integrity. As well as good decision making and risk management there is a focus on leadership, as well as on integrity, diversity, board effectiveness and openness and accountability.”
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