Charity Regulatory Concerns & Statutory Inquiries

A statutory inquiry is a legal power that enables the Charity Commission to use its information-gathering capabilities to formally investigate matters of regulatory concern within a charity. 

The Commission will establish the facts of a case and identify the extent (if any) of misconduct or mismanagement in the administration of the charity. 

By opening a statutory inquiry, the Commission can also make use of its protective powers. 

These include: 

• Suspending a trustee, charity trustee, officer, agent or employee of the charity from their office or employment while the Commission considers removing or disqualifying them from that position.
• Vesting charity property in the Official Custodian for Charities.
• Preventing a person who holds charity property from parting with it without the Commission’s consent. This is sometimes referred to as a ‘freezing order’ as it can be used to freeze a bank account. 
• Preventing people from repaying any type of debt to a charity without the Commission’s consent. 
• Restricting the transactions that a charity can enter into — or the nature or amount of payments that can be made — without the Commission’s consent. 
• Appointing an interim manager to look after the affairs of the charity, alongside (or instead of) the trustees. 
• Suspending a trustee, charity trustee, officer, agent or employee from membership of a charity when they’re suspended from office or employment and try to use their membership to become reinstated. 
• Directing a person not to take a specified action that would be considered misconduct or mismanagement. 
• Issuing a warning to a trustee or charity for a breach of trust or duty (or other misconduct or mismanagement). 

An Official Warning can be issued to a charity or charity trustee that the Commission considers has committed a breach of trust or duty (or other misconduct or mismanagement). 

A relatively new power that was issued to the Charity Commission in the Charities (Protection and Social Investment) Act 2016, an Official Warning intends to notify trustees that a breach of trust or misconduct or mismanagement has occurred. It ensures that the trustees know how to rectify the situation and avoid a future repetition. 

Official Warnings are often published by the Charity Commission. This means that the regulatory concerns of the Commission can be viewed by members of the public.

Misconduct and mismanagement aren’t defined in the Charities Act. This means that there’s no legal definition of the terms. 

However, the Charity Commission has outlined how it views the terms in its guidance on statutory inquiries:

• “Misconduct includes any act (or failure to act) that the person committing it knew (or ought to have known) was criminal, unlawful or improper”.
• “Mismanagement includes any act (or failure to act) that may cause charitable resources to be misused or the people who benefit from the charity to be put at risk. A charity’s reputation may be regarded as the property or resources of the charity”.