OPERATIONAL GUIDANCE

ORDERS AND SCHEMES

APPLICATION FOR A SCHEME - WHO MAY APPLY AND WHAT FORM SHOULD THE APPLICATION TAKE?

OG 1 B2 – 19 February 2004

Divisional responsibility

For action:

Regulatory Framework

Contents

1. Who may apply for a Scheme?
2. How should the application be made?
3. Content of application

Meaning of expressions - list of Glossary terms used in this Guidance
Index to further related information

The law

Refer to a lawyer

Refer to an accountant

1. Who may apply for a Scheme?

1.1 Rules
1.2 The charity
1.3 The Court
1.4 The Attorney General
1.5 Schemes "of our own motion"
1.6 Insufficient trustees available to apply for a Scheme
1.7 No trustees to apply for a Scheme
1.8 Application deemed where Scheme is needed but charity fails to apply

1.1 Rules

There are strict rules governing who may and should apply to us for a Scheme.

1.2 The charity

The charity itself may apply for a Scheme (s.16(4) of the 1993 Act).

The application should be in writing or we should be supplied with written evidence of a resolution to apply for a Scheme – see section 2.1.

1.3 The Court

The Court may order a Scheme to be established and refer the matter to us for preparation or settling (s.16(2) and (4)(b) of the 1993 Act).

1.4 The Attorney General

S.16(4)(c) of the 1993 Act allows us to accept an application made by the Attorney General.

In practice we will normally need to invite such an application. This should only be done in a case in which there is substantial public interest, and where no other method of obtaining jurisdiction is practicable. It cannot be used in the case of exempt charities.

Any case where it is proposed to follow this course of action should always be referred to Legal Division for advice.

1.5 Schemes "of our own motion"

If there is any suspicion of the loss or misuse of charity property which might constitute grounds for opening a s.8 inquiry, the papers should be passed to the appropriate Evaluations Unit.

Under s.18(2)(ii) of the 1993 Act, we may make a Scheme for the administration of a charity "of our own motion" (that is, without an application) where, having opened an inquiry under s.8 of the 1993 Act, we are satisfied that:

• there is (or has been) misconduct or mismanagement in the administration of a charity; and

• it is necessary or desirable that we act to protect, or secure the proper application of, the charity's property (including property coming to the charity).

1.6 Insufficient trustees available to apply for a Scheme

If a charity cannot apply for a Scheme because:

• insufficient trustees are in office; or

• one or more of them is absent or incapacitated,

we may accept an application from whatever number of trustees we consider appropriate in the circumstances (s.16(7)).

We can use this provision where the number of trustees has been reduced below the minimum number required by the governing document of the charity for the transaction of business. We can accept an application for the Scheme from one or more of the remaining trustees (provided they were properly appointed).

We should accept an application under s.16(7) unless there are particular reasons for not doing so. These circumstances will be rare.

1.7 No trustees to apply for a Scheme

If there are no trustees, we need to appoint them. This should include the appointment of at least one charity trustee either by an Order of "our own motion" under s.18(5) or under the provisions of s.36 of the Trustee Act 1925. These Orders should be made by Regulatory Framework. The appointed trustee(s) can then apply for a Scheme.

1.8 Application deemed where Scheme needed but charity fails to apply

Section 16(6) allows us to proceed with making a Scheme as if an application has been made by the charity if:

• the charity concerned is not exempt; and

• forty years have passed since it was founded; and

• we are satisfied that the trustees:

• ought, in the interests of the charity, to apply for a Scheme; but

• have unreasonably refused or failed to do so; and

• we have given the trustees an opportunity to make representations to us.

This course of action can only be followed with the authority of a Legal Commissioner.

2. How should the application be made?

2.1 Application to be in writing
2.2 Standard forms
2.3 Resolution of trustees
2.4 Authorised applicant
2.5 No authorised applicant
2.6 Special powers
2.7 S.82(1)of the 1993 Act
2.8 No application required from charity or trustees

2.1 Application to be in writing

The 1993 Act does not specify how an application for a Scheme should be made but, except in those cases set out in section 2.8 below, we should normally ask for either an application in writing or written evidence of a resolution to apply for a Scheme.

The precise form the application should take will depend on the constitution and circumstances of the charity. See flowchart.

2.2 Standard forms

We cannot insist, but it is desirable, that applications are made on one of our forms:

• form CHY-ST1(A), for unincorporated charities administered by individual trustees; or

• form CHY-ST1(B), for:

• incorporated charities;

• unincorporated charities whose custodian trustee is authorised to make the application; or

• unincorporated charities with incorporated trustees; or

• parochial church councils or other bodies corporate not acting under seal.

If an application has to be made in some other form, the name of the charity, a statement of where the evidence of application is filed and the date it was received in the office should be entered on a copy of the appropriate CHY-ST1 form and kept on file. Once made, an application cannot be withdrawn (Re Poor Lands Charity, Bethnal Green [1891] 3 Ch 400).

2.3 Resolution of trustees

Most applications arise from a resolution taken by the charity trustees. Any resolution must have been taken strictly in accordance with the normal rules for the conduct of business of the charity trustees. Where the rules require a meeting, it must have been properly convened.

The resolution may authorise a named individual or individuals to sign the application on behalf of the charity. These "authorised applicants" might include one or more of the charity trustees, a charity officer or a professional agent or adviser.

Where we are in contact with the charity before the trustees make their application, we should normally:

• give advice on the precise wording of the resolution (this should include provision for an authorised applicant); and

• suggest that the notice calling the meeting states clearly that among its purposes will be the passing of a resolution authorising application to be made to us for a Scheme.

2.4 Authorised applicant

The standard application forms contain a certificate, to be given by an authorised applicant, to the effect that:

• the charity trustee(s) duly decided to apply for the Scheme on behalf of the charity; and

• the person signing the form has been authorised by the trustee(s) to sign the application.

Unless there is some reason to believe that the certificate has not been properly given by the authorised applicant, it is unnecessary to ask for further evidence of his or her authority to make the application. Where the application has not been made on the standard form, and does not contain a certificate to this effect, the applicant should be asked to sign a separate certificate. Without appropriate authority from the trustees:

• a custodian trustee;

• a person who is merely holding charity property without any right to act in its administration; or

• a person who is acting as a trustee without being properly appointed,

cannot make an application on behalf of the charity.

2.5 No authorised applicant

Where the charity trustees do not authorise an applicant to sign the form of application for the Scheme on their behalf, they, or a sufficient number of them to demonstrate that a decision was duly taken to apply for the Scheme, will have to sign the form, or provide other evidence of their decision to apply for the Scheme.

2.6 Special powers

Exceptionally, under an unusual constitution, there may be other ways in which a particular charity can make an application for a Scheme. Any claim from the trustees that they have a special power, will need to be checked by examining the charity's governing document. All such cases should be referred to a senior officer in payband 4/5 and, if necessary, to Legal Division.

An application from a body other than the charity may be provided for by statute. For instance, paragraph 11(6) of the Third Schedule to the Pastoral Measure 1983 provides that we may accept applications from Diocesan Boards of Finance where the administration or purposes of a charity for ecclesiastical purposes of the Church of England are affected by a pastoral scheme or order.

Again, such cases should be referred to a senior officer.

2.7 S.82(1) of the 1993 Act

Under s.82(1) of the 1993 Act, trustees may grant to any two or more of themselves a general or qualified authority to execute certain "assurances or other deeds or instruments" on their behalf.

Because it is not a "transaction", an application for a Scheme is not an instrument within the meaning of s.82 and does not fall within a general authority of this kind. However, we can accept a resolution which expressly grants authority to apply for a Scheme on individual trustees (authorised applicants).

2.8 No application required from charity or trustees

No application from the charity or from the trustees will be required where the need for a Scheme stems from:

• an Order of the Court;

• an application from the Attorney-General; or

• is made of "our own motion".

3 Content of application

The standard application forms do not (and any other form of application should not) refer to actual provisions to be included in the Scheme. This is to prevent an application which might limit the content of the Scheme, and necessitate a further application or resolution.

However, even where the trustees do give details of provisions for inclusion, S.89(1) of the Act will almost certainly permit the addition of provisions to the Scheme beyond those outlined in the application and we are not bound to include everything asked for in an application.

See also: Issue of form

The following words and phrases are defined in the Glossary of Terms:

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1993 Act
charity trustees
custodian trustee
exempt charities
local charity
trustees

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