Background (Legislative)

All Irish companies are required by legislation (which came into effect in November 2016) to establish and maintain a “Register of Beneficial Owners”. This includes charities and non-profits which are “Companies Limited by Guarantee” (CLGs). This blog is written specifically for charities which are “CLGs”. 

Purpose of Central Register

The purpose of the Central Register is to provide a central register of beneficial ownership of companies and industrial and provident societies. 

Who has access to the Central Register?

The Central Register can be accessed by:

• Criminal Assets Bureau;

• Revenue Commissioners

• Gardai Síochána

• Office of Director of Corporate Enforcement

• General Public (a Beneficial Ownership Report can be requested) 

How to identify Beneficial Owner?

Definition of a beneficial Owner

“any natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in the relevant entity, or through control via other means”.

However, charities who are CLGs, don’t have beneficial owners in the conventional sense. The assets of the charity are held for its charitable purpose and the charity is run for the benefit of its beneficiaries. All CLGs are still legally obliged to submit the prescribed information to the Central Register. They are also required to hold an internal “Register of Beneficial Ownership”. The definition does not take into account that “ownership” or voting rights and so forth are solely for the benefit of the beneficiaries of the charity (it’s charitable purpose) and not in the interests of individual members.

Consequently, your charity needs to interpret this definition to establish how the legislation applies to and which individuals need to be classified.

The legislation determines that an “ownership” of over 25% defines a beneficial owner. Members of a CLG are determined to be the owners as they exercise control over the CLG by way of their right to vote at AGMs.

Three Members or less

Members are likely to qualify as “beneficial owners” if a CLG (charity) has three or less members. This is because each member has more than 25% of the voting rights. In this instance, details of the three members must be submitted to the Central Register and recorded on the company’s Internal Register of Beneficial Ownership.

Four Members or more

Most charities which are CLGs, have four or more members. The charity must diligently review whether there any individual (s) exercise indirect or direct voting rights or control over the charity. Check your Constitution and any other legal agreements in place to clarify membership). If any individual, other than a member or a senior managing official exercises control, they need to be recorded as a “Beneficial Owner”. The charity may not be able to identify a beneficial owner (having checked the Constitution and other agreements), because there are four or more members or control and voting rights are not exercised by other individuals.

In the majority of instances however, CLGs need to file prescribed information on their “Senior Managing Officials” on the Central Register of Beneficial Ownership and on an Internal Register of Beneficial Ownership. 

A Senior Managing Official includes the Directors and the Chief Executive Officer. 

Details to be filed on the Central Register

The prescribed information required for each Managing Official:

Name

Residential Address

Nationality Date of Birth

PPS Number

Nature and extent of the Interest held or control exercised (an opportunity to record the charitable status of the CLG)

Date the individual was added to the Register

Date of cessation on the Register

PPS number entered in the RBO portal must match the name as registered on their PPSN with the Department of Employment and Social Protection. The information is not verified against the Revenue Commissioners records. For example: “Paddy” might be recorded with DEASP as “Pat”, Patrick” etc

You can ring DEASP at 1890 927 999 to check the exact name you’re registered with DEASP (for PPSN)

In the unlikely event a Managing Official does not have a PPS number, they are required to complete a BEN2 Form (to verify their identity) which must be legally authenticated. Further information on BEN2 is here. 

Maintain up-to-date details on the Central Register

It’s critical to keep the information up-to-date. Any changes to the Beneficial Owners must be recorded on the Central Register and also on the charity’s Internal Register of Beneficial Ownership.

Penalties for non-compliance

Legal entities (charities not exempt) who do not file are guilty of an offence and be liable on summary conviction to a Class A fine of up to €5,000 and on conviction on indictment to a fine of up to €500,000.

All charities must ensure that details are up-to-date and accurate with the Register of Charities. Trustees are legally obliged to ensure information on the Register of Charities is accurate.

If you are a charity Trustee, you can check the register very easily, click on this link, enter the name of your charity, click onto the charity name when prompted and click the “People” tab. There you will see the names of Trustees, appointment date and years of service.

Check with your charity, that the contact details recorded for you are correct.. The Charity Regulatory uses the information recorded to communicate essential information, if they don’t have the relevant contact details you are missing out on important guidance and correspondence from them.

In their last ezine, the Charity Regulator requested all Trustees to check and update if necessary. To do this log into your MyAccount and check that the following details are correct:

• Registered postal address

• Email address

• Telephone number

   

  If you’re having any issues, you phone the Charity Regulatory Authority 0818 927999 or email info@charitiesregulator.ie., their phone lines are manned Monday to Friday between 11am-3pm

   

Irish Charities: Where to donate?

Here are some basic steps you can take to help you be sure your donations are going to a registered and well-governed charity.

• Know your cause
• Check Charity Registration
• Review your chosen charity’s data on Benefacts
• Read their Annual Activity Report
• What Governance Regulations are in place?
• Do they recognise they need to be on a Governance Journey?

Know your Cause

What do you care about and then follow your heart and your aspirations – it will mean you are more likely to be generous, and interested in staying engaged. Your chosen charity will also benefit from long term donations from you as (an interested supporter.

Check Charity Registration

First thing’s first – check that your chosen charity is on the Register of Charities before you donate.

Review your chosen Charity on Benefacts

Benefacts, a non-profit social enterprise established in 2014 is transforming accessibility and transparency of the non-profit sector in Ireland. The company provides up-to-date financial and governance data, sourced from a number of regulatory sources including the Companies Registration Office

Check your chosen charity on benefacts here and you can see their sources of funding levels of funding, income/turnover, company information (directors and length of terms), employee numbers etc. The information is presented in a neutral and impartial way and allows you judge the effectiveness of your chosen charity objectively.

Charity’s Annual Activity Report

Normally available to download on a charity’s website – a charity’s Annual Activity Report provides information that’s of interest to a number of stakeholders, including donors. A good report will provide an honest picture of what the charity is set up to do, how they use the resources available to them and their achievements.

What Governance regulations are in place?

At an absolute minimum expect to see compliance with the Charities Governance Code – (all Irish registered charities should have complied by 2020).

Charities that meet compliance in the three areas (Governance Code, Implementation of SORP and adhere to Guidelines for Charitable Organisations on Fundraising from the Public) are awarded the Charities Institute “Triple Lock Award”. This is on the basis that these charities uphold the highest standards in transparent reporting, ethical fundraising and strong governance structures.

Is your chosen Charity on a Governance Journey?

We need to recognise that most charities are on a governance journey, many smaller charities with exceptionally limited resources and other hurdles are slowly implementing these changes. In these cases, look for a thoughtful strategy where the charity’s governance commitment implementation plans are clearly set out.

We have become so used to hearing about Charity Trustees who have gone bad and lost the run of themselves but, in this case, depending on one’s viewpoint the only ones losing the run of themselves is either the Charities Regulator or the Revenue Commissioners or both.

Paul Murphy of RTÉ Investigates issued a fascinating update on 21.02.2020 entitled “Charities Regulator excoriated after its Trustee Nominees sued by Revenue”.  When reading this article you must suspend any thoughts about “sense” “logic” “appreciation” with “weird” “illogical” and “what on earth”.

In brief, the Kerry based Animal Heaven Animal Rescue (AHAR) incurred substantial tax liabilities which ultimately led to the closure of the Charity.  

o   January 2017 – RTÉ Investigates exposed misleading fundraising practices, unreceipted cash expenditure and a lack of financial controls.

o   March 2019 – the Charity was wound up following an audit which had commenced over 18 months before the Charities Regulator nominated four Trustees.

o   April 2019 – the Revenue initiated High Court proceedings against the Trustees nominated by the Charities Regulator. 

AHAR is now wound up but, had tax liabilities of €203,000 of which €140,000 has been paid with a commitment to repay the balance of €60,000 in October 2020.  Given the tax liabilities are being repaid, and (based on RTÉ Investigates reports) the Revenue have stated its intention to drop these proceedings if the outstanding tax liability is discharged in full why is the Revenue taking proceedings against the current Trustees?

Concerns over the level of “poor governance” at the Charity prompted the Charities Regulator to start nominating Trustees in order to “Implement proper governance and controls of the charity”

The Trustees (nominated by the Charities Regulator) did not receive any remuneration or expenses for their work.  They are however receiving legal bills as they have to defend themselves against prosecution by the Revenue which must be costing each of them somewhere between €12k to €15k each.

The Charities Regulator expressed “sympathy” for the Trustees nominated by his office to help sort out CRA issues with the Charity. 

One thing for sure the very people who were put in to help rescue the situation were the ones who are being been hammered.  Why would anyone want to be involved with a Charity at any level based on this type of scenario where people were doing the right thing for the right reasons and still lose!

If you cast your mind back to before we all dug into Mince Pies and Christmas pudding, you might recall the hullabaloo  concerning registering beneficial owner details of practically every company  in Ireland on the Register of Beneficial Ownership before an end of November deadline.

While companies were by and large aware of their obligations it has been my experience that Charities are not as aware that they too must Register and even if they are aware the first question I hear is …. “but who are the ‘Beneficial Owners’ of our Charity?”.  This blog will try and answer that question……….

‘Control’ is the key as under Beneficial Ownership rules this determines who must register. In your standard limited liability company, it is generally the case that whoever holds over 25% of the shares in the company is considered to ‘control’ it and must register their details. Most charities however are companies limited by guarantees (CLG’s) and don’t have shares. As such you have to look at its members as in general they are entitled to exercise, through their right to vote at general meetings, some ‘control’ over the company. Then it is simply a question of numbers!

• ≤ 3 members

If there are 3 or fewer members in a Charity CLG, those members are likely to meet the definition of “control” (because each member has greater than 25% of the voting rights) and their details must be placed on the Register of Beneficial Ownership.

• ≥ 4 members

If there are 4 or more members in a Charity CLG (which is typically the case in most charities), no one member has over 25% of the voting rights and so they do not qualify as a beneficial owner. In this case, the details of the “senior managing officials” (i.e. its Directors and any Chief Executive Officer) must be placed on the Register of Beneficial Ownership.

• Exceptions

As you would expect, my easy numbers rule is not the case for every single charity and there can be exceptions (e.g. the constitution of the Charity prescribes ‘control’ in a particular way) but by and an large the members ‘rule’ applies to the vast majority of charities and is an easy way of identifying who must register.

As always, if you have any questions on this blog please contact myself or one of my colleagues.

Coronavirus has no race – Photo by visuals on Unsplash

COVID-19 – OPTIONS FOR YOUR IRISH CHARITY’S AGM

The Covid-19 pandemic is having a huge impact on charities in Ireland most of whom will have to reconsider their AGM arrangements this year. All companies in Ireland must hold an AGM every calendar year. The following are suggestions to take into account for planning the AGM this year:

DELAY

Consider delaying the AGM, taking the following into account:

• The length of time between one AGM and the next can be no more than 15 months.
• No more than 9 months between the year end and the AGM date.

The good news is that the Companies Registration Office announced this week that Annual Returns due between now and the 30^th June will deemed to have been filed on time if all elements of the return are completed and filed by that date.  They are reviewing the situation and this date may be extended again. 

 The Charity Regulatory Authority do not currently propose to formally extend filing deadlines. This may be reviewed.

WRITTEN RESOLUTION

Check your constitution to see if holding an AGM via Written Resolution is an option. The Written Resolution would need to be signed by all of the Members entitled to attend and vote at the AGM.  This is may not be practical for charities with a large membership. In that instance, consider attendance by proxy.  

USE OF PROXIES

Arrange the AGM attendance by use of proxies, subject to the constitution. Ensure the proxy form offers alternate proxy holders and permits appointing a substitute, doing so will avoid the risk of a of an absent proxy holder and the member’s voting preferences not being counted.

VIRTUAL MEETINGS

Irish Company Law does not allow virtual meetings. However, subject to the constitution, a hybrid general meeting may be possible. This is where a physical meeting is held and facilitates electronic participation.

•        The Chair must be able to identify Members present which could tricky in a virtual AGM if the member is not visible.
•        Attendees must be able to both speak and vote at the meeting.

The use of any proposed technology needs to be tested in advance to include the above requirements and also ensure electronic votes can be counted. The AGM notice should also include a helpline number for any member having difficulty joining the meeting.

Consider the possibility that the technology may not work due to Covid-19 and certainly should not be trusted for a quorum.

You could arrange the AGM by proxy and still hold a virtual meeting to facilitate participation.

WHAT IF FINANCIAL STATEMENTS ARE NOT READY?

If the Financial Statements are not ready, the charity can hold the AGM and then immediately adjourn it.

Alternatively, hold the AGM, deal with all items that should be dealt with i.e. reappoint the Statutory Auditors, change of Drectors, Special Resolutions (if any).  Adjourn the meeting when the Financial Statements are to be dealt with. The meeting is then reconvened at a time and place determined by the Directors when the Financial Statements are ready.  The reconvened AGM only deals with unfinished business from the adjourned AGM i.e. present the Financial Statements to the members.  

Canvassing members on this option is recommended best practice.

COMMUNICATION

Finally, communicate clearly with your members and stakeholders. Explain that in light of the current global health emergency, the charity must comply with legal restrictions imposed by the Government and the HSE. Being open and transparent with your members should migate any risk of the charity being accused of unreasonable behaviour.

As always if you have any questions on this article or are struggling with any governance issue for your charity, please do not hesitate to contact me or one of my colleauges in KomSec. 

Keep well and safe.

Nathan Lemon (unsplash)

New Charity Governance Code

The Charity Regulator launched a new governance code for charities last week. It sets out a basic standard made up of 6 governance principles i.e. Advancing Charitable Purpose, Behaving with Integrity, Leading People, Exercising Control, Working Effectively and being Accountable and Transparent.  There are 32 core standards outlined in putting the six principles in place with additional standards for more complex charities

On reviewing the standard it might appear detailed, however, it won’t be daunting for most well-run charities who will already have processes in place to deal most of the core standards e.g. managing conflicts of interest, financial controls and hold regular board meetings etc.

Charities will be expected to be compliant with the code from 2020 and begin reporting on their compliance in 2021 which gives organisations ample time to review and implement the code.  The Charities Regulator has wisely identified that the key to implementation is to ensure board engagement. Directors must review and approve the charities implementation, therefore by supporting its implementation, challenges can be addressed more readily. 

  The Charities Regulatory Authority recently published a guide for Charities which describes the limitations of a charity’s promotion of political causes.

The guide states that the promotion of a political cause is acceptable on condition that the promotion directly relates to the advancement of the charitable purpose of the Charity.

It is recognised that on occasion, Charities need to engage in activities such as influencing policy or advocating change to legislation to support their charitable purpose. However, the promotion cannot be contrary to the charity’s constitution nor can the charity support a political candidate or a political party.

Permitted Activities

The guide provides clear examples to help Charity Trustees understand the kinds of actions that may or may not be permitted.

A political speaker at a charitable event is permitted on condition that it is the event and not the politician is being promoted.

Another example of a permitted activity is where a charity organises a march to Leinster House to encourage additional funding for integrated projects which advances the charity’s charitable funding.   This is permitted because the purpose of the march is to get more funding to promote good community relations, which in turn advances the charity’s charitable purpose.

Prohibited Activities

The guide refers to a fictional charity which provides its resources (a hall)  free-of-charge for use by a  political candidate for a fundraising event. This is not permitted because allowing a political candidate free use of the hall is not promoting the charity’s objects; and, secondly, it is conferring a private benefit to the political candidate. However, there would be no issue if the charity charged the political candidate its standard rate for hall hire, thereby raising funds for the charity.

The second example provided describes a charity which was set up for the purpose of advancing sustainability. This charity could not have campaigned for a ‘yes’ vote in respect of the 34th amendment of the Constitution, (same-sex marriage). The reason this would not have been permitted is that this activity is not directly related to the charitable purpose of the charity.

Lobbying

The guide also refers to the lobbying activities and highlights that charities need to ensure that if lobbying they need to comply with the Regulation of Lobbying Act 2015.

The Register of Lobbying is web-based and is maintained by the Standards Commission. Further information on the Regulation of Lobbying Act 2015 and the role of the Standards Commission can be found at www.lobbying.ie

The Charities Regulatory Authority has introduced a “Trustee Learning Portal” to provide training to help Trustees understand their legal obligations.

The first course “Guidance for Trustees” is online and takes approximately 40 mins to complete. The content covers the material from their guidance booklet of the same name. Try it for yourself, https://trusteelearning.ie/.

Despite the limitations of online learning, there are numerous advantages; the course is free, convenient, flexible and delivers quality information to a large cohort of Trustees in Ireland fully online.   

We can look forward to the introduction of additional courses over the coming months to support Trustees in getting to grips with governance requirements in the Charity Sector.

Trustees’ Week: 13-17 November 2017

What is Trustees’ Week?

This week is Ireland’s first Trustees’ Week and is a nationwide campaign organised by the Charities Regulatory Authority and other partner organisations to celebrate the essential role that Trustees’ in Ireland play for the not-for-profit sector and to highlight the opportunities for all of us to make a difference and get involved.

#TrusteesWeekIrl

The week will be supported by the organisations on the steering committee posting on social media using the hashtag and publishing a series of blogs about trustees, you can access these on the Trustees’ Week LinkedIn page here.

Events

Please click on the hyperlink CRA Trustees’ Week Events  for a list of events being held in Dublin and Limerick. In addition, the Charities Regulator will host public meetings in Limerick (November 13) and Dublin (November 15). 

E-Learning Module for Trustees

The centrepiece of these will be to showcase the new e-learning module for trustees (which will be hosted on www.charitiesregulator.ie, the Charities Regulator website).  There will be case studies from a number of charity trustees and a short presentation by Boardmatch Ireland on how to become a charity trustee.