OG42 A1 - THE LAW

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OPERATIONAL GUIDANCE

WAIVER OF DISQUALIFICATION FOR ACTING AS A CHARITY TRUSTEE

THE LAW

OG 42 A1 – 27 February 2007

Purpose

The purpose of this guidance is to set out the current law on waivers of disqualification, and our policy on applying it.

Contents

1. Our powers of waiver
1.1 Powers under section 72(4) of the 1993 Act
1.2 Powers under section 72(4A) of the 1993 Act
1.3 Statutory duty to notify person of waiver
2. Limitations on power of waiver
2.1 Prohibition in Governing Documents
2.2 Unable to rescind waivers once granted
2.3 Disqualification under other legislation
2.4 Ineffective Waivers because of Bankruptcy
3. Further disqualifying conditions
4. The Commission’s policy
4.1 General approach
4.2 Applications for waivers under section 72(4)
Glossary of Terms used in this Guidance

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1. Our powers of waiver
	The various circumstances under which a trustee may be disqualified for acting as a charity trustee or trustee for a charity are set out in OG 41. There are two provisions in the 1993 Act which empower us to waive trustee disqualifications, which give rise to two separate regimes which are described in section 1.1 and 1.2 below..
	The differences between these two provisions lie in:-
	who may apply for the waiver; and
	the degree of discretion we have to grant or refuse a waiver.

1.1 Powers under section 72(4) of the 1993 Act
	S.72(4) of the 1993 Act empowers us on the application of a disqualified person, to waive the disqualification either generally or in relation to a particular charity or a particular class of charities.
	Although there are some limits on who may apply for a waiver (see 2 below), it is wider in scope than section 72(4A). We have absolute discretion as to whether we grant the waiver or not – this is in contrast with s.72(4A) which requires us to grant the waiver unless there are special circumstances which mean that we should not to do it.
1.2 Powers under section 72(4A) of the 1993 Act
	S.72(4A) of the 1993 Act (as inserted by the 2006 Act) provides that we must grant an application for a waiver from disqualification to trustees who have been removed from office more than 5 years previously on the grounds of misconduct and mismanagement in the administration of the charity, either under England and Wales or Scots law, unless they are:-
	disqualified as a company director;
	an undischarged bankrupt;
	have defaulted under a county court administration order,
	or unless the Commission is satisfied, on account of special circumstances that this should be refused.
	Although the 2006 Act creates a presumption that a waiver will be granted, the Commission retains the discretion to refuse a waiver, but must use this discretion in a way which can be shown to be fair, reasonable and proportionate. When we might wish to use this discretion to refuse a waiver is discussed in more detail at 4.3 below.
1.3 Statutory duty to notify person of waiver
	We have a statutory duty to notify in writing any waiver to the person concerned (s.72(5)).

2. Limitations on power of waiver
2.1 Prohibition in Governing Documents
	Any provisions in the charity’s governing document regarding automatic determination of trusteeship are paramount and may not be overridden by any waiver we may grant.
	For instance, if the governing document of a charity stipulates that a person who is an undischarged bankrupt shall cease to be a trustee, a waiver under s.72(4) would be ineffective in respect of that particular charity.
2.2 Unable to rescind waivers once granted
	Waivers cannot be rescinded once granted (though a waiver granted on the basis of fraud or misrepresentation by the applicant would have no effect). If there is a justification for doing so, we can, however, remove a trustee who has been granted a waiver, under s.16 or s.18 of the 1993 Act (power to act for the protection of charities)
2.3 Disqualification under other legislation
	Our power of waiver does not extend to trustees disqualified under legislation other than s.72 of the 1993 Act. This includes the Criminal Justice and Court Services Act 2000 which specifically disqualifies individuals with convictions for certain offences against children from being trustees of children’s charities. See OG 41 A1.
2.4 Ineffective Waivers because of Bankruptcy
	Any waiver granted under section 72(4) or 72(4A) in respect of a director of a charitable company would be ineffective if the individual in question has become bankrupt during the period of disqualification and has not been discharged from that bankruptcy, unless he or she has been granted leave under section 11 of the Company Directors Disqualification Act 1986 to act as a director of any company, charitable or otherwise.
	If the Official Receiver considers that granting leave is contrary to the public interest then he will oppose the application for leave. If leave has been granted for a trustee to act as director of a charitable company, he or she is not disqualified for being a charity trustee of that charity. If leave has not been obtained by a disqualified person to act as a director of any company, then we cannot grant a waiver which applies to the administration of a charitable company. But if the disqualified person has obtained the leave of the court to act as director of any company, then we may grant a waiver in relation to the administration of any charitable company not already affected by the leave granted by the Court (see OG 42 B1 section 4.2).
	If someone is an undischarged bankrupt or the subject of a disqualification order under the Company Directors Disqualification Act 1986 (as amended), we can however give a waiver which allows him or her to act as a charity trustee of a charity which is not a company.
	We may wish to impose conditions on a waiver. For more information on this see OG 42 B1 section 4.1

3. Further disqualifying conditions

Any waiver granted by us applies only to the disqualifying condition(s) which exist at the time when the waiver is granted. It will not waive disqualification in relation to any later event. If, say, a person is adjudged bankrupt or is convicted of (another) relevant offence after the grant of a waiver, he is disqualified again and would need to apply for the grant of a further waiver if he wished to act as a trustee.

4. The Commission’s policy
4.1 General approach
	The approach we take depends on whether the application for waiver is within the scope of section 72(4) or section 72(4A).
4.2 Applications for waivers under section 72(4)
	In most cases, the Commission’s starting position on waivers of disqualification is that any trustee who is disqualified for acting as a charity trustee or a trustee of a charity in the circumstances set out in OG 41, should normally remain disqualified until those circumstances no longer prevail.
	Although a disqualified person may apply, with the support of the charity trustees, for his or her disqualification to be waived, the onus is entirely on the applicant and the trustees to convince us that it is in the best interests of the charity (and will not undermine public confidence in charity) for us to grant a waiver.
	Our policy on the granting of waivers reflects, as far as possible, those criteria that the Court would take into account when considering the disqualification of directors. An analysis of relevant cases shows that:
	The underlying principle appears to be that the Court would do what was in the best interests of the company. For instance, in the case of Re Barings plc and others (No 3) [1999] All ER 1017, the court recognised a range of blameworthiness in the failure to discharge the duties of a director, so that the more culpable the failure, the greater the risk to the public in allowing the disqualified director to act. The greater that risk, the stronger the evidence of the importance of that disqualified director’s involvement in a particular enterprise which would be necessary to tilt the balance in favour of waiver.
	Although the disqualification in the Barings case was not the result of bankruptcy, this idea of a balancing act between the risks and rewards of granting a waiver seems equally applicable to a situation where the disqualification of a trustee is the result of bankruptcy, or the other insolvency-related regimes referred to in section 72 of the 1993 Act.
	In s.72(4) of the 1993 Act there are no specific criteria laid down for when we consider an application for a waiver of disqualification, whether this is general or specific and whether or not any conditions apply. We must, however, act in the best interests of the charity and the criteria we apply when we deal with applications are discussed more fully in OG 42 B1.
4.3 Applications for waivers under section 72(4A)
	The situation is different in the case of a person disqualified under section 72(1) (d) or (e). These clauses deal with persons who have been removed from office because of misconduct or mismanagement in the administration of the charity. This will typically be in cases where we have used our powers under s.18 of the 1993 Act as part of an inquiry.
	Section 72(4A) requires the Commission to grant a waiver from disqualification to persons who were removed from office more than 5 years previously because of mismanagement or misconduct, unless they are:-
	disqualified as a company director; or
	an undischarged bankrupt; or
	have defaulted under a county court administration order
	or unless the Commission is satisfied that there are special circumstances to refuse the waiver. No distinction is made between a general or specific waiver.
	This discretion must be exercised in a way which is consistent with administrative law principles and our own stated regulatory stance, ie that we must act in a way that is fair, reasonable and proportionate.
	The general intention of section 72(4A) is to ease the path back into charitable work for persons who may have acted wrongly, but not fraudulently or with personal gain in mind.
	Therefore, we must start from the basis that any waiver applied for in these circumstances should be granted unless we can show that it is in the public interest and/or the charity’s interest not to do so. The circumstances referred to below may have a greater impact if the waiver applied for is general rather than either general (with conditions) or specific.
	The issues which are likely to persuade us that there are special circumstances and it is advisable to refuse the application are as follows:-
	the original disqualification was because there was malicious or criminal intent on the part of the trustee;
	there is evidence to suggest that there is a real risk of the person in question repeating the behaviour which led to the original disqualification;
	there is evidence of the person’s unsuitability as a trustee;
	there is opposition from the other trustees (if there is simply lack of support rather than actual opposition this would need to be considered).

Glossary of Terms used in this Guidance
• • • •	The 1993 Act the Court governing document trustee

Index to further related information