Robert Nieri and Michele Price, Partners in gunnercooke's charities team provide an overview of some of the recent developments in the world of governance, legal and regulation, and outline how these may affect charities.
All provisions of the Charities Act 2022 were finally brought into effect towards the end of 2025, with implementation of long-delayed changes to rules on making ex gratia payments, since when there has been a host of legislative, regulatory, policy and governance developments of relevance to charities.
How can charities keep on top of all these developments, as well as focus on “business as usual”, at a time of change in the leadership and the apparent priorities of the current Labour administration?
By remaining focused on what they are here to do, ensuring their funds reach their end causes and making a real difference; and that their organisations operate to high ethical standards - because this is what matters to the public (according to the latest Charity Commission survey on trust in charities) and which justifies the special treatment charities enjoy under the law.
Clearly communicating your charity’s impact
Many charities already do all of this but could be better at communicating the impact they achieve - hence the exhortation of SORP 2026, already considered in depth elsewhere by CFG, to take the opportunity presented by a trustees’ annual report to tell a charity’s story, acknowledging successes, failures and learnings, helping the reader to understand where the charity’s money has come from and how and why the money has been spent in the way it has; to assess the charity’s progress against its objectives; and to understand its plans in relation to its purposes, linking the narrative to the numbers and providing context to the results.
Ethical fundraising
Telling your charity’s story and explaining your beneficial outcomes rather than just your outputs, is fundamental to successful fundraising in an age of so many competing voices and shortened attention spans. The revised and much shorter Code of Fundraising Practice reiterates the importance of fundraising that is “legal, open, honest and respectful”, but also now emphasises the importance of charities protecting their own fundraisers, directing them to take all reasonable steps to protect fundraisers from harm, abuse, harassment or undue pressure.
The Code raises standards by demanding judgement, as will effective use of the greater freedoms afforded by the Data (Use and Access) Act 2025 to charities to contact existing supporters by email and text messages under the recently enacted “soft opt-in” exemption. But just because there may now be more opportunity to contact more people about your work does not necessarily mean your charity should take it, by moving from consent-based contact to engagement based on a “legitimate interest” assessment. It will depend on your charity’s circumstances and its strategy.
Creating the right culture
Despite the inexorable rise of AI, it’s the efforts of people that enable charities to make a meaningful difference with their work. In its guidance the Charity Commission regards “safeguarding” as keeping from harm all who come into contact with your charity, but success is much more than the avoidance of failure. The Employment Rights Act 2025 is being implemented in stages during this year and in 2027 and gives employees more rights, in particular (from January next year) earlier and stronger unfair dismissal rights, with the qualifying period reduced from 2 years to 6 months and the cap on compensation to be removed. The Act can be regarded not just as more regulation, but as an opportunity for charities to focus on recruiting the right people and on creating a culture where staff regard working for your charity as a privilege, not just an accumulation of rights.
Such a culture requires people to feel empowered to “call out” behaviour that is wrong, and while an Employment Tribunal has this year decided (on a non-binding basis) that charity trustees as opposed to employees are not entitled to bring claims for whistleblowing detriment under the Employment Rights Act 1996, this decision does not mean trustees - or any other charity volunteers - are left without any agency to challenge perceived wrongdoing within their charity: under legislation the Charity Commission is a “prescribed person” for disclosures on matters relating to the administration of charities and for the last reported year to September 2025 nearly half of the disclosures to the commission were by made by non-employees.
Last year the Economic Crime and Corporate Transparency Act 2023 introduced the new criminal offence of failure to prevent fraud, holding to account large corporates (including charities) for fraud committed by their employees, agents, subsidiary undertakings or other “associated persons” who provide them with services. But the reasonable fraud prevention procedures which, when properly implemented, should provide a defence to this offence are of general application to all charities in seeking to inculcate a healthy working environment, where people do not turn a blind eye to wrongdoing, where all are respected, and habits are ingrained to “do the right thing”, being:
- proportionate risk-based prevention procedures;
- communication (including training);
Adopting such a systematic approach may assist in addressing various other legal risks, including in respect of section 250 of the Crime and Policing Act 2026, enacted this April and making any incorporated organisation - including charities - criminally liable where a senior manager commits any offence while acting within the actual or apparent scope of their authority, and where the definition of “senior manager” is functional, not title-based, and captures an individual who plays a significant role in decision-making about how the organisation’s activities are managed or organised, or in the managing or organising of those activities i.e. not just trustees.
And charity governance is something that is always worth dusting down and reviewing, especially when the Charity Commission issues updated guidance. In April this year the regulator published a new version of guidance CC29 in response to several high-profile cases, and with a view to tackling what it perceives as a lack of awareness of how to spot and deal with such conflicts. While there is nothing very new in the guidance itself, it aims to be more accessible and relevant by making use of worked examples. Conflicts of interest or loyalty are a perennial issue and will be experienced by all charities at some point, but adherence to the updated guidance should mitigate their impact and ensure regulatory compliance.
Greater recognition by government of the value of civil society?
Five years ago and while still serving his first term as Mayor of Greater Manchester, Andy Burnham made clear his wish to involve civil society in “co-designing and co-delivering” government and community services and the need to shift power and resources closer to communities, and he called for procurement processes that place genuine weight on social value.
Now that Mr Burnham has become our prime minister the charity sector can expect the Civil Society Covenant to gain even greater traction within central and local government, with the embedding of the principles of “recognition and value”; “partnership and collaboration”; “participation and inclusion” and “transparency and data” in government’s dealing with charities, as well as greater opportunities for charities to use the Office for the Impact Economy to unlock billions of pounds in alternative funding, social investment and philanthropic capital.
And during these hostile times where the chair of the Charity Commission has recently observed that “uncertainty is fuelling cynicism, tension and division” but where charities undoubtedly have a major part to play in bridging divides, for example by “supporting people with specific health conditions regardless of worldview, heritage, political affiliation or social background”, there will be opportunities for the sector in helping to realise the government’s new social cohesion strategy, in creating opportunities for connection e.g. cultural and sporting events and youth and community infrastructure.
Undoubtedly the challenges remain great but they present opportunity, and as well as regulating the sector by supporting charities to get it right and taking robust action where it sees wrongdoing and harm in pursuance of its second Strategic Objective, in its recently published annual report for 2025-2026 the Charity Commission has restated its commitment to its third Strategic Objective, to speaking with authority and credibility, free from the influence of others and has acknowledged it is not its role to second guess trustees who make tough decisions in the face of straitened financial circumstances and who do so within the law and its guidance. Trustee boards and senior leadership should take comfort from the commission’s stated position that where trustees are fulfilling these duties, it will defend their right and duty to make such decisions, even where those decisions are difficult or controversial.