The Charity Commission puts its regulatory powers into practice – a cautionary tale

Inquiry into Rhema Church London

Charity trustees are often worried about what the Charity Commission might do if they get something wrong in the running of their charity. In many cases, the trustees can be reassured that the problems are minor and are not likely to reach the level of seriousness that would justify the Commission using its formal powers under the Charities Act 2011.

However, from time to time we do have to let trustees know about some of the possible outcomes if they get on the wrong side of their regulator, and particularly if they do not cooperate with the Commission.

Rhema Church London – the background

On 30 March 2023, the Commission published its report of an inquiry into Rhema Church London, a charity that had been registered in 1999 and operated an evangelical church in Croydon. Within the report, we can see a wide range of the formal steps the Commission is willing to take where it believes there is misconduct or mismanagement in a charity.

Rhema Church was no stranger to the Commission’s regulatory functions. In addition to persistent late filing of accounts and annual returns, there had in 2010 been a whistleblowing report about the use of the charities funds which resulted in the Commission issuing regulatory advice to the trustees about meetings, keeping records of their decisions and the need for independent professional advice on certain matters.

A further whistleblowing report arrived with the Commission in December 2014, linked to the charity’s accounts having been qualified, as the auditors had not been able to locate records to show whether credit card payments of £203,707 and petty cash of £76,161 had been used for the charity’s purposes.

The Commission takes action – a timeline

The Commission’s initial examination of the issues established that the trustees had not followed the earlier regulatory advice. This led to the Commission exercising a range of its regulatory powers:

It issued an order under section 52 of the Charities Act 2011 requiring the trustees to provide information. When that was not forthcoming, the Commission opened a formal inquiry under section 46 on 3 August 2015, in part so that it would then have access to further statutory powers that are only available once an inquiry has been opened.

In the course of the inquiry, which ran on into 2022, the Commission used the following weapons in its arsenal:

It used powers under section 47 (to obtain evidence for the purposes of an inquiry) and again under section 52 (to require a person to provide information relevant to the discharge of the functions of the Commission).

Under section 76(3)(d) the Commission ordered the charity’s bankers not to part with any of the charity’s funds, effectively freezing its accounts.

Using the power in section 76(3)(g) the Commission appointed two solicitors to act as interim managers of the charity, taking the place of the trustees.

In December 2017, the Commission used its power under section 76(3)(c)(i) to vest three of the charity’s properties in the Official Custodian as a protective measure. In August 2018, the Commission authorised the sale of those properties under section 91(4).

A new power under section 181A, introduced by the Charities (Protection and Social Investment) Act 2016, was used in July 2018 to disqualify the pastor of Rhema Church London from being a charity trustee and/or holding any senior management position in any charity. The initial disqualification was for 12 years but, following a review of the Commission’s decision, this was reduced to 10 years. When the pastor appealed to the First Tier Tribunal, the disqualification was upheld.

How it was concluded

Towards the end of the inquiry, the Commission used its power under section 85 to direct to the interim manager (the other had been discharged at an earlier date) to distribute the charity’s remaining funds to three other Christian charities operating in the Croydon area.

The findings of the inquiry, largely informed by the reports of the interim Managers, make for interesting reading in their own right, featuring numerous overseas trips made by the pastor at the charity’s expense, charity money being used to reduce the pastor’s mortgage payments, the suspension and then dismissal of the pastor, a tax bill of £543,285 and the eviction of the pastor from the charity’s property.

Press coverage of the inquiry also refers to the interim managers and their staff being subjected to “considerable harassment, intimidation and threats”, payments out of charity funds for cosmetic surgery, vet bills and cleaning and gardening services at the pastor’s home.

In addition to powers used by the Commission in this case, there are in fact many other powers at its disposal, including:

  • with a magistrate’s warrant, to enter premises and to seize paper and electronic records, take copies and require anyone on site to explain any document or information or to state where it can be found.
  • to require any person to provide any document or any information in their custody or under their control relating to any charity that is relevant to the discharge of the Commission’s functions.
  • to disclose to any relevant public authority (such as a local authority, the police or HMRC) any information the Commission has received in connection with performing any of its functions.
  • to suspend a trustee, officer, agent or employee of a charity from their office and also to suspend such a person from membership.
  • to direct trustees not to take, or to stop taking, any action specified in that order that the Commission considers would constitute misconduct or mismanagement.
  • to order those in possession or control of charity property to apply the property in a specified manner.
  • permanently to remove any trustee, charity trustee, officer, agent, or employee of the charity.
  • to make a scheme for the administration of the charity.
  • to issue a formal official warning to either:
    – a trustee who it considers has committed a breach of trust or duty or other misconduct or mismanagement in that capacity; or
    – a charity in connection with which it considers a breach of trust or duty or other misconduct or mismanagement has been committed.

The Commission does not take these steps lightly; as a responsible regulator, it will assess any case carefully before deciding that the statutory powers need to be invoked. It operates within its Regulatory and Risk framework, which sets out how it identifies and assesses risks, how it responds and how it will review and adapt its approach.

How Moore Barlow can help

Moore Barlow has a long established reputation within the charity and social enterprise sector, with expertise in all aspects of charity law and in offering specialist advice. We act for a wide variety of charitable trusts, associations and companies, ranging from local to international.

The firm’s experience of dealing with applications and negotiations with the Charity Commission is reflected in their appointment to the panel of Interim Managers. If you require specialised legal advice in this area, please contact us today.