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Clarifying the legal framework for social investment by charities
Social investment provides financial returns
while at the same time generating social benefits. It is an important and
developing area for charities, enabling them to meet their charitable
objectives by combining investment and spending. In a consultation opening
today the Law Commission is seeking views on the law that governs how
charities make social investments. Many charities are already involved in social investment and the existing
law is not proving an impediment to them. There is some concern, however, that
the law is unclear on the precise powers and duties of charity trustees in this
developing field. There is a risk that some trustees may be deterred from
engaging with social investment owing to the complexity and lack of clarity in
the current law.
The Law Commission’s consultation paper
analyses the legal framework, explains the ways in which the law already
supports charity trustees and proposes changes that would clarify the way in
which charities can use social investments to achieve their charitable aims.
The Commission is asking whether the introduction of a new statutory power to
make social investments (sitting alongside existing powers), and a checklist of
factors that may be considered by trustees, would bring clarity and certainty
and give trustees more confidence in making social investments.
The Commission is also reviewing the
circumstances in which charities with permanent endowment can use their
endowment to make social investments.
Professor Elizabeth Cooke, the Law
Commissioner leading the project, said: “Charities have a special place
in society. The contribution they make is made possible, in part, by how they
spend their money.
“Social investment is an important and
developing area for charities. The reforms we are proposing would make social
investment more straightforward legally. We are asking consultees: would our
proposals help trustees to make the best of the opportunities offered by social
investment?”
The consultation paper is available
on www.lawcom.gov.uk. The consultation closes on 18 June 2014.
Notes for editors
1. The Law Commission is a non-political
independent body, set up by Parliament in 1965 to keep all the law of England
and Wales under review, and to recommend reform where it is needed.
2. For more details on this project,
visit www.lawcom.gov.uk
3. For all press queries please
contact:
Phil Hodgson, Head of External
Relations: 020 3334 3305
Jackie Samuel: 020 3334
3648
Email: communications@lawcommission.gsi.gov.uk