How does the Charities Act 2022 change the rules relating to trust corporations, and why is this important?
What is a trust corporation?
A trust corporation is a corporate entity which carries out the administration of trusts and/or acts as a corporate trustee. A corporate entity needs 'trust corporation status' before it can act as a trust corporation.
Why might a charity need a trust corporation?
Some unincorporated charities have a sole corporate trustee. This may typically arise on a charity incorporation where the old charitable trust needs to be retained so that particular property can remain on its existing trusts (for example where land or property is permanently endowed). In this situation the new corporate charity is appointed as sole corporate trustee of the existing unincorporated charity in place of the outgoing trustees.
If charity property is held on trust by a sole corporate trustee, the corporate trustee will require 'trust corporation' status. Without this legal status the corporate trustee may be unable to give proper discharge to a retiring trustee on its appointment, and where land held on trust by the corporate trustee is sold the sales proceeds must be paid to a trust corporation or two trustees in order to obtain good receipt.
What was the old position?
Corporate trustees of a charitable trust previously obtained trust corporation status either by an application to the Charity Commission for a scheme to appoint the corporate trustee, or, by an application to the Ministry of Justice for trust corporation status. These were both time intensive processes, often taking several months.
What are the new rules under the Charities Act 2022?
Since 31 October 2022, automatic trust corporation status is granted to any trustee that is both a body corporate and itself a charity (e.g. charitable company or CIO), and which is the sole trustee of or for a charitable trust. This has greatly simplified charity restructures and reduced time and cost for charities where this status is required. Trust corporation status is acquired in these circumstances even if the corporate trustee became the trustee of or for the charitable trust before the new rules came into force.
It is important to note that the old rules will still apply where trust corporation status is required but the corporate trustee in question is not a charity.
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