Bermuda’s new Charities Act 2014 (the Act), approved by the House of Assembly and Senate in March 2014, becomes operative on 31 December 2014. The new Act repeals and replaces the Charities Act 1978 with substantial amendment, and complements Bermuda’s sensible and well-regarded legal framework for the establishment of local and international charitable structures.
The Act clarifies what is meant by ‘charity’, gives the Registrar General (the Registrar) and Charity Commissioners increased regulatory authority, and strengthens reporting requirements for registered charities. The Act is supplemented by the Charities Regulations 2014 which set, out among other things, the process for applying for charitable registrations and temporary licenses.
Based largely on the Charities Act 2011 of the UK, the Act was brought about principally as a result of a 2007 detailed assessment report on anti-money laundering and combating the financing of terrorism, based on the recommendations of the Financial Action Task Force and due to changes in international standards for supervision of non-profit organizations demanded by the International Monetary Fund.
The Act introduces several salient features in that it expands the definition of charitable purpose and imposes a public benefit requirement. All entities established in Bermuda for exclusively charitable purposes and for the public benefit will be governed by and must comply with the requirements of the Act.
The Act defines ‘charitable purpose’ to include any of the following provided it is for the public benefit:
• the prevention or relief of poverty
• the advancement of: education, religion, health or the saving of lives, citizenship or community development, arts, culture, heritage or science, sport, human rights, conflict resolution or reconciliation (or the promotion of religious or racial harmony or equality and diversity) environmental protection or improvement, animal welfare;
• the relief of those in need because of some disadvantage;
• promotion of the efficiency of the armed forces of the Crown, police, fire, rescue or ambulance services; and
• the provision of recreational and similar facilities in the interests of social welfare.
It also provides for the continuation of the Charity Commissioners for Bermuda made up of five to seven individuals appointed by the Minister, and comprising at least one accountant and one lawyer.
ROLE OF THE REGISTRAR
The Act further defines the objectives of the Registrar and the Charity Commissioners to include increasing and promoting public confidence, public benefit, compliance, charitable resources and accountability.
The Registrar will publish guidance on the public benefit requirement.
Other functions of the Registrar include: determining whether an entity is charitable; encouraging better administration of charities; investigating misconduct and mismanagement of charities and taking appropriate action; and maintaining a register of Charities.
Under the Act, the Registrar can take remedial or protective action where there is evidence of misconduct or mismanagement in the administration of the charity, or can suspend or cancel the registration of the charity. It is open to the charity to appeal decisions and/or submit a new application for registration at a later date.
In addition, the Registrar has enhanced powers to gather information and launch investigations into registered charities but it must have a reasonable suspicion that a particular exempted charity is engaged in illegal activities before investigating it.
Limited disclosure of information (other than information subject to legal professional privilege) is permitted where the Registrar has a reasonable suspicion that a charity is or has been involved in money laundering or the financing of terrorism.
FEES PAYABLE BY REGISTERED CHARITIES
Annual fees payable by a registered charity are:
(a) $100 – where the annual income of the charity is $35,000 or less
(b) $250 – where the annual income of the charity exceeds $35,000 but is less than $450,000
(c) $400 – where the annual income of the charity exceeds $450,000
REQUIREMENTS OF CHARITIES
The Act requires every Bermuda charity to be registered unless it is:
(1) Exempt by regulations made by the Minister; or
(2) Privately funded and does not solicit funds from the Bermuda public, or receive funding from the Bermuda Government or Bermuda public sources; and (a) in the case of a trust, has a licensed trustee or private trust company as trustee or (b) has a registered office with and is subject to compliance by a Bermuda regulated institution.
Registration may be indefinite or for a definite period of one, three or five years at a time. The Act also allows for temporary three month licenses to solicit and collect donations in limited circumstances.
Charities must notify the Registrar of any changes to its registered details and any change in the charity’s trusts or if the charity ceases to exist.
Furthermore, all registered charities are required to prepare statements of accounts and annual reports to be submitted to the Registrar within six months of the end of the financial year, and to preserve accounting records and annual reports for at least seven years.
The Act sets out several offenses, including supplying false or misleading information to the Registrar and failing to keep, preserve or submit accounts.
The Act includes a new requirement that all charitable trusts have an express dissolution clause providing that the trust assets will be applied for the purposes of the charity on termination of the trust.
Charitable status must be disclosed in publications.
It is an offence for anyone other than a registered charity to undertake public fundraising activities apart from solicitations within a religious or school premises or as approved by the Registrar.
The amendments brought about by the Act reflect efforts by the Bermuda Government to further improve and modernize the legal framework, increase regulatory authority of charities and strengthen charities’ reporting requirements for increased efficiencies and transparency, which will benefit individual and corporate donors and ultimately the Third Sector as a whole. The Act reinforces Bermuda as a leading jurisdiction for the creation and management of philanthropic and charitable structures.