Third Party Protection & The Charity Commission for Northern Ireland

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Third Party Protection & The Charity Commission for Northern Ireland
 
This topic was raised in the Charity Tribunal as a potential consequence of the Commission as a body corporate, not being accepted as a body who has the capacity in law to afford 3rd parties the same protection to the public as a regular incorporated company. The fear appears to be, that if we accept (and we do), that the Commission is a statutory incorporation, constrained by the statute that created it, then the public is not afforded the same protection as with ordinary incorporated bodies.
The Charity Commission for Northern Ireland is an Executive NDPBAs a public body it delivers a particular public service, and is overseen by a board of Commissioners rather than ministers. Appointments are made by ministers following the Code of Practice of the Commissioner for Public Appointments. It employs its own staff and is allocated its own budget. Also known as an NDPB, the Commission was established under statute, and is accountable to the Northern Ireland Assembly through the sponsor department the Department of Communities rather than to Her Majesty's Government. This arrangement allows more financial independence since the government is obliged to provide funding to meet statutory obligations.
The Charity Commission is a corporate body created by statute. It has no shareholders and its powers are defined by the Act of Parliament which created it, and may be modified by later legislation. The Charity Commission was created to provide a public service, and that service was to be the regulator of Charities. The Commission is not a company which operates as a conventional shareholder-owned company registered under the Companies Acts. Although as a body corporate the Commission may as a convenience, and subject to the creating statute regulate its own business and procedure.
 The doctrine of Ultra vires
 Ultra vires in company law is used to indicate an act of the company which is beyond the powers conferred on the company by the objects clause of its memorandum. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it. Similarly the Charity Commission as a body corporate is bound by articles 6 to 10 of the Charities Act (Northern Ireland) 2008 (“the Act”). Any action undertaken that is not envisaged or allowed for outside of those objectives, functions, duties and  powers may be seen as ultra vires  
There can be substantive and procedural ultra-vires. When the Commission lacks power/authority to undertake a certain act,  that is when the empowering clauses do not provide for such an act, any act undertaken in such situations is substantive ultra vires The Commission is not bound by the acts constituting substantive ultra vires, since every person contracting with the Commission is supposed to know the constitutional documents of the Commission comprising of the Charities Act (Northern Ireland) 2008.
Procedural Ultra Vires is when the company is having power/authority to undertake certain acts as provided by the empowering clauses, but the organ of the company (authority exercising the power) has no authority to undertake such an act. Procedural ultra vires binds the company as an outsider is not always expected to know the power arrangement inside the company and the act has been literally allowed by the company. In the event of substantive ultra-vires, the Commissioners may be held personally liable by any affected third party. In the event of procedural ultra vires the body corporate which comprises the Commissioners is accountable. Section 40 of the Companies Act 2006 applies to the Commission as a body corporate.
 Ostensible Authority
 Even an employee acting with ostensible authority may not bind the body corporate. Section 40 of the Companies Act is about protecting third party rights against excesses of the Body corporate, or individual rogue Directors (Commissioners), not employees, and should be read with EU Directive 2009/101/EC, which applies to all incorporated companies in the United Kingdom, and says at article 9; “The protection of third parties should be ensured by provisions which restrict to the greatest possible extent the grounds on which obligations entered into in the name of the company are not valid.” Clearly providing protection to those dealing with the Commission.
In the event that a restriction imposed by the statute is breached,  in committing the breach the Commissioner, or Commissioners in question will have left him, or themselves open to a claim that he/they failed to comply with their statutory duties as a member(s) of the body corporate. Section 171(a) of the Companies Act 2006 specifically requires directors/Commissioners to act in accordance with the articles (schedule 1 & articles 6-8 Charities Act (Northern Ireland) 2008), and a director who did not comply with a limitation or restriction will find it difficult to argue that he exercised reasonable care and skill pursuant to section 174 of the Companies Act 2006.
The doctrine of ultra vires is a matter of judicial control that protects third parties in their dealings with the Commission. This doctrine prevents the Commission exercising its powers in a way other than those stated in schedule 1, and articles 6 to 10 of the Charities Act (Northern Ireland) 2008. Thus, the third parties and the Commission may be assured that the powers vested in the Commission will not be used for any activities which they did not have in contemplation at the time of the commencement of the Act. The doctrine of ultra vires prevents Commissioners from departing from the objects for which the Commission has been formed and, thus, puts a check over the activities of the Commissioners. It enables the Commissioners to know within what lines of business they are authorised to act, and how they are constrained by the enabling legislation, thus protecting the rights of 3rd parties as intended by the statute in compatibility with EU Law. The protection therefore is extant and implicit within existing legislation.
www.probityaacni.uk  for further advice or information

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