The Parochial Church Councils (PCCs) of evangelical churches have many questions to ponder at the moment as they face potential changes in the established doctrines and practices of the Church of England. Aside from the deep theological and spiritual questions, many also have practical questions about the use and preservation of their assets for gospel ministry.

Some people have already set up separate charities to support the current ministries of the PCC in a variety of ways e.g. by employing staff or providing buildings. Some have sought to set up a separate legal structure which could form the basis for a new church outside of the Church of England. Many more are now considering one or both of those options. While the situation of individual churches may vary, we seek to offer here some general charity law principles to help guide your initial thinking about these matters.

Before setting up a new charity for fundraising / grant-making, we would always recommend considering alternatives in the first instance, such as the Ephesian Fund (hosted by the Church of England Evangelical Council), or platforms such as those provided by Stewardship.

PCC Members are charity trustees

The PCC of an Anglican church is a corporate body established by canon law and governed by the Parochial Church Councils (Powers) Measure 1956 and the Church Representation Rules. Its principal purpose is “cooperation with the Minister in promoting in the parish the whole mission of the Church, pastoral, evangelistic, social and ecumenical”. This means that every member of the PCC is a “charity trustee” with all the legal obligations that entails. This is true whether or not the PCC is formally registered as a charity with the Charity Commission. Only PCCs with an income over £100,000 are required to register, but all PCCs whether registered or not are legally charities and all its members are the trustees.

A charity trustee has a number of legal duties but perhaps key amongst them for consideration here are:

  • to act in the best interests of the PCC and the furtherance of its charitable purposes
  • to manage the PCC’s resources responsibly
  • not to put yourself in a position where your duty to the PCC is in conflict with your personal interests or your loyalties to another person or organisation.

Managing the PCC’s resources responsibly means you have a duty to protect them and to make sure they are only used to carry out the PCC’s charitable purposes and in the charity’s best interests.

Further details of the duties of PCC members as charity trustees can be found here: Charity Commission guidance – the essential trustee.

A new charity must be independent of the PCC

This second principle follows from, and is the outworking of, the duties of charity trustees outlined above. Since charity trustees must avoid conflicts of interest and loyalty, PCC members should not be trustees of a new charity established in connection with the church. The same applies to staff members of the church and arguably to anyone connected by family or business relationships with PCC members or staff, unless there are very transparent ways of managing the conflicts of interest that arise.

In order to establish a new charity therefore you will need to find at least three people independent of any PCC members who are willing to take on the trusteeship of the new charity. You can look to longstanding faithful members of the congregation to take on this role, or it may be sensible to look further afield, for example to past members or others well known to the church. If possible include at least some people who do not have a current or past connection to the church in order to demonstrate true independence.

Of course, setting up a new charity costs money and in view of the principles already explained this is not something the PCC itself can fund. Independently sourced start-up funding will be required. Also, there should be no assumption that the PCC can transfer funds, assets or staff into the new charity once it is established.

The charity should not only be set up independently, it should also be seen to be independent. For these reasons we would advise a separate charity to avoid a name or objects which are too closely associated with a particular church, or from using the same registered office or contact details for example. For grant making charities (i.e. where the charity may fund staff or activities carried out by the church), a properly tailored grant making policy can also help with evidencing the required independence.

Another way of demonstrating independence from the PCC would be to establish a charity in partnership with other local churches or for the advancement of the Gospel more generally in a wider area. Existing ‘Good Stewards Trusts’ are an example of that and may provide a suitable alternative to a new charity for some churches.

A new charity should normally be established as a Charitable Incorporated Organisation (CIO)

Historically many charities linked to churches have been established as trusts and are often called such in general conversation. However, unless a trust is going to be very limited in scope (i.e. making simple grants and not employing staff or owning buildings) we would normally advise that it should be established as a corporate entity. The most obvious route here is a charitable incorporated organisation, otherwise known as a CIO, although in some circumstances a charitable company may be appropriate.

A CIO is a legal entity able to enter into legal relationships and hold assets in its own name. It also provides limited liability for the trustees. By way of contrast, a trust can only make legal relationships and hold assets in the names of the individual trustees who are not afforded limited liability.

A CIO is governed by a constitution. The Charity Commission produce model documents but these are unlikely to be suitable without some amendment and specialist advice is usually required. In every case careful thought needs to be given to the precise wording of the charitable purposes of the new charity so as to allow for future developments, and to demonstrate the required independence. You may also wish to refer to a Statement of Faith in the charity’s purposes, and specialist advice will help to ensure that the evangelical identity of the charity is enshrined for the future. If the charity may in due course become a new church then the CIO constitution will look
quite different from a grant making charity and will certainly need to structure its governance arrangements with that option in mind – see more on this below.

The ongoing relationship between the PCC and the new charity

Since the members of the PCC are charity trustees with a duty to maximise the resources available to the PCC, they cannot be involved in raising funds for the new charity which would otherwise have gone to the PCC. In other words, the PCC members would be in breach of trust if they were to organise any fundraising activity that diverts money away from the PCC to the new charity.

The independent trustees of the new charity can of course invite people to donate to the charity, and, if carefully handled, it may be possible for this to happen in a church service. But this would need to be in the same way as any other independent Christian charity might do e.g. mission agencies or Christian relief organisations.

The trustees of the new charity must meet and act independently of the PCC. It would be appropriate for them also to consider gifts to more than one church and to avoid creating an automatic expectation of funding only one. It will be important for the new charity to ensure that all this is reflected in their communications e.g. separate website, annual report, giving forms etc. (There may also be accountancy questions to consider which are beyond the scope of this note.)

The “lifeboat” option?

If it is proposed that the new charity may in due course become a new church, there are broader considerations to take into account. The conflict of interest for those involved is also much more acute in this case and will need careful management. There could be difficult and serious consequences for clergy as well as lay members of PCCs if these issues are not addressed, including a possible risk of personal liability or clergy discipline. The timing and process of how the charity is set up and a new church formed could be crucial here.

As indicated above, the CIO constitution will require much more thought and in particular will need to reflect the church’s theological convictions about church governance and oversight. While for Church of England churches these are currently governed by canon law, a newly independent church will need to think through the ecclesiological issues of how spiritual leadership and trusteeship inter-relate, as well as what role, if any, members of the church congregation should have.

Historically, churches have ensured mechanisms for oversight and accountability in a variety of ways – presbytery, episcopacy, congregationalism, loose affiliations in networks etc. Although the principles are theological, it is still important in a legal and practical sense to consider how best to avoid the risk that church leaders lack accountability. Clearly it is a developing situation but there are likely to be a number of “umbrellas” under which a new charity may choose to fall, depending on the answer to these questions of church governance.

Some questions to ask

After thinking through the principles above, here are some questions a church should consider from the outset to ensure that in establishing a new charity the right path is chosen and is not open to question or challenge in the future.

What are you trying to achieve?

Are you trying to ringfence funds or other assets away from the PCC and thus outside the Church of England? Are you trying to set up a structure which
could become a new church?

Are there already existing charities linked to the church?

If so, these should be reviewed to see if there are things which can be done to establish/evidence independence from the PCC and to enshrine an evangelical identity going forward.

Who could establish a new charity independently of the PCC?

It is the potential trustees of this new charity who should seek legal advice about establishing it, and not the PCC. Funding for that advice should be sought from sources other than the PCC.

How are you making decisions?

It is important that all decisions of the PCC and the potential new charity are properly (and separately) recorded. When each of the PCC and the new charity
trustees make decisions, the trustees of each charity respectively must:

  • act within your powers
  • act in good faith, and only in the interests of your charity
  • make sure you are sufficiently informed, taking any advice you need
  • take account of all relevant factors you are aware of and ignore any irrelevant factors
  • deal with conflicts of interest and loyalty
  • make decisions that are within the range of decisions that a reasonable trustee body could make in the circumstances
  • record how you made more significant decisions in case you need to review or explain them in the future.

The Charity Commission’s guidance about charity decision making can be found here.

Next steps?

We hope this article is useful as a guide in your initial thinking about these matters. In our follow up article – ‘Setting up a non-PCC trust’ – we go into greater detail, providing a step-by-step guide for setting up a non-PCC Trust.

If you would like to explore any of these ideas further, please contact us – we’d be very happy to chat with you.

Here at ECS we are praying for you as you think through these issues, for wisdom, grace and peace.

“Trust in the LORD with all your heart and do not lean on your own understanding. In all your ways acknowledge him and he will make straight your paths”

Proverbs 3 v 5-6.

 

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