Guidance Note: Ex Gratia Payments by a Charity
This Guidance Note: Ex Gratia Payments by a Charity outlines the law and practice on “ex gratia” payments by a charity to any person or organisation. We urge all charity trustees and administrators to familiarise themselves with this guidance.
- applies to any and all charities, irrespective of their size, type or legal form.
- is intended to help trustees decide whether it will be lawful to proceed with any proposal by the charity either to pay any sum or to transfer any property or assets or waive/transfer any rights to another person or organisation.
- explains the steps trustees need to take before they proceed with such a proposal.
- explains the kind of payment of funds, transfer / waiver of property / assets, or transfer / waiver of rights that constitutes an ex gratia payment, transfer or waiver.
- outlines how ex gratia payments differ from other types of payment, transfer or waiver.
- gives typical examples of “ex gratia” payments.
- explains that trustees may not delegate to charity staff the power to decide to make an ex gratia payment.
- explains the need to involve the Charity Commission before making an ex gratia payment.
- explains the changes to the law on ex gratia payments that have been included in the Charities Bill expected to pass into law in 2022. Those changes will reduce to an extent the current legal regulation of ex gratia payments/transfers/waivers. Since the Charities Bill is not expected to undergo any significant change before it passes into law, we recommend that all charity trustees make themselves aware now of these expected reforms to the rules on ex gratia payments.
As indicated in the guidance, charity trustees should seek legal advice before making any payment or taking any other step to ensure that any proposal can be lawfully implemented, and to ensure that it is carried out in accordance with the law.
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