The UK has introduced a new statutory social investment power to clarify the law on the historically unclear area of social investments made by charities and social enterprises.
It is hoped that the provisions contained in the Charities (Protection and Social Investment) Bill will give trustees clarity and certainty about the investments they can make, and will help charities make the best of the opportunities the provisions offer. The Bill has made it through the Parliamentary process and is awaiting Royal Assent, which is expected in the next few weeks.
THE NEW LAW AT A GLANCE
Whilst the existing law generally permits charities to make social investments, the Bill gives all charities (except statutory charities and Royal Charter bodies) a statutory power to make social investment, and defines social investment in statute for the first time.
The Bill deliberately aims for a wide definition of social investment where neither the furtherance of the charity’s purposes nor the financial return should be required to take precedence, in order to include the full spectrum of investments.
The core principles in the legislation are as follows:
WHAT THE LAW MEANS FOR SOCIAL ENTERPRISE
The passage of the Bill could encourage charity trustees to take informed risks where the benefit to the charitable objects and the financial benefit justify the investment. The Bill is a big step forward in social investment, and it will be interesting to see if the legislation encourages further developments in the social enterprise sector.
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