The following Private Client guidance note provides comprehensive and up to date legal information covering:
Charities want to borrow funds for many purposes, even if just to assist in cash flow situations or, perhaps, for investment purposes. However, apart from the potential difficulties in finding a lender willing to advance to a charity, a stumbling block could be a lack of power to borrow. This is unlikely in modern charity documentation but may be an issue with older charities. The position may also require a different approach for incorporated and unincorporated charities.
Generally, the power to borrow will be found:
in the governing document
in the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996)
in the Trustee Act 2000 (TrA 2000)
It would be strange if a modern governing document did not include a power to borrow. Those model documents supplied by the Charity Commission all include the necessary power.
Where the governing document fails to assist, the charity will have to, firstly, rely on the statutory provisions. Prior to 1 January 1997, trustees could rely on the provisions of sections 29 (power to borrow) and 71 (power of a tenant for life) of the Settled Land Act 1925 (SLA 1925). This is now only of historical interest to prove that a charity had the absolute power to charge property, as SLA 1925 was replaced by the Trusts
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