The Law Commission is bringing forward to April its consultation on mixed-purposed social investment by charities, after the Office for Civil Society asked it to prioritise the topic.

The consultation will invite responses to the question of allowing endowed charities to invest their endowments in mixed-purpose social investment vehicles.

The Law Commission is currently conducting a broad review of charity law, covering the powers of the Charity Commission and the Charity Tribunal; mergers and incorporations; insolvency law; regulation of certain charity transactions and dispositions, and the amendment of royal charters and statutory governing documents.

Months after announcing these original topics, it also added mixed-purpose social investment by charities to this list.

In an article written for the Charity Finance Yearbook 2014, James Linney, research assistant at the Law Commission, said that it added social investment to the agenda after hearing anecdotal evidence from charity trustees that while the Charity Commission’s guidance sanctions mixed-purpose investments, charity law “does not easily accommodate them”.

“We have heard that this inhibits charities from investing in the developing social investment market,” Linney wrote.

The review will therefore consider the need for clarification of the powers and duties of charity trustees in the context of mixed-purpose investment, and the Law Commission will also consult on the introduction of a new power for non-functional permanent endowment to be spent on mixed-purpose investment, with the requirement that capital levels must be maintained or restored within a reasonable period.

This consultation was initially slated to be part of the wider consultation that the Law Commission is preparing to issue in the summer. But yesterday it announced that the mixed-purpose investment part would be brought forward to April at the behest of the Office for Civil Society. 

The consultation on the other topics will necessarily slip back, with these now scheduled for later in the year.

Asked why it requested the consultation to be brought forward, a Cabinet Office spokesman said: “Tackling barriers to social investment is a priority for the Cabinet Office. We therefore asked whether the Law Commission could look at this part of its charities project first, and welcome yesterday’s announcement.”  

The government is currently consulting on various proposals relating to social investment tax relief, until February, and plans to introduce legislation in the Finance Bill 2014.

• James Linney wrote an article for the Charity Finance Yearbook 2014 outlining the scope of the Law Commission’s review.  Click here to read the article and order your copy of the Yearbook.