This consultation closed on 5 April 2004.
This paper sets out for consultation the proposal to make an order under section 41 of the Trustee Act 2000 to amend the King's College London Act 1978.
The proposed order would result in the application of the trustee investment provisions of the 2000 Act to the council of King's College London acting as trustees under the 2000 Act in respect of certain pool investments, and hence alter their powers to make trust fund investments.
The consultation is aimed specifically at the distinct groups of people who will be affected by the proposed amendment, as provided in section 41(2) of the 2000 Act. For this reason, it is a limited, rather than full public consultation. The relevant groups are listed in the paragraph below. In view of the fact that the groups who will be affected by the proposed amendment can be identified and will receive copies of this paper direct, the Parliamentary Secretary, Department for Constitutional Affairs has agreed that the consultation should run for eight weeks rather than the usual minimum of twelve weeks. Twelve weeks is the standard minimum provided for under the Code of Practice on Written Consultation issued by the Cabinet Office. Apart from this exception, the Code criteria set out in General Principles of Consultation have been followed.
Copies of the consultation paper are being sent to:
How to respond
Please send your response by 5th April 2004 to:
Mark Farrow
Department for Constitutional Affairs
Civil Law & Justice Division
Room 3.05
Southside
105 Victoria Street
London SW1E 6QT
Tel: 020 7210 1229
Fax: 0870 739 4260
Email:Mark Farrow
We would appreciate receiving responses by email in MS Word format if possible.
Representative groups are asked to give a summary of the people and organisations they represent when they respond.
The Department may wish to publish responses to this consultation document in due course. Please ensure your response is marked clearly if you wish your response or name to be kept confidential. Confidential responses will be included in any statistical summary of numbers of comments received and views expressed.
Further copies of this consultation paper can be obtained from Mark Farrow at the above address or by phoning 020 7210 1229.
The Proposals
Introduction
When reference is made to one of these Acts, it will be by year only. Relevant extracts of the two Acts are set out in Annex A.
The 1978 Act united the University of London King's College with the Corporation of King's College London to form the institution now known as King's College London ('KCL'). It addressed the transfer of assets from the University to the Corporation and the pooling of various investment funds. It is an amendment to this Act that KCL are seeking.
The Investment PoolsSection 12 of the 1978 Act sets up two investment pools; the trustee investments pool and the general pool. The reason for this is that the two pools have different investment powers. Those endowment funds whose investments were bound by the rules relating to the investment of trust property were placed in the trustee investments pool; all other endowment funds were put in the general pool.
The investment powers of the Council, as KCL's trustees, in relation to the two pools are set out in section 13 of the 1978 Act. Section 13(1) provides that the trustee investments pool shall constitute a trust fund for the purposes of the Trustee Investment Act 1961 (parts of which have now been repealed by the 2000 Act) and should be invested two parts in wider range investments such as equities, to one part in narrower range investments such as gilts. Section 13(8) of the 1978 Act allows for an increase in this proportion should the restrictions in the 1961 Act be relaxed. The Charities (Trustee Investments Act 1961) Order 1995, superseded by the Charities (Trustee Investments Act 1961) Order 1996 (which lapsed on the repeal of the enabling authority by the 2000 Act), increased this ratio to three parts wider range investments to one part narrower range.
Prior to this pooling under the 1978 Act, the investment powers of such funds would have, by definition, been those in the 1961 Act. The provisions of section 13(1) at the time effectively widened the relevant investment powers and enabled the investments to be pooled.
For the general pool, section 13(2) provides the Council with wide investment powers. At present KCL, through mergers and in its own right, holds approximately 620 endowment funds. All are administered through the two pools created by the 1978 Act. As of 31st July 2003 there were approximately 611 funds in the trustee investment pool and 14 in the general pool.
Section 3 of the 2000 Act gives trustees a general power of investment wider than that granted under the 1961 Act. However, as KCL derive their investment powers from a separate statute, the 1978 Act, they are unable to take advantage of this power in respect of the trustee investments pool. The applicable investment powers in section 13(1) of the 1978 Act are more restrictive than those in the 2000 Act, hence the trustees are restricted in terms of the types of investments (and the sorts of companies) in which they may invest. The trustees of KCL do not consider that this is in the best interests of KCL as a charity, nor is it within the spirit of the 1978 Act. This is particularly so as the 1978 Act originally appears to have been intended to give the trustees wider investment powers than under the general law, as it provided wider powers than those in the 1961 Act.
The Purpose of the OrderKCL are requesting that the Lord Chancellor make an order under section 41 of the 2000 Act amending the 1978 Act. Section 41 entitles any Minister of the Crown to make an appropriate amendment to an existing Act in consequence of or in connection with Part II or Part III of the 2000 Act.
This order will have the effect of enabling KCL's trustees to exercise the general power of investment contained in section 3 of the 2000 Act in relation to any endowment fund held by KCL. This will allow them to make any kind of investment that they could make were they absolute owners of the trust assets, subject to the trustees' duty of care, set out in sections 4 and 5 and Schedule 1 of the 2000 Act. They consider this will allow them to make a more effective use of these funds.
In order to ease the considerable burdens associated with the administration of the funds, it is also proposed that the order merge the trustee investments pool and the general pool into one. This will ensure that the general power of investment will apply to every endowment fund held, rather than just those in the trustee investment pool. Retaining separate pools would mean the investment powers in relation to the general pool would still be those in section 13(2) of the 1978 Act, and as such may be wider than those in section 3 of the 2000 Act. However, KCL felt that on balance that the organisational advantages of a single pool would outweigh this possible slight benefit.
Glossary
General power of investment
Section 3(1) of the 2000 Act gives trustees, subject to safeguards and limitations,
the same power to invest trust assets as if they owned the assets outright
rather than holding them on trust. This enables trustees to hold investments
jointly or in common with other persons. The power does not however extend
to investments in land other than by loans secured on land. In exercising
the power, trustees are still subject to their fundamental duties, the duty
of care in Schedule 1 of the Act, and specific duties to have regard for
the need for diversification and suitability of investments and to obtain
and consider proper advice where appropriate.
Minister of the Crown
Section 8(1) of the Ministers of the Crown Act 1975 states "'Minister
of the Crown' means the holder of an office in Her Majesty's Government
in the United Kingdom, and includes the Treasury, the Board of Trade and
the Defence Council."
Trust and trustee
A trustee is a person who has property or rights (trust property or assets)
which he holds or is bound to exercise for or on behalf of another or others,
or for the accomplishment of some particular purpose or purposes. He or
she is said to hold the property on trust for that other or others, or for
that purpose or purposes.
Trusts
May be private or public (charitable). A private trust is a trust
for the benefit of an individual or class, irrespective of any benefit which
may be conferred on the public at large. A public trust is a trust
whose object is to promote the public welfare, even if it incidentally confers
a benefit on an individual or class. Charitable trusts are public trusts
solely and exclusively for purposes that the law regards as charitable.
Annex A - Extracts from Statutes
Extracts from Statutes
[49kb]
Annex B - Draft Order
Draft Order [93kb]
Annex C - Questionnaire
Questionnaire [42kb]
Consultation Co-ordinator
If you have any complaints or comments about the consultation process, you should contact the Department for constitutional Affairs consultation co-ordinator, Laurence Fiddler, on 020 7210 2622 or email him at Laurence Fiddler Alternatively, you may wish to write to the address below:
Laurence Fiddler
Consultation Co-ordinator,
5th Floor,
Lord Chancellor's Department
Selborne House
54-60 Victoria Street
London SW1E 6QW
General principles of consultation
The criteria in the Code of Practice on Written Consultation issued by the Cabinet Office is as follows:
Timing of consultation should be built into the planning process for a policy or service from the start, so that it has the best prospect of improving the proposals concerned, and so that sufficient time is left for it at each stage.
It should be clear who is being consulted, about what questions, in what timescale and for what purpose.
A consultation document should be as simple and concise as possible. It should include a summary, in two pages at most, of the main questions it seeks views on. It should make it as easy as possible for readers to respond, make contact or complain.
Documents should be made widely available, with the fullest use of electronic means (though not to the exclusion of others), and effectively drawn to the attention of all interested groups and individuals.
Sufficient time should be allowed for considered responses from all groups with an interest. Twelve weeks should be the standard minimum period for a consultation.
Responses should be carefully and open-mindedly analysed, and the results made widely available, with an account of the views expressed, and reasons for decisions finally taken.
Departments should monitor and evaluate consultations, designating a consultation co-ordinator who will ensure the lessons are disseminated.