Charity Commission Publishes New Litigation Guidance for Trustees

New guidance from the Charity Commission, Charities and litigation: a guide for trustees (CC38), examines what trustees need to know about taking out or defending all types of legal action and outlines “important principles” for trustees to follow before considering litigation. It notes that trustees should “consider whether their intended actions are proportionate of the circumstances” and “assess the economic prospects of success or failure and the impact on the charity”.

It applies to all charities, including community interest companies, companies, trusts, membership bodies and any other structure, regardless of whether they are registered. However the guidance does not apply to criminal cases or challenges to commission decisions.

A 16-point checklist published alongside the guidance urges charities to “explore all reasonable options to resolve the issue”; take specialist legal advice to assess the costs, risks, impact and potential value of a claim; explore insurance options and consider conflicts of interest as well as the impact on donors and beneficiaries. It also calls on trustees to consider whether to involve the Commission with the case.

Kenneth Dibble, chief legal advisor at the Commission, said the guidance aims to:

“help trustee bodies reach a justified decision on litigation and crucially, to manage risk effectively by assessing the challenges and costs their charity might face and deciding how to deal with them”.

A Charity Law Association working group has expressed concern that the tone of the guidance suggested litigation should be avoided at all costs. But Mr Dibble responded:

"Legal action can present significant risk to a charity’s beneficiaries, assets, and reputation, but in some circumstances it may be the best or only option."

Charity Commission updates guidance on social investment

The Charity Commission has also produced interim guidance on managing risks in social investment and operating within the law.

The guidance reflects the definition of social investment in the Charities (Protection and Social Investment) Act 2016 and complements existing Charity Commission guidance on charities and investment matters.

The new Act is the first time social investment has been defined in legislation. It is defined as a “relevant act” that is carried out “with a view to both directly furthering the charity’s purposes and achieving a financial return for the charity”. The guidance explores this definition to provide further advice on what is and is not a social investment.

The new law places specific duties on trustees of charities which are considering a social investment, with trustees obliged to consider whether advice on the social investment ought to be obtained and to consider any advice provided. The guidance also advises that trustees have a duty to satisfy themselves that any social investment the charity undertakes is in its best interests.

The Charity Commission said the new legislation did not override trustees’ general common law duties and the guidance applied to any decision regarding social investments.

Sarah Atkinson, director of policy and communications at the Commission, said:

"The stated purpose of this power is to give confidence to charities to undertake social investments . . . This updated guidance should help trustees to make well-considered, prudent decisions in this developing area."

New Charity Commission logo

The Charity Commission has unveiled new branding.

The new logo, which cost the Commission just over £5,000 and was devised after the regulator held an internal competition to generate ideas, features a crown and the main colour is now dark blue.

In a blog on the Commission’s website, chairman William Shawcross said the new branding was needed because the old one “did not reflect the new approach of the Commission”. He said: “We believe that our new logo is crisp and clear and represents us as a regulator much better. We also hope that it will increase recognition of the Commission amongst the public and charities.”

Charities law experts

IBB Solicitors' specialist Charities team has over 50 years’ combined experience in delivering practical commercial advice to charities and not for profit organisations and those who work with them. For advice, contact our experienced charity law solicitors on 01895 207809 or email charities@ibblaw.co.uk.

You may also be interested in

Charity mergers and acquisitions: Due Diligence

Charity Mergers Process: How To Merge Your Charity Effectively from IBB Solicitors