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Charity Commission revised Conflicts of Interest guidance

Charity Commission revised Conflicts of Interest guidance

On 15 May 2014 the Charity Commission published its revised guidance for charity trustees on conflicts of interest (CC29). The revised guidance is accompanied by a detailed paper explaining the legal underpinning for the guidance as well as a case study on conflicts of interest issues that typically arise where all, or most, of the trustees of the charity are also directors of the charity’s trading subsidiary.

The guidance includes a revised definition of a conflict of interest, being “any situation in which a charity trustee’s personal interests or loyalties could, or could be seen to, prevent them from making a decision only in the best interests of the charity”.

The Commission advises that a three-step approach is taken to managing conflicts of interest – identify, prevent and record. In particular, the revised guidance recommends that trustees ensure that:

  • their charity’s governing documents include provisions to deal with conflicts of interest, which may require amendments to be made to a charity’s existing governing documents;
  • their charity has a written conflicts of interest policy;
  • a register of trustee interests is maintained by the charity;
  • a declaration of any actual or potential conflicts of interest is included as a standard agenda item at the beginning of each trustee meeting; and
  • potential charity trustees are asked to declare any potential conflicts of interest so that consideration can be given to their suitability for appointment prior to their appointment.

The Commission notes that conflicts of interest occur most often where:

  • a person’s duty as a trustee may conflict with any of their personal interests;
  • a person may be unable to act properly in a particular capacity because of a person or matter with which they are connected; or
  • a person may profit personally from decisions made in their capacity as trustee or by using knowledge gained through being a trustee.

The new guidance also explains the serious consequences which could flow from conflicts of interest if they are not properly managed, including:

  • trustees having to repay the charity for any loss caused by their breach of trust;
  • a duty to account to the charity for any unauthorised benefit a trustee may receive; and
  • setting aside a disposal of charity property where there has been a conflict of interest, even where the trustee who breached the rules did not receive any personal benefit.

If you would like assistance in reviewing your conflicts of interest policy, please contact our charity law solicitors on 01895 207809 or email charities@ibblaw.co.uk.