February 19, 2018
The Charity Commission has published draft guidance for charities on the proper management of their relationships with connected non-charitable organisations. The guidance and its associated documents are open for consultation until 15 May 2018; feedback should be submitted using the online survey.
It is becoming increasingly common for church charities to have associations with non-charitable bodies such as trading subsidiaries; and any such charity should look carefully at the Commission draft.
The new guidance for trustees is closely based on their core duties as set out in the Commission’s existing guidance. It notes in particular that, while it is common for charities to have close connections with non-charities (for example, trading subsidiaries or charities established by commercial businesses), and that this is not a concern in principle, trustees must manage these relationships properly in order to fulfil their legal duties and maintain public trust and confidence. It is vital that the public be able easily to distinguish between the charity and the connected non-charitable organisation, particularly where, for example, they share a very similar name.
The draft guidance reminds charities that trustees must, inter alia:
- actively manage their relationship with any non-charitable organisation in compliance with their legal duties and the law;
- preserve the charity’s separation and independence from the non-charitable organisation;
- manage the risks arising from the charity’s association and/or work with the non-charitable organisation;
- make decisions in accordance with their legal duties;
- identify and avoid conflicts of interests and loyalty in respect of the non-charitable organisation when making decisions; and
- be accountable for the relationship, for example by complying with all relevant accounting and reporting requirements.
The Commission explains that this guidance is for charities that have connections with one or more non-charitable organisations: that is, where the relationship has been created or is being maintained through deliberately having one or more of the following:
- the same people (trustees/directors) involved in the charity and the non-charitable organisation;
- shared names, branding, websites and/or premises;
- regular funding flowing from one organisation to the other;
- shared aims or purposes; and/or
- shared staff.
The guidance is not aimed at charities that work together with other organisations to which they have no formal connection.