There’s been debate in these pages recently about how charitable companies should manage conflicts of interest.  New conflict of interest management provisions were introduced from 1st October 2008 under the Companies Act 2006 which affect all companies, whether charitable, private or plc.  Many plcs have rushed to amend their constitutions to take advantage of new powers to authorise conflicts - do charitable companies really have to do the same?

Charities, of all types, have been alive to the issue of managing trustee conflicts for many years, arguably much more so than the private sector – so to a large extent, this is nothing new.   Charities often have provision in their constitutions for what happens if a trustee has a conflict of interest – can he/she vote, can they be counted in the quorum?  And many larger charities have detailed conflicts policies.  As a result many, if not most charitable companies will have constitutional procedures which are reconcilable with the new legislation. 

One of the changes introduced by the Companies Act 2006 is to provide a new tool for dealing with conflicts – a power for the directors (which in the case of a charity are the trustees) to authorise one of their number to be in a position of conflict.  To rely on this, charities must include a specific power in their articles. This is however not the only way conflicts can be dealt with and some charities may have good reasons for not wanting to give their trustees this power.  A more significant issue for charitable companies is that (if they don’t already do so) their conflict of interest procedures should appear as part of their articles (as opposed to their memorandum).

In all of this, what is perhaps more crucial is that all charities, not just those that are companies, use the current debate as a trigger to review their current procedures – to make sure they deal adequately with the type of conflicts that typically arise for their particular charity and, more importantly, that the procedures are adhered to and minuted in practice - good governance that will ensure trustees sleep peacefully at night.