The Charity Commission has today issued new draft guidance on its expectations for charities that have a ‘long-term close relationship’ with connected non-charities.
The guidance is likely to be of particular relevance to:
- Charities and their trading subsidiaries
- Corporate foundations
- Charities that operate within international federations
- Dual structure campaigning charities
- Social enterprise structures which include both a charity and non-charity
The Commission’s definition of ‘connected’ entities is expressed widely in the guidance, to include any ‘deliberate’ connection between the charity and the non-charity, such as through ‘the ownership of shares, common personnel, or purposely having the same or similar name’. Further indicators of a connection are provided later in the guidance, including where charities are regularly funded by a non-charity and where organisations ‘routinely share projects or initiatives’ or work towards ‘common goals or have a shared mission’. The wide definition of ‘connection’ used in the guidance means that many other arrangements beyond those listed above may be caught.
The draft guidance takes the form of a 39 page document covering the areas summarised in the box below, a summary of the duties and principles engaged in overview and a matrix for assessing compliance with the guidance’s key principles through a 1-4 grading system.
The guidance is separated into the following key sections:
Key duties and principles applying to all relationships
This section of the guidance covers compliance with trustee duties and steps to ensure clear separation between charities and non-charities (covering issues such as shared staff/resources, funding and branding), managing conflicts of interest and loyalty (with the Commission suggesting that a conflict may arise where trustees ‘support the aims or purposes’ of the connected non-charitable organisation), avoidance/authorisation of personal benefit, the importance of implementing written agreements to manage relationships between charities and non-charities, accountability, transparency and risk management.
Common issues for trustees
The largest part of the guidance is a scenario-based list of common issues for trustees of charities that are connected to non-charities, covering shared service/project delivery, grant funding non-charities, receiving funds from non-charities and sharing of names/branding/resources.
If things go wrong
The guidance sets out the risks the Commission deems to arise when charities do not comply with their duties in respect of connected non-charities, focussing on the risk of public/internal confusion as to the separation (or lack thereof) between the organisations and the risk that the ‘decisions and actions’ of trustees ‘are inappropriately influenced by the interests of the non-charitable organisation or organisations closely connected with it’, before referring to possible consequences and the Commission’s powers of intervention.
Organisations applying for charitable status
The Commission has also set out a list of information that the Commission expects to receive from organisations that apply for charitable status that either are or will be connected with a non-charitable organisation.
Help us influence the new guidance
The guidance will be subject to a three month consultation period, ending at 5pm on 15 May.
During the consultation period BWB will arrange various opportunities for the gathering of views on implications of the guidance for our clients. If you would be interested in feeding into this process and to receive updates and invites to relevant future events, please contact Simon Steeden at firstname.lastname@example.org.
Posted on 13/02/2018 in Legal UpdatesBack to Knowledge