Spotlight Working with the Not-for-Profit Sector Autumn 2011
1–2 Managing Conflicts of Interest for Charitable Companies 2 Ann Phillips becomes Charity Law Association Chairman 3 Client Focus – Legacy Trust UK 3–4 Trustee Disputes 4 HMRC Confirms That Roman Catholic Mass Offerings Can Be Donated Using Gift Aid 5 News in Brief 5 Forthcoming Events
Managing Conflicts of Interest for Charitable Companies The Companies Act 2006 (Act), introduced a statutory duty for every Director “to avoid a situation in which he/she has, or can have, a direct or indirect interest that conflicts or possibly may conflict with the interests of the company.” For Directors who are also Trustees of charitable companies, this has lead to an extra layer of complexity when seeking to manage conflicts of interest. The key mantra is “Declare, Document, Depart”.
Declare No one can manage a conflict they don’t know exists, so the crucial starting point is to know about your Trustees other interests and connections, and how they could overlap with the interests of the charity. Effective ways of doing this are: u adopt a Conflict of Interest Policy (& Declaration Form) up front
that everyone can agree to be bound by; u allocate someone to oversee implementation, keep records and
raise the issue; u have existing Trustees complete a Declaration Form at least
annually; and prospective Trustees before appointment; u keep the information under review, update it, keep it in mind
for all meetings and do not be afraid to raise the issue if it suddenly becomes relevant part way through a meeting; and u if individuals are reluctant to disclose their other activities, and
Aid (May 2011)), so even if there are no conflicts, if the charity cannot demonstrate that it is monitoring the issue it can still find itself exposed to real reputational risk. Perhaps consider external training to reinforce the point, and take the heat off internal personnel. It is also a statutory requirement under the Act for Trustees to declare any transaction or arrangement they, or a person/entity deemed connected to them, are going to enter into with the charity. Conflicts linked to this will also need to be authorised (see below) unlike for commercial companies. In particular look out for any arrangements between related charities or within group structures.
that in the Charity Commission’s (CC) words “perception is
If the non conflicted Trustees decide that the situation identified
as important as reality” (CC Regulatory Case Report: Wildlife
can reasonably give rise to a conflict, then the conflicted Trustee
do not think complying with this process is important, note
Managing Conflicts of Interest for Charitable Companies –continued
should only continue to act if that situation can be authorised. Such authorisation can only be given by a charitable company if this is authorised under its Articles of Association (usually a
the trustee benefit section of the Articles (or Memorandum, if the Memorandum and Articles have not been amended since the Act.)
power delegated to the non conflicted Trustees), or if the CC
The recommended approach is that a conflicted Trustee must
provide specific consent.
not do any of the following things, unless expressly authorised
If the charity’s Articles need amending, this will usually require CC consent. In any event, the CC normally require that only a minority of a charity’s Trustees are conflicted at any one time. Records
to do so under the Articles, or with specific CC consent: u take part in the quorum for the part of the meeting about
which they are conflicted; u be involved in discussions surrounding a conflicted matter; and
In order to be able to demonstrate to the CC (or others), that there is an effective conflict management process in place it is of course necessary to keep records of any information provided. We would recommend: u having Trustees complete a Declaration Form; or make entries
in a Register (anything from a lever arch file to a bound tome could be appropriate); and u putting declaring conflicts of interest as the first item on
the agenda of every Trustee meeting, and making sure it is documented in the minutes either that there were none or
u take part in a vote on a conflicted matter.
It is also recommended that a conflicted Trustee should physically leave the meeting room during this time, so that their presence should not indirectly influence or inhibit free discussion by the other Trustees. Having a strong person chairing the meeting will in our experience be helpful in enforcing this. If you would like to discuss any of the points raised or require further advice regarding conflicts of interest, please contact Alexandra Whittaker (firstname.lastname@example.org).
what there were and how they were authorised if necessary.
Alexandra Whittaker Associate Solicitor
Most charitable companies will have a procedure laid out in
Ann Phillips becomes Charity Law Association Chairman Stone King is pleased to announce that
charity law and related issues and is co-author with Michael
Ann Phillips, a partner in our charity
King of Charities Act 2006 - Guide to the New Law (Law Society
& education team, has been elected
chairman of the influential Charity Law
She is also a trustee of both Creativity Culture & Education,
Association (CLA), which currently has more than 900 members including many of the country’s largest charities and leading charity lawyers.
a charity established by the Arts Council to promote creative learning in primary schools, and the Anaphylaxis Campaign which helps people affected by life-threatening allergies. She
She follows in the footsteps of Michael King, head of Stone
previously sat on the Research Ethics Committee of Great
King’s charity and education team, himself a former CLA
Ormond Street Hospital, of which she was vice-chair for many
chairman, and of fellow charity partner Jonathan Burchfield,
a former CLA deputy chairman when previously with law firm
“It’s a great honour to be elected chairman of the Association
at what is a critical time for the charity sector,” said Ann. “I look
Ann joined Stone King, which acts act for hundreds of voluntary
forward to working with all those involved with the Association
organisations including more than 150 of the country’s largest
for the benefit of the sector.”
charities, in 2001 from Stephenson Harwood. She specialises in
Client Focus – Creating a lasting legacy from London 2012 Legacy Trust UK is an independent charity set up to create a lasting cultural and sporting legacy from the London 2012 Olympic and Paralympic Games across the UK. Set up in 2007 with a £40 million endowment, Legacy Trust UK funds 4 national and 12 regional programmes which encompass more than 100 individual cultural and sporting
backgrounds the chance to get involved in inspiring arts
projects. As a Principal Funder of the Cultural Olympiad and
activities, or bringing innovative cultural events to remote
London 2012 Festival, these projects will link the whole of the
communities. In 2010 alone the Trust’s projects involved more
UK to the excitement and inspiration of London 2012, but will
than 3 million people across the UK and created over £26
also to make a lasting difference to those involved.
million in economic impact.
The Trust’s projects are about more than just celebration
With 2012 fast approaching, the legacy of the Games is
and many reach out beyond traditional arts audiences,
becoming a very real issue. Many projects have already
encouraging community engagement and inclusion. The
secured support to continue their work beyond 2012 to ensure
opportunities created through the Trust’s funding will have
a lasting legacy for people and communities nationwide.
a lasting impact, whether this is equipping people with
For more information on Legacy Trust UK and all its funded
skills to find work, giving young people from disadvantaged
programmes go to www.legacytrustuk.org.
Trustee Disputes It is rare to find, even in the most loving family, no disagreement
the chairman of trustees needs to create consensus. Voting
between its members – children’s bedtime, curfew for teenagers,
should be avoided if possible: a narrow vote might be inherent
use of credit card, indeed it might be a little boring to have no
in politics but amongst trustees can prolong tension.
family disputes. A well run trustee board might well be the ideal family, operating with a common purpose and without self interest, but inevitably disputes happen. Indeed, disagreements are not necessarily unhealthy; to have a wide range of opinions to inform trustees’ decision-making can be a source of creativity and the natural outcome of bringing together a diverse range of people to pursue that common purpose. However, if disagreements turn into a dispute, preventing decision-making, that can obviously have a negative effect on the charity.
Understanding Roles “Civil Servants”, Margaret Thatcher famously announced, “are
there to advise, Ministers are there to decide”. In larger charities there is inevitably a tension between the board and the senior management team and disputes can arise when the board gets too involved in detail and insufficiently involved in strategy. Equally a board can find itself unhappy if the chief executive becomes dominant and simply wishes the trustees to rubber stamp his suggestions. The chairman has an important role in managing that tension
Managing the Board
and ensuring that individuals or cliques do not dominate
Unlike a family, a board needs to be recruited and its members
proceedings. Trustees are expected to work in the best interests
properly introduced to the purpose and activities of the charity
of the charity and to seek to resolve issues that have the
and the role of trustees. The tension mentioned above, rising
potential to damage the charity’s work. It is sad, but not a week
out of diversity, can be creative but it is necessary to ensure
goes by without an internal dispute being reported in the charity
that the shy and retiring are able to get their point across and
press, often in quite large organisations. The consequence is
“…the charity’s chairman or vice-chairman have a particularly important role in anticipating and resolving disputes but equally they can also be the cause of a dispute”
not simply that the charity can lose focus in what it is trying to
Use of Tribunals
achieve but also that its supporters or funders are turned off.
Arguments within charities and between charities are
Disputes can result in action by the Charity Commission and
notoriously expensive, possibly because each party thinks that
that almost certainly will entail expensive involvement by the
they are in the right and only rarely does action directly affect
charity’s professional advisors.
their pockets. Litigation should be avoided unless the charity is
Managing Disputes In many organisations there are procedures for resolving disagreements, whether in their constitutional documents or in a separate code of conduct or governance policy, but, if these procedures are absent or if they break down, trustees might have to look externally for support, for example to a regional
at great risk and even then some element of mediation should be considered. The Charity Commission’s resources are under great pressure because of considerable cuts in public expenditure but they will get involved in disputes affecting large charities, if there is clear evidence of mismanagement or the charity’s reputation is
or national umbrella body, such as the NCVO, or to their own
in serious risk of damage.
professional advisors or external consultants.
A more useful way of settling disputes might be to set up an
It is self evident that the charity’s chairman or vice-chairman
independent commission established by the trustees and
have a particularly important role in anticipating and resolving
consisting of two or three supporters or members of the charity,
disputes but equally they can also be the cause of a dispute.
chaired by someone with judicial or legal experience.
If a dispute cannot be resolved, it might become necessary to
For further advice on governance issues including trustee
remove a trustee. This is something that many boards will shy
disputes please contact Michael King (email@example.com).
away from but sometimes having a quiet word with the trustee, in the knowledge that there is power to remove him will be sufficient to bring an argument to an end. It is in any event good practice to have maximum terms of service for trustees and
Michael King Head of Charity & Education Group
particularly for the chairman/vice-chairman, so that individuals do not become entrenched.
HMRC Confirms That Roman Catholic Mass Offerings Can Be Donated Using Gift Aid Until now it has been assumed that Mass offerings for a
used for the general purposes of the charity (Diocese, Parish
particular intention could not be given by gift aid because the
or Religious Order) or for the maintenance of the clergy. This
payment was made in consideration for what was a private
development could potentially generate significant revenue for
benefit. Robert Meakin, a partner in our Charity & Education
the Roman Catholic Church. It will also be of relevance to other
team, has secured confirmation from HMRC (Her Majesty’s
churches with similar arrangements.
Revenue & Customs) that such payments can be donated by
Before taking advantage of this new development professional
gift aid on the basis that priests will say Mass for an particular intention whether or not an offering is made and also because such Masses are open to the public there cannot be a private
advice should be taken. For further information, please contact Robert Meakin (RobertMeakin@stoneking.co.uk).
benefit in law. This allows the Church to reclaim basic rate tax on the offering and higher rate donors to reclaim the difference between the basic rate paid in respect of the gift and the higher rate of tax. The gift aid relief applies whether the offering is
Robert Meakin Partner
News in Brief Charity Commission: Annual Reports falling short on public benefit reporting
Bribery Act 2010: What do you need to know?
Recent research published by the Commission shows that nearly
a copy of our guidance note which sets out the key provisions
nine out of ten charity annual reports do not fully comply with
of the Act, its impact on charities and steps that must be taken
the law in relation to public benefit reporting.
now to ensure adequate procedures are put in place, please
The annual report should set out what a charity’s aims are and
contact Sarah Clune (firstname.lastname@example.org) or visit our website.
what is has done to carry them out; who it seeks to benefit; and how people have benefited. It must also state that the trustees have considered the Commission’s guidance on public benefit. The research shows that trustees are generally able to explain the charity’s aims and who benefits, but they are less successful in explaining how they have benefited in practice. Charities
The Bribery Act 2010 came into force on 1st July 2011. To obtain
Companies House launch an eReminder Service Companies House have launched a free email service to remind companies when company accounts and annual returns are due to be filed. To join eReminders follow this link: http://www. companieshouse.gov.uk/toolsToHelp/eReminders.shtml
which employ accountants generally expect them to ensure
Registration of Places of Worship
that reporting requirements are satisfied but there is concern
A reminder that, except in the case of churches belonging to the
that there may be a lack of awareness amongst trustees of the
Church of England and the Church in Wales, to benefit from the
requirements. There are reputational risks to be considered,
exemption from rates under the Places of Worship Registration
especially if a charity is seeking funding from a third party.
Act 1855, places of worship actually need to be registered – it
For assistance and advice in preparation of annual reports,
does not happen simply by default.
please contact a member of the charity team. The Commission’s guidance can be found on the Charity Commission’s website in the Charity Requirements & Guidance – Accounting & Reporting section.
Forthcoming Events Stone King has a full programme of seminars/workshops for 2011 which will include Charity, Education and Employment Law Update Workshops. We are also often involved in joint events with third-party charity professionals from time to time. Please contact Helen (01225 324436; e-mail email@example.com) or Charlotte (01225 326746; e-mail firstname.lastname@example.org) for further information or check Events on our website at: www.stoneking.co.uk
2011 27 Sept
The Equality Act 2010: Is your charity compliant?
Stone King, 16 St John’s Lane, London EC1M 4BS
29 Sept The Equality Act 2010: Is your charity compliant?
Stone King, Wellington House, East Road, Cambridge CB1 1BH
The Bribery Act 2010: What Should We Do?
Stone King, 16 St John’s Lane, London EC1M 4BS
The Bribery Act 2010: What Should We Do?
Bristol – Venue TBC
What’s New for Religious Charities?
Stone King, 16 St John’s Lane, London EC1M 4BS
Your Contacts Charity: Michael King Partner Jonathan Burchfield Partner Robert Meakin Partner Ann Phillips Partner Stephen Ravenscroft Partner Alexandra Whittaker Associate Vicki Bowles Barrister at Law Sarah Clune Solicitor Hannah Kubie Solicitor Tom Murdoch Solicitor Darren Hooker Solicitor Reema Mathur Solicitor Myles Taaffe Paralegal
Commercial Property: Hugh Pearce Partner Stephanie Howarth Partner Hugo Greer-Walker Partner Catherine Sanderson Senior Associate Joanne Burton Associate Sally McFadden Associate Andrew Small Associate Daisy Barnett Solicitor Chris Sharpe Solicitor Tamsin Simmonds Solicitor Sarah Lawson Paralegal Kathryn Williams Trainee Alison Pearce Trainee
Charity Legacy Team: Jonathan Burchfield Partner Robert Meakin Partner Paul Sutton Partner
Corporate & Commercial: Roy Butler Partner Caroline Leviss Associate
Child Protection: Steven Greenwood Partner
Dispute Resolution: Paul Sutton Partner Alice Wood Solicitor Antony Pidgeon Solicitor Jon Moore Solicitor Health & Safety: Andrew Banks Partner David Milton Associate Solicitor
Education: Roger Inman Partner Graham Burns Partner Richard Gold Consultant Michael Brotherton Senior Associate Kate Grimley Evans Solicitor Rishi Mital Solicitor Nicola Berry Solicitor Lydia Brookes Solicitor Emer Hughes Paralegal Employment: Nick Watson Partner Peter Woodhouse Partner Jean Boyle Associate Tamsin Wilkinson Solicitor Victoria Blake HR Consultant Sarah Turner HR Advisor Amy Gordon Trainee Housing: Geraldine Winkler Legal Executive Trust and Taxation: Andrew Mortimer Partner Alison Allen Partner David Ainslie Partner Charles Hayward Partner
Stone King LLP 13 Queen Square Bath BA1 2HJ Tel. 01225 337599 Fax. 01225 335437 16 St Johnâ€™s Lane London EC1M 4BS Tel. 020 7796 1007 Fax. 020 7796 1017 Wellington House East Road Cambridge CB1 1BH Tel. 01223 451070 Fax. 01223 451100 New Hall Market Place Melksham Wiltshire SN12 6EX Tel. 01225 337599 Fax. 01225 335437
www.stoneking.co.uk email: email@example.com
ÂŠ Stone King LLP 2011
The Spotlight deals with some current legal topics. It should not be used as an alternative to specific legal advice on the individual circumstances of a particular problem. Stone King LLP - registered limited liability partnership no OC315280, registered office 13 Queen Square, Bath BA1 2HJ