This document discusses conflicts of interest and loyalty that charity trustees may face. It summarizes updated guidance from the Charity Commission on identifying and managing conflicts. A conflict of interest occurs when a trustee's decision-making could be influenced by secondary interests or loyalties rather than solely the charity's best interests. Trustees have a duty to act without conflicts. The guidance provides examples of common conflicts involving financial interests or loyalties to other organizations. It advises trustees to consider conflicts proactively, identify any relevant to their roles, and determine the appropriate way to authorize, manage or avoid each conflict.
1. Conflicts of Interest & Loyalty
Giselle Davies, Partner, Geldards LLP
Tuesday 28 April 2015
2. 1
Conflicts of Interest & Loyalty
Giselle Davies, Partner
Conflicts of Interest & Loyalty
• Why all the fuss?
- Spotlight on charities
- Use of public money
- Need for accountability
• What do we mean?
• Is this new?
Coflicts of Interest & Loyalty
• Revised and updated Charity Commission
Guidance CC29
• Conflicts of Interest: A Guide for Charity Trustees
1 May 2014
• https://www.gov.uk/government/publication
s/conflicts-of-interest-a-guide-for-charity-
trustees-cc29
3. 2
Conflicts of Interest & Loyalty
Summary of duties
• All charity trustees have a legal duty to act only in
the best interests of their charity
• Charity trustees are not entitled to put their own
interests before those of the charity
Conflicts of Interest & Loyalty
In CC29 conflict of interest =
“any situation in which a trustee’s personal
interests or loyalties could, or could be seen to,
prevent them from making a decision only in the
interests of the charity”
Conflicts of Interest & Loyalty
• Something which may affect the proper exercise
of trustee duties
– Not necessary that it will
– Only that it might
– External perception
4. 3
Conflicts of Interest & Loyalty
• Nothing new in saying 2 types of issues
– The personal financial interest; and
– “loyalty” to another
Conflicts of Interest & Loyalty
Why “new” guidance?
• Charity Commission – “vast majority of
compliance cases stem from mismanaged
conflicts of interest”
• Perceived difficulty in properly identifying
conflicts of interest and especially loyalty
Conflicts of Interest & Loyalty
• Now clear and helpful: CC29 says
“Conflict of loyalty: this means a particular type
of conflict of interest, in which a trustee’s loyalty
or duty to another person or organisation could
prevent the trustee from making a decision only
in the best interests of the charity”
5. 4
Conflicts of Interest & Loyalty
Conflicts of loyalties
• Common
• Often overlooked
• Other organisations / bodies
• Connected persons
Conflicts of Interest & Loyalty
Connected person
• A Trustee’s spouse or unmarried or civil partner,
children, siblings, grandchildren and
grandparents as well as businesses where a
trustee or family member holds at least one fifth
of the voting rights
Conflicts of Interest & Loyalty
Some obvious and should be easy to identify
• e.g. Trustee benefits
– Sale, loan, lease to charity
– Acquisition / borrowing from trustee
– Paying a trustee
– Paying a connected person
– Employment of family member
– Grant to trustee or relative
– Beneficiary / service user / tenant trustee
6. 5
Conflicts of Interest & Loyalty
Loyalty to:
• Appointing body
• Another organisation (e.g. employer)
• Another charity of which they are trustee or
senior executive
• A member of their family, other connected
person or firm
Conflicts of Interest & Loyalty
Appointing body
• Especially Local Authority
• Local Authority =
– Landlord
– Grant funder
– Party to contracts with charity
– Has other interests in charity work
Conflicts of Interest & Loyalty
Action?
• Authorise
• Manage
• Avoid
7. 6
Conflicts of Interest & Loyalty
Authority?
• In governing document?
• In Charities Act 2011?
Conflicts of Interest & Loyalty
Manage?
• Identify
• Declare
• Not to participate in discussion
• Not to vote
• Record in minutes
Conflicts of Interest & Loyalty
Avoid?
• When “overwhelming” / will constantly arise
How?
• Don’t appoint
• Remove
• Change appointment provisions / revise
governance
8. 7
Conflicts of Interest & Loyalty
Way forward
• Think ahead and plan how to deal with conflicts
• Change appointment rights to nomination rights
• Avoid paid trustees (especially Chief Executive on
the board)
Conflicts of Interest & Loyalty
Top Tips
• Don’t forget about loyalties as well as personal
financial benefits
• Take steps to deal /avoid
• Keep records of steps taken and why as future
evidence
Conflicts of Interest & Loyalty
Charity Commission resources:
• CC29
• Website summary
• Checklist
• Case study
• Legal underpinning
