Revised Conflicts of Interest guidance published by the Charity Commission

The Charity Commission published revised public guidance on conflicts of interest for charity trustees on 15 May 2014.

The guidance follows a public consultation and has been developed in light of the frequency of improperly handled conflicts of interest across the Commission's casework.  The new guidance has been designed to improve general levels of understanding amongst trustees about this common governance issue and to be clearer about what is expected of charities and their trustees regardless of the size of the charity and the extent of the risks posed.

One of the features of the guidance includes a simple three step approach to managing conflicts of interest.  This includes declaring any conflicts of interest.  Although declaring conflicts of interest is primarily the responsibility of the affected trustee, the trustee body should ensure that they have strong systems in place so that individuals have a clear understanding of the circumstances in which they may find themselves in a position of conflict of interest and understand their personal duty to declare them. 

The second step is to consider removing conflict of interests.  Trustees must consider the issue of the conflict of interest so that any potential effect on decision making is eliminated.  A serious conflict of interest can include those which are so acute or extensive that the trustees are unable to make their decisions in the best interests of the charity or those which are present in significant or high risk decisions of the trustees or for example are associated with inappropriate trustee benefit. 

The third step is to follow the law and the charity's governing document.  Where trustees have decided against removing the conflict of interest they must consider how to make a decision only in the best interests of the charity.  Trustees must follow any legal or governing document requirements which say how the conflict of interest must be handled.  The trustees should also consult and follow their own conflicts of interest policy if they have one.  Where there are no legal or governing document provisions about managing conflicts of interest, and there is a proposed financial transaction between a trustee and the charity, or any transaction or arrangement involving trustee benefit, then the trustee benefit must be authorised in advance and the Charity Commission expects the affected trustee to be absent from any part of any meeting where the issue is discussed or decided.  The individual should not vote or be counted in deciding whether a meeting is quorate.

Other features of the guidance include considering conflicts before new trustees are appointed and the Charity Commission gives illustrative examples to demonstrate the principles in action.  The Charity Commission advises that trustees read this guidance to understand the basics and how they expect them to deal with conflicts of interest facing them or their charity.  The Charity Commission guidance is CC29 and is available at www.charitycommission.gov.uk.

Posted on: 07/07/2014

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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