Charity Commission publishes updated guidance on conflicts of interest

On 15 May 2014 the Charity Commission published its updated guidance on conflicts of interest (CC29) together with a case study and a paper setting out its legal underpinning for its guidance.

The guidance follows a public consultation and was developed following several improperly handled conflicts of interest identified in the Commission’s casework.  In its recent publication Tackling Abuse and Mismanagement the Commission reported that conflicts of interest were a feature in all of its completed investigations of 2012/13.

The new guidance focuses on trustees’ duties to declare a conflict of interest and the consequences of failing to manage a conflict of interests, including:

• a revised definition of conflicts of interest i.e. “any situation in which a charity trustee’s personal interests or loyalties could, or could be seen to, prevent them from making a decision only in the best interests of the charity”;
• a three-step approach to identifying, preventing and recording conflicts of interest;
• specific guidance in Annex B on the statutory rules on conflicts of interests for directors of charitable companies and the trustees of charitable incorporated organisations (CIOs); and
• a checklist on addressing a conflict of interests.

The guidance also includes particular recommendations:

• a charity’s government document should include provisions to deal with declaring and managing conflicts of interest;
• Trustees should adopt a register of interests and a written conflicts of interest policy (a template policy is set out in Annex D to the guidance);
• there should be a standard agenda item at the beginning of each of trustee meetings for trustees to declare any actual or potential conflicts of interest; and
• prospective trustees should be asked to declare any potential conflicts of interest so that those who appoint trustees can carefully consider their suitability for appointment.

Charities should consider the revised guidance and may wish to review their current conflicts of interest policies and procedures.  Charities looking to reconstitute as a company or CIO will also need to consider how the rules on “substantial property transactions” or common trustees will apply to such projects.

For more information please contact Joanne Davison or 0191 211 7958.