Legal duties for charities engaged in commercial activities
A regulatory alert has recently been issued emphasising the importance of trustees’ legal duties and their responsibilities when there are commercial partnerships and agreements in place with charities and trading subsidiaries.
There are benefits of such an agreement including raising funds and increasing the profile of a charity. The basis of an agreement is not a concern, however the emphasis is to ensure trustees have effective oversight of the arrangement and can justify that decisions are made in the best interests of the charity, including demonstrating how entering into an agreement with a commercial organisation will help them achieve their charitable aims. There are a number of criteria the Charity Commission expects trustees to consider including:
- Agreements to be in writing
- Demonstrate processes are in place for oversight and control
- Carry out appropriate checks on a commercial organisation before entering into an agreement
- Manage any conflicts of interest ensuring any partnership is in the best interests of the charity
- Consider the risks and benefits to the charity’s name and reputation, even if the agreement is in the subsidiary company
For further information please contact our Charity Team.