Managing conflicts of interest
Trustees have a duty to act in the best interest of their charity. There are two common types of conflict of interest: financial conflicts and loyalty conflicts.
These conflicts happen when a trustee, or person or organisation connected to them, could get money or something else of value from a trustee decision.
Financial conflicts for a trustee happen if your charity is deciding whether to:
- Buy goods from a business owned by the trustee
- sell charity assets to the trustee
These conflicts are not about money or other trustee benefits. Loyalty conflicts can happen if the charity’s decision involves a person or organisation linked to a trustee. For example:
- the trustee’s employer
- another charity where they are a trustee
There can be a conflict (or a perceived conflict) because the trustee’s loyalty to the other
organisation or person could compete with their loyalty to the charity.
The board of trustees must identify and deal with all conflicts. This can be done by following the below steps:
1. Declare conflicts of interest
It is crucial to inform fellow trustees promptly if you find yourself in a situation where you
have a personal conflict of interest. Address this matter early, before any discussions or
decisions take place.
This can be done by:
a. Identifying and declaring conflicts of interest as a standard agenda item at the
start of all meetings.
b. Maintain a register of interests and ensure it is regularly updated
c. Adhere to a conflicts of interest policy. The policy should include examples of
common conflicts, as well as the process for declaring them.
d. Follow the rules in your charity’s governing document.
2. Consider removing conflicts of interest
The trustees should consider if it is best for the charity to remove the conflict. This is particularly important if it is a serious conflict. If you decide that you do not need to remove the conflict, you must prevent it from affecting your decision.
3. Manage conflicts of interest
Check and follow:
– the charity’s governing document
– any previous direction given by the Charity Commission
– other legal rules that apply to your charity
If you do not have any of these rules to follow, make sure your charity sets some before you make a decision affected by a conflict of interest.
As a minimum, the rules should require that the conflicted trustee is not involved in any
discussions, does not take part in the vote and is not counted in the quorum.
4. Keep a record of conflicts of interest
Keeping a detailed record of all conflicts will help to show that the trustees have acted
properly. The record should include details of
- what the conflict was
- who or what it affected
- when it was declared
- how you managed it
Serious conflicts are ones where the majority have a conflict, or there is a significant amount of charity money involved. In the event of a serious conflict, trustees should consider the following options to remove the conflict:
- change the plan
- ask the conflicted trustee to resign
- appoint additional trustees not affected by the conflict
- take legal advice if still unsure
- asking the charity Commission to authorise your decision
For more information please contact a member of our Charities team.