Charities in times of crisis
While it is difficult to see any positives in the news at the moment, I am sure that most people have been heartened to see individuals and charities rising to the present challenges to protect the most vulnerable in society.
In the past couple of weeks, the NHS and related charities have been pledged donations of over £40 million – all through the actions of two individuals, Hugh Grosvenor pledging a further £10 to “top up” his earlier donation of £2.5 million, and Captain (now Colonel) Tom Moore’s remarkable fundraising feat has now raised over £30m (and this sum only looks set to increase).
Charities and fundraising are now playing an increasingly important role in society as the economic, social and medical implications of the coronavirus are becoming clearer. Charities focusing on a number of social issues, such as homelessness, healthcare, domestic abuse, addiction issues and mental health must be looking to make the best use of their resources to play their part in responding the unfolding crisis.
Large international charities may already have a practiced crisis response with clear guidelines about how to respond and allocate resources, however smaller or family run charities may be considering these issues for the first time and will face different challenges.
Acting within your objects
Trustees must, first and foremost, consider whether a proposed course of action is one which they can legally take. If a charity has very wide charitable objects, then this should not be a problem, even if the trustees have previously decided to focus their resources on one particular issue, they remain able to respond to particular events. A charity with more restricted objects will be more limited in their approach, but, the Charity Commission acknowledges that trustees can help indirectly, for example they confirm that an arts charity might help to relieve social isolation through online courses or events.
Partnering with other charities
It might be a good opportunity for two or more smaller charities to band together to provide a consistent and targeted response in their particular field of expertise, or for their communities. If this can be achieved then the trustees of both charities will need to understand the scope of the joint project and ensure that any delegation or funding arrangements are clearly understood, properly decided and clearly recorded.
Funding trading subsidiaries
Charities which own or operate a trading company may be facing difficult decisions if that business is suffering economically. Trustees could legitimately take the view that providing additional funds to a trading subsidiary might help that company weather the present storm – however they must remain objective when making these funding decisions. Trustees may become personally liable for the funds spent keeping a failing subsidiary going if it was reasonably clear that the failure of the subsidiary was likely. Where the trading company takes part in “primary purpose trading”, i.e. a company whose commercial activity is part and parcel of the charity’s work, this may justify the trustees taking more extreme steps to save the company, but this remains a difficult balance for the trustees to maintain.
Conflicts of interest and decision making
There is heightened risk of conflicts in family charities due to the personal connections between the trustees themselves and, occasionally, between the trustees and the charitable purpose itself. The Charity Commission acknowledge that conflicts of interests are common and that having a conflict of interest does not mean that the trustees have done something wrong. Trustees should, however, take care to ensure that any conflicts do not interfere with the trustees’ ability to act in the best interests of the charity. Trustees who choose to continue with a course of action, despite a conflict of interest, should take care to follow the Charity Commission guidance, and take legal advice where necessary, to ensure that they are acting within the law and best practice. The Charity Commission recommend a three-step approach- identify, prevent and record to help protect the trustees and a charity’s reputation.
Conflicts of interest may arise where trustees want to make a donation to a medical facility where family members or loved ones are being treated. While such donations can be made properly, the trustees will need to be conscious of the risk of conflicts of interest or personal benefits arising.
Once a decision has been made, charities may face practical difficulties actually implementing their plans. Charities with an international focus may have difficulties with foreign banks if they have closed or if their local partners are also under lockdown. Closer to home, trustees may face difficulties accessing supplies or even just getting documents signed and arranging trustee meetings where trustees are self-isolating in different households.
Certain types of documents can be easily signed by each party printing off a separate copy of the document and each signing one copy. However, where documents need to be signed as a deed then the signature will need an independent witness The law in this area lags far behind technological possibility, and though the government has now accepted the Law Commission’s recommendation to set up an industry working group to analyse potential solutions to allow video witnessing, however, this is not at present a possibility. The coronavirus has led to some innovative means of witnessing (for example witnesses standing outside and the document being passed through a door or window). The virus can be transmitted through handling the same item such as pens and paper, so all parties should take care to wash their hands before and after handling the document and use different pens.
As always with charities, record keeping must be a focus. The Charity Commission advise trustees to check their governing documents to see if they can hold telephone or virtual meetings. Where there is no express power to do so, the Charity Commission urges trustees to record their decision to hold a virtual or telephone meeting to demonstrate good governance. If routine or non-essential meetings are postponed, this should again be clearly recorded and it would be best to include a proposal for a new date or a date to review when this could be done. Trustees should consider whether postponing will make filings annual reports and accounts more difficult at a later stage.
The Charity Commission will rely on a charity’s written records as the evidence of the actions taken if there is ever reason to investigate. If the written records are not complete or any elements are lacking, then the Charity Commission may find this to be a failure in management and administration of the charity.
Related in depth posts
This article by Jennifer Emms and Sophie Wettern provides a "behind the scenes" introduction to charity law. In the first of two articles, they look at the meaning of "charity", the various forms a charity might take and the basics of charity taxation.
The MEET | THE | EXPERTS panel Kate Goldberg, Jill Halford and Jennifer Emms, with Ed Powles in the chair, shared their views on how those running charities can navigate difficult waters.
Register now for the next MEET | THE | EXPERTS discussion on how those running charities can navigate difficult these waters.