On 29 March 2019 the Charity Commission published new guidance on managing connections between charities and non-charities. Intended for use by charity trustees where the charity is connected to a non-charity, the guidance gives six principles for trustees to follow in managing such relationships.

Does it apply to you?

The guidance applies to your charity if it:

  • has set up and owns a trading subsidiary;
  • has been set up by a non-charity (e.g. charities set up by social enterprises);
  • gets regular funding from the non-charity (or vice versa, e.g. charities set up to support activities of a non-charity);
  • works regularly with a non-charity to deliver services, campaigns or other projects; or
  • has a non-charity as a significant/sole member or trustee (or where the non-charity can appoint trustees).

The six principles

The guidance is wide-ranging and can be found in full on the Charity Commission’s website, but in summary the principles are:

  1. Recognise the risks;
  2. Do not further non-charitable purposes;
  3. Operate independently;
  4. Avoid unauthorised personal benefit and conflicts of interest;
  5. Maintain your charity’s separate identity; and
  6. Protect your charity.

What do you need to do?

Trustees are expected to actively manage the relationship if their charity is connected with a non-charity. Important points to remember are:

  • Charities must have systems in place to review, assess and address any risks arising from the connection with the non-charity, and be able to produce evidence of active management and review of risks if required.
  • Trustees must understand their charity’s purposes as set out in its governing document and ensure the charity sticks to them (i.e. not funding or supporting non-charitable purposes).
  • Charities should be independent and separate from non-charities (both financially and in terms of decision-making). Where there is a funding relationship, trustees must monitor to ensure the charity is not just giving effect to the wishes of the non-charity.
  • Ensure conflicts of interest are managed and addressed appropriately. Advance authorisation must be in place for any trustee benefit, and there should be a sufficient number of trustees who are not conflicted.
  • Trustees should be clear on whether sharing an identity with a non-charity is in the charity’s best interests. It must be clear externally (e.g. to donors) which organisation is which, and donors must be aware how donations are being used – the non-charity must not use charity donations.
  • The charity must undertake appropriate due diligence checks on the non-charity and, where necessary, have any arrangements set out in the form of a written agreement.
  • Trustees should submit information on any proposed connection with a non-charity so the Charity Commission can check that the connection will not lead to a breach of charity law.

Note that if a relationship between charity and non-charity breaks down due to poor management by the trustees, the Charity Commission will need to be informed. The Commission may intervene if they see fit, and could open a statutory inquiry. It could even lead to legal proceedings with fines or personal liability for trustees, so active relationship management is crucial.