Download - Conflict of interest slides 06 march 2015
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13 March 2015
Conflicts of interest –
why do they matter?
Helen Furneaux,
Head of Charities Team
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Key issue for charities
• Updated guidance
• Area of regulatory focus
• Failure to deal can lead to:
disputes
flawed decision making
damage to reputation of charity
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What is meant by ‘conflict of interest’?
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Rules from trust and charity law
• Cannot be in a position in which duty to charity
and other interest conflict
• Rule against dealing with yourself – e.g. as
buyer and seller, or employer & employee
• Cannot profit from role as trustee
• Voluntary nature of trusteeship
• Obligation to act in best interest of charity
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Company Law
• Director must avoid a situation in which he has
or can have a direct or indirect interest that
conflicts, or possibly may conflict, with the
interests of the company s175 Companies Act
2006
• Director duty to promote success of company in
achieving its charitable purposes s172
• Similar rules apply to CIOs under relevant
legislation
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More than preventing fraud by trustee
“A man acting for himself may indulge his
own caprices, and consider what is
convenient or agreeable to himself, as well
as what is strictly prudent...Trustees of a
charity within the limits of their authority,
whatever that may be, should be guided
only by a desire to promote the lasting
interest of the charity” Lord Langdale 1840
case AG v Kerr”
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Goes beyond acting in good faith
“The [Charitable Fund] trustees owe duties to no
one but their charitable objects and have no
powers to benefit any but their charitable
objects” Hart J in 1999 Public Trustee v Cooper
& others
Strict principles to reflect trust based
nature of charity trustee’s role
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What means in practice?
Conflict between duty to charity and trustee’s
direct interest.
Financial – property, employment - whether
loss or benefit
Other material loss or benefit – e.g. charity
acquiring neighbouring premises
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Conflict between duty as charity trustee
and indirect interest
Again financial or other material loss or benefit
Typically where involves “connected person”
• Family member
• Employer or business associate
• Company or firm or society with which director is associated
• Trust or charity of which director is trustee
• Local authority of which director is member
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How to approach?
Identify
Avoid/Prevent
Manage
Record
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Where conflicts can be permitted
• Out of pocket expenses
• 185-188 Charities Act
• Governing Document permits
• Charity Commission Order
• Failure to comply can make trustees/directors
personally liable
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Is your charity fully equipped?
• Systems to identify conflicts
• Power in your Governing Document to
manage
• Conflict of interest policy
• Always consider how it might look to outsiders
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Case Study
The Oakworth
Heritage Railway Trust
4 trustees
• Peter & Bobby -brother &
sister
• Mr Perks – retired
railwayman
• Mrs Smith – local councillor
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Peter & Roberta, Mr Perks, Mrs Smith
Scenario 1:
• Peter runs internet model railway
business
• Proposes to Board to take lease of
empty building owned by Trust as shop
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Peter & Bobby, Mr Perks, Mrs Smith & ?
• Peter & Bobby’s sister is wealthy banker
living in London
• She offers loan to the Trust at interest
rate lower than they would get from their
bank.
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Peter & Bobby, Mr Perks, Mrs Smith & ?
• Mr Perks is trustee of another local
charity concerned with the local canal
network
• He know both charities are looking to
apply to be on a popular TV programme
regarding heritage projects
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Peter, Roberta, Mr Perks, Mrs Smith & ?
• Mrs Smith local councillor
• Council has been major grant funder for
many years
• Council recently cut funding and
threatening legal action claiming
misleading figures from charity
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ConflicConfo• Conflicts of Interest Matter
• Expect and prepare for them
• Recognise the potential dangers they
present
• Ensure you know the rules and the
implications for your charity
• Take legal advice where appropriate
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About us:Helen Furneaux
Head of Charities Team
Stephens Scown Solicitors
1 High Cross Street
St Austell
Cornwall
PL25 4AX
Tel: 01726 74433
E-mail: [email protected]
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The information in this presentation is intended to be general
information only and should not be interpreted as legal advice.
English law is subject to change so whilst Stephens Scown LLP
seeks to ensure the information contained in this presentation is up to
date and accurate, the law can change quickly and no guarantee is
made as to its accuracy which means the information should not be
relied upon. Presentation slides should not be viewed as an
alternative to professional advice and Stephens Scown LLP does not
accept liability for any action taken or not taken as a result of this
information.
Disclaimer