At Work: Law and Governance - Keep it legal - Conflicts of interest

Ros Harwood, a partner and head of charities at Dickinson Dees

Charities need to open their eyes and identify existing and potential conflicts of interest between the organisation and the personal or business affairs of the trustees.

There is no rule against conflicts of interest per se, but they must be effectively managed. Trustees are not permitted to receive any benefit from their own charity unless this is authorised in the governing document.

The Charities Bill will allow trustees to be remunerated for providing services to their charity, provided some conditions are met.

Payment of a trustee is not the only situation in which a conflict of interest can arise. The Charity Commission recommends that charities establish a policy on how they will deal with any conflicts that could arise as a result of the work they undertake.

Drawing up such a policy will help trustees to identify in advance possible situations in which a conflict of interest might occur. The policy should include the charity's own procedure for dealing with conflicts of interest, such as declaring the interest and when withdrawing from any discussion on that matter at trustees' meetings is required.

Charities may also find it helpful to draw up a register of trustees' interests on an annual basis. Some charities find it beneficial and not particularly burdensome to include an item on the agenda for every trustees' meeting dealing with conflicts of interest. This helps to keep the idea of conflicts of interest at the forefront of trustees' minds and, if there is nothing to report, the meeting can quickly proceed to the next item on the agenda.

Some conflicts of interest will be easier to spot than others. Direct financial benefit to a trustee, such as payment for services provided to the charity or the award of a contract to another organisation in which a trustee has an interest, can easily be identified.

Indirect financial gain may be less obvious and a conflict of loyalties may be known only by the trustee concerned. Trustees also need to think of possible benefits to their spouses, children, parents, brothers or sisters and so on, as well as to their business partners.

If the trustees are in any doubt as to whether a conflict exists or, more importantly, how this conflict should be managed, they should seek professional advice.

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