Bates Wells responds to Charity Commission draft guidance on charities and “connected” non-charities

Bates Wells has lodged a detailed response to the Commission’s consultation which closed last week. The draft guidance set out a series of principles and good practice requirements applying across a wide range of charity relationships with non-charities including for example, a charity’s relationship with its trading subsidiary, a corporate foundation’s relationship with its founder, a charity’s relationship with a sister campaigning organisation, and a charity’s relationship with a commercial fundraiser. A summary of Bates Wells’ key points is set out below. To read the full response see here. 


1. We welcome the chance to comment on this draft guidance and are particularly grateful for the useful round table on this topic hosted at BWB, attended by Commission representatives. We are keen to work with Commission to agree guidance in this area that is useful, proportionate and helps (not hinders) trustees. We would welcome the opportunity to be involved with reviewing further drafts or take part in further discussions.

2. Before issuing guidance of such a wide ranging application across the sector, we believe that (a) there should be evidence of a significant, sector-wide regulatory concern, and (b) an impact assessment should have been undertaken by the Commission demonstrating that the proposed guidance will be a proportionate response to that concern.

3. In our view, there is a serious risk that the proposed new guidance will place a regulatory burden on charity trustees which is disproportionate to the ‘mischief’ it is intended to address.

4. The guidance inappropriately paraphrases other forms of Charity Commission guidance in a way which materially alters their meaning, notably in relation to political activity, grant funding non-charities and investment.

5. The guidance should reflect that charities and connected non-charities will often have overlapping, common purposes, and that in such cases working closely together may amplify their combined impact.

6. The guidance seems to be based on the existence of a duty of transparency and accountability extending beyond legal disclosure requirements. We are not aware of the basis of any such duty.

7. The guidance fails to recognise that the separate identities of a charity and a related non-charity will not always be relevant to a charity’s interaction with the public, and it will not always be possible for the charity to control the public’s understanding of the arrangements between a charity and a connected non-charity.

8. If, by issuing this guidance the Charity Commission has in mind its statutory objective to increase public trust and confidence in charities, we note that individual charity trustees have no corresponding duty to uphold the reputations of charities generally. Individual trustee duties are very much linked to protecting and safeguarding the charity of which they are a trustee.

9. In our view, a reasonable consideration for the trustees would be the extent to which any reputational harm or benefit is expected to fall within sections of the public that might reasonably be expected to be, or become, supporters of the charity. Potential reputational harm amongst core constituencies of the charity’s supporters should be considered more carefully than potential harm amongst constituencies which are already opposed to the charity’s agenda, purposes and mission.

10. In many cases, the supporters of a charity and a non-charity will be equally happy to support the purposes of both organisations, underlining the confluence of interest that will often exist between them. Conversely, complaints about the relationships between charities and ‘connected’ non-charities will often be made by organisations or individuals with a pre-existing agenda which conflicts with the charity’s purposes and mission.

11. In pursuit of its statutory objective, the Commission may be better advised to invest resources in ensuring that the media and the public better understands the different arrangements that charities might enter with non-charities, to advance their charitable purposes. A better understanding of trading subsidiaries, commercial participation arrangements and the sharing of brands between charities and non-charities could help protect public trust and confidence in charities more effectively than guidance which arguably overstates the risks, and understates the benefits of such relationships.

12. There is already a potential crisis in the recruitment of trustees. If the Commission defines conflicts of loyalty so widely that a trustee who supports a non-charitable organisation is treated by the Commission as having a conflict in relation to a ‘connected’ charity, then it may become virtually impossible to find people to serve as trustees.

13. We are concerned that the overall tone and length of the guidance is similarly unhelpful and could unnecessarily discourage the formation of relationships which can make a very positive contribution to the furtherance of charitable purpose.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of May 22, 2018.