Lessons to be learned from charity commission inquiry

The Earl of Chester’s Fund is a grant-making trust within the county of Cheshire. The Charity Commission opened a compliance case after receiving a complaint that the charity made a grant to a non-charitable company that was linked to a trustee.

The trustees in this case accepted that the grant was made in error and reimbursed the charity £24,000 as a gesture of goodwill.

The report issued by the Charity Commission serves as a good reminder for trustees as to their duties. In particular, trustees should ensure:

• that the charity has carried out the purposes it was set up for and for no other purpose – this is particularly so when the charity is making a grant to non-charitable bodies

• they comply with the charity’s governing document – in particular how trustees are appointed, how meetings must be conducted, conflicts of interest and trustee benefits

• they act in the charity’s best interests and deal appropriately with conflicts of interest. In particular, payments or other transactions that benefit trustees, or persons connected to a trustee, can only be made if permitted by the charity’s governing document or by charity law

• they make balanced and adequately informed decisions – trustees should make decisions collectively, in good faith and armed with all the relevant facts, and not swayed by irrelevant facts. Trustees that are conflicted should not take part in the decision-making process

• that when the charity makes grants they carry out appropriate due diligence and monitoring. Trustees should ensure that the grant is only used towards their charitable purposes. This can be done by making the grant a restricted fund.

Sophie Martyn is an associate in our corporate & commercial department. She has extensive experience, including mergers and acquisitions, company reorganisations, banking, venture capital and joint ventures. Clients describe her as “extremely responsive, knowledgeable and professional”.