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Conflicts of interest

The Charity Commission has published a report of its investigation into Mayfair Charities Limited

The inquiry was opened in July 2012 to investigate how the complex network of property related financial arrangements between the charity, its trading subsidiaries and companies connected to the trustees worked for the benefit of the charity and to examine various financial transactions including a loan by the charity to a subsidiary.

The investigation found that the financial arrangements ultimately benefited the charity, nevertheless the terms and circumstances of the loan by the charity to a subsidiary should have been periodically reviewed by the trustees.

The regulator also found that a loan, now repaid, by the company connected to the trustees to a subsidiary of the charity was difficult to be negotiated or supervised in a truly arm’s length way given that the directors of both companies were the same people and they were also two of the three trustees of the charity resulting in a conflict of interest. As a result of the inquiry the trustees have agreed to appoint at least one fully independent trustee.

Commission says:

"This case is a timely reminder to all charities to be alert to and deal with conflict of interest situations. Conflicts of interest can lead to decisions that are not in the interests of the charity, which damage its reputation and public trust and confidence in the charity. It may mean those decisions are legally invalid or open to challenge. Conflicts of interest should be avoided, but, where they cannot be completely, trustees must ensure they are properly managed including declaring conflicts of interest at an early stage and preventing them from affecting trustee decision making. The existence of a conflict of interest in itself does not reflect on the integrity of the person affected but equally, it does not mean the conflict can be ignored. The Commission sees too many cases of unidentified or poorly handled conflicts of interest. Trustees need to be able to show that they have made decisions independently of any private or competing interest."

For full report see http://www.charitycommission.gov.uk/our-regulatory-work/reporting-our-regulatory-work/inquiry-reports/

 

 

Date: 16th December, 2013
Author: Wendy Bambrick

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