In this article, Jo Coleman, Partner in IBB Solicitors Charities Team looks at decision making by charity trustees. In the charitable context what does good decision-making look like?

IBBSOLICITORSCHARITIESTEAMCharitygovernance

GOODDECISIOnMAkInG

THISBRIEFInGnOTEISOnLyInTEnDEDTOPROvIDEGEnERALGuIDAnCEAnDISnOTInTEnDEDTOCOnSTITuTELEGALADvICE.

• thatanyconflictsofinterestorpotentialconflictsofinterest(whichincludenotonlydirectorindirectpersonalgainbyatrusteebutalsoaconflictofduty)areproperlyidentifiedandmanaged.

JusticeWalkerinScott v National Trust(1998) summarisedhowcharitytrusteesmustmakedecisionsinexerciseoftheirduties.Charitytrusteesmust:

• actingoodfaith,responsiblyandreasonablywhichincludesmanaginganyconflictsofinterestappropriately.(Actingingoodfaithmeansactingwithgenuineorhonestintentionsormotivesandtryingtodotherightthingforthecharity);

• informthemselves,beforemakingadecision,onmatterswhicharerelevanttotheirdecision;

• takeadvice,wherenecessary,fromappropriateexperts,whethertheexpertsarelawyers,accountants,actuariesetc;

• takethedecisionsthemselvesandcannotdelegatetheexerciseoftheirdiscretions(unlessauthorisedtodoso);

• weighupthecompetingfactorsanddisregardirrelevantfactors.

CharitytrusteesareexpectedbytheCharityCommissiontotakethebestdecisionsthattheypossiblycaninthebestinterestsoftheircharity.

RecentCharityTribunaldecisionshaveconfirmedthatdecisionsonkeyissues,suchashowmuchpublicbenefitissufficientpublicbenefit,aredecisionsthatonlythecharitytrusteescantake.SuchTribunaldecisionscombinedwiththedecreasedresourceandcapacityoftheCharityCommissiontoassistinindividualcases,meansthatincreasinglycharitytrusteesarehavingtorelyupontheirownjudgment.Theprocessofdecision-makinghascomeintosharperfocusandtheCharityCommissionhasrecentlylauncheditsnewGuidance,It’s Your Decision*,tohelpcharitytrusteeswiththeprocessofdecision-making.

Whenmakingsignificantorstrategicdecisionsitisimportanttoensurethattheyareproperlytaken.Thedecisionsdonottohavetoturnouttoberight–no-oneexpectstrusteestohaveacrystalball–butiftheyareproperlytakenthenthetrusteeswillusuallybeprotectedfrombeingcriticisedorpossiblyevensanctioned.

Attheoutsetcharitytrusteeshavetocheck:

• theyhavethepowertodowhattheyareproposingtodo(whichwillnormallymeancheckingyourcharity’sconstitutionandascertainingwhetherthereareanyparticularstatutoryrestrictionswhichapply);and

IBBSOLICITORSCHARITIESTEAMGooddecisionmaking

* http://goo.gl/yUCM9y

sUffICIentlY InforMeD?Trusteesshouldactproportionately.Sodependinguponarangeoffactorsincludingtheimportance,complexity,risk,cost,impactandurgency,thetrusteeswillneedtoensurethattheyhavegatheredtheevidenceandtakenappropriateadvice.Thatdoesnotmeanthattheyneedtoconsultprofessionalsoneveryissue,buttheyneedtobesurethattheyhaveunderstoodtheimplicationsandconsequencesoftheirdecisions.

What are relevant faCtors?Obviouslywhatfactorsarerelevantwilldependupontheparticularcircumstancesofeachcasebuttrusteesshouldconsiderwhether:

• thedecisionisinthecharity’sbestinterests;

• anyresultingactivitieswillfurtherthecharity’scharitablepurposes;

• thetrusteeshavehadregardtothepubicbenefitguidance(theyarerequiredbystatutetodoso);

• theyhavesufficientpower;

• theproposedcourseofactioncomplieswithalllaws–notonlycharitylawbutalso,forexample,equalityandbriberylegislation;

• anyalternativesmightbebetter;

• theyhavetakenproperadviceandwhethertheyneedspecialisthelp;

• therisksofproceedingandhowanyriskscanbemanaged;

• thedecisionmightimpactuponthecharity’sreputation;

• thetrusteeswillbeabletochangecourseifthedecisioniswrong.

What Is Irrelevant?Allowingpersonalprejudicetoplayapartinthedecision.Forexamplewhenchoosingtosellahousewhichbelongstothecharity,choosingtoacceptalowerpricefromayoungfamily,becauseyouprefertheideaofthepropertybeingusedandenjoyedinthatway.(However,ifinfactyoucontinuedtoownneighbouringlandthenchoosinggoodneighboursmayberelevant.)

ColleCtIve DeCIsIon MakIngDecisionsneedtobetakencollectively.Thetrusteesneedtoparticipateinthedecision,expresstheirviewsandonceadecisionismadestandbehindit.Atrusteewhodoesnotagreeisentitledtoexpressadissentingopinionandhaveitrecordedbutoncethedecisionismade,heorsheshouldnotunderminethedecisionthathasbeenmadebythetrustees.Ifatrusteewishestospeakoutagainstadecisionoftheboardheshouldgivesomethoughttoresigningfromtheboard.Eventhen,heorshewillneedtohaveregardtotheirdutiesofconfidentialitytothecharity.Anyindividualswhousuallytakepartintrusteemeetingsandarenotentitledtovoteonthisissueshouldnotbeincludedinanyvote.

the range of reasonable DeCIsIonsThecourtwillnotoverturnthedecisionofaboardoftrusteesunlessithasbrokenthelawinsomewayorisoutsidetherangeofreasonableness.

Decisionsaremorelikelytobereasonableifthetrustees:• havegivenenoughtimeandattention

tothematter;

• ensuretheyhaven’toverlookedanything;

• havegivensomethoughttowhethertheyoughttotakesoundingsfromstakeholders;

• areactingconsistently;

• stoodbackfromthedecisionandtriedtoviewitobjectivelyorimpartially.

DeCIsIon MakIng bY e-MaIlDependinguponthepowersinyourconstitution,youmaybeabletomakedecisiononthephone,bySkypeorbyemail.Whilstweunderstandthattheurgentnatureofsomemattersmaymaketheseotherformsdesirable,inourview,betterdecisionsaremadewhenthetrusteescanmeetinpersonandhaveenoughtimetoconsiderthefactsandaskappropriatequestions.

MInUtesFinally,onceadecisionistakenitshouldbeproperlyrecorded,toreducethelikelihoodofafuturechallengeandtoprovideevidencethatthedecisionwasproperlytakenandmadeonrelevantfacts,ifitischallenged.Ifanimproperlytakendecisionresultsinfinanciallosstothecharity,thecharitytrusteesmayfindthattheirdecisionisinvalidandinveryextremecasestrusteesmayfindthemselvesheldpersonallyliable.

IBBSOLICITORSCHARITIESTEAMGooddecisionmaking

If you or your Trustees would like to discuss the issues raised by this note and the potential issues in your charity, please contact:

JoColeman,Partner,IBBSolicitorsCharitiesteam01895207809jo.coleman@ibblaw.co.uk

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