GOOD DECISIOn MAkInG - IBB Solicitors

IBB SOLICITORS CHARITIES TEAM

Charity governance

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?

good decision making

This briefing note is only intended to provide general guidance and is not intended to constitute legal advice.

IBB SOLICITORS CHARITIES TEAM

Good decision making

Charity trustees are expected by the Charity

Commission to take the best decisions that they possibly can in the best interests of their charity.

Recent Charity Tribunal decisions have confirmed that decisions on key issues, such as how much public benefit is sufficient public benefit, are decisions that only the charity trustees can take. Such Tribunal decisions combined with the decreased resource and capacity of the Charity Commission to assist in individual cases, means that increasingly charity trustees are having to rely upon their own judgment. The process of decision-making has come into sharper focus and the Charity Commission has recently launched its new Guidance, It’s Your Decision*, to help charity trustees with the process of decision-making. When making significant or strategic decisions it is important to ensure that they are properly taken. The decisions do not to have to turn out to be right – no-one expects trustees to have a crystal ball – but if they are properly taken then the trustees will usually be protected from being criticised or possibly even sanctioned.

•

Justice Walker in Scott v National Trust (1998) summarised how charity trustees must make decisions in exercise of their duties. Charity trustees must: •

act in good faith, responsibly and reasonably which includes managing any conflicts of interest appropriately. (Acting in good faith means acting with genuine or honest intentions or motives and trying to do the right thing for the charity);

•

inform themselves, before making a decision, on matters which are relevant to their decision;

•

take advice, where necessary, from appropriate experts, whether the experts are lawyers, accountants, actuaries etc;

•

take the decisions themselves and cannot delegate the exercise of their discretions (unless authorised to do so);

•

weigh up the competing factors and disregard irrelevant factors.

At the outset charity trustees have to check: •

they have the power to do what they are proposing to do (which will normally mean checking your charity’s constitution and ascertaining whether there are any particular statutory restrictions which apply); and

* http://goo.gl/yUCM9y

that any conflicts of interest or potential conflicts of interest (which include not only direct or indirect personal gain by a trustee but also a conflict of duty) are properly identified and managed.

sufficiently informed? Trustees should act proportionately. So depending upon a range of factors including the importance, complexity, risk, cost, impact and urgency, the trustees will need to ensure that they have gathered the evidence and taken appropriate advice. That does not mean that they need to consult professionals on every issue, but they need to be sure that they have understood the implications and consequences of their decisions. What are relevant factors? Obviously what factors are relevant will depend upon the particular circumstances of each case but trustees should consider whether: •

the decision is in the charity’s best interests;

•

any resulting activities will further the charity’s charitable purposes;

•

the trustees have had regard to the pubic benefit guidance (they are required by statute to do so);

•

they have sufficient power;

•

the proposed course of action complies with all laws – not only charity law but also, for example, equality and bribery legislation;

•

any alternatives might be better;

•

they have taken proper advice and whether they need specialist help;

•

the risks of proceeding and how any risks can be managed;

•

the decision might impact upon the charity’s reputation;

•

the trustees will be able to change course if the decision is wrong.

What is irrelevant? Allowing personal prejudice to play a part in the decision. For example when choosing to sell a house which belongs to the charity, choosing to accept a lower price from a young family, because you prefer the idea of the property being used and enjoyed in that way. (However, if in fact you continued to own neighbouring land then choosing good neighbours may be relevant.) collective decision making Decisions need to be taken collectively. The trustees need to participate in the decision, express their views and once a decision is made stand behind it. A trustee who does not agree is entitled to express a dissenting opinion and have it recorded but once the decision is made, he or she should not undermine the decision that has been made by the trustees. If a trustee wishes to speak out against a decision of the board he should give some thought to resigning from the board. Even then, he or she will need to have regard to their duties of confidentiality to the charity. Any individuals who usually take part in trustee meetings and are not entitled to vote on this issue should not be included in any vote.

IBB SOLICITORS CHARITIES TEAM

Good decision making

The range of reasonable decisions The court will not overturn the decision of a board of trustees unless it has broken the law in some way or is outside the range of reasonableness. Decisions are more likely to be reasonable if the trustees: • have given enough time and attention to the matter; •

ensure they haven’t overlooked anything;

•

have given some thought to whether they ought to take soundings from stakeholders;

•

are acting consistently;

•

stood back from the decision and tried to view it objectively or impartially.

decision making by e-mail Depending upon the powers in your constitution, you may be able to make decision on the phone, by Skype or by email. Whilst we understand that the urgent nature of some matters may make these other forms desirable, in our view, better decisions are made when the trustees can meet in person and have enough time to consider the facts and ask appropriate questions.

minutes Finally, once a decision is taken it should be properly recorded, to reduce the likelihood of a future challenge and to provide evidence that the decision was properly taken and made on relevant facts, if it is challenged. If an improperly taken decision results in financial loss to the charity, the charity trustees may find that their decision is invalid and in very extreme cases trustees may find themselves held personally liable.

If you or your Trustees would like to discuss the issues raised by this note and the potential issues in your charity, please contact: Jo Coleman, Partner, IBB Solicitors Charities team 01895 207809 [email protected] This briefing note is only intended to provide general guidance and is not intended to constitute legal advice.

© 2013

members of:

08456 381381 ibblaw.co.uk