Policy paper

Conflicts in your charity

Published 1 June 2008

Applies to England and Wales

1. About this guidance

A dispute can have a negative impact on how a charity operates and needs to be resolved quickly by charity trustees. This guidance outlines when the Charity Commission will or will not get involved in a dispute, and provides you with contact details of organisations that are able to offer you additional information and support.

2. Definitions

Dispute: A dispute is a serious disagreement within a charity, which left unresolved, can lead to a breakdown in the effective governance and day to day management of a charity. Disputes most often occur in membership charities, but can also arise within the trustee body and between trustees of different charities.

Trustees: Charity trustees are the people who serve on the governing body of a charity. They may be known as trustees, directors, board members, governors or committee members. Charity trustees are responsible for the general control and management of the administration of a charity.

Governing Document: A governing document is a legal document setting out the charity’s purposes and usually how it is to be administered. It may be a trust deed, constitution, memorandum and articles of association, will, conveyance, Royal Charter, scheme of the commission or other formal document.

Mediation: Mediation is a private and confidential process by which the parties in a dispute agree to appoint an independent person who meets them and their advisers with a view to helping the parties reach a solution. As the solution is agreed to by those directly affected, rather than imposed externally, it is more likely to provide a long-term resolution.

3. What should a charity do if it gets into a dispute?

3.1 The short answer

Those involved in a dispute should try and use all available methods to resolve the dispute themselves.

3.2 In more detail

The commission expects charity trustees to work in the best interests of their charity and to apply funds and administer property in accordance with its charitable purposes. Trustees are ultimately responsible for the governance of their charity, providing overall direction and supervision and are held accountable for the charity’s assets.

At times, trustees may disagree or there might be disagreement between or within the membership and the trustees. While it may be positive to have a wide range of opinions to inform decisions, where this leads to a dispute which has a negative effect on the functioning of a charity then it is a problem. The commission expects the trustees and the members of a charity, where these exist, to work in the best interests of the charity and to seek to resolve issues where they have the potential to damage the charity.

The fact that a dispute exists does not necessarily mean that the commission will become involved. The commission expects those involved to have exhausted all other means of resolving the dispute before approaching it.

3.3 Dispute resolution

Some charities have procedures for resolving disagreements. These procedures may be stated in the charity’s governing document, for example in a disputes clause. If these mechanisms break down, or there is disagreement about the interpretation of any written procedures, one or more of the parties involved should look externally for support. An external person or organisation may help to provide a fresh perspective and facilitate resolving the dispute. Who a charity approaches will depend on the nature of the dispute. If the dispute concerns the internal governance of the charity then the charity could:

• approach its national body, or a regional or national umbrella body, if they exist
• approach its local Council for Voluntary Service or national bodies such as the National Council for Voluntary Organisations for support
• for doctrinal disputes you could approach a neutral respected person from within your community, for instance the trustees might like to ask a clerk from a local church or a community elder

3.4 Mediation

Alternatively, a charity might consider a more formal approach to resolving a dispute by employing the services of a professional mediator. Mediation can be a quick and cost effective way to resolve disputes.

If the parties involved in the dispute decide to take their disagreement to the charity tribunal or the court, the tribunal or the court will expect them to have tried mediation before hearing their case. Often the parties need commission permission under section 115 of the Charities Act to take court action in relation to a dispute within the charity. In these cases, the commission will usually expect them to have tried mediation before it provides consent to allow the matter to go to court. Even if the commission agrees that the matter is best resolved by the court, it will not follow that the charity must in all cases meet the costs of the application. This may have to be paid by those bringing the case.

4. When does the commission get involved?

4.1 The short answer

The commission will only get involved when it has evidence that all other available methods of resolving the dispute have been attempted and have failed.

4.2 In more detail

If there are properly appointed trustees in place the commission will not get involved. It is the responsibility of the trustees to ensure any complaints are addressed.

The commission will become involved if the following two points are satisfied:

1) there are no validly appointed trustees; and

2) all other methods of resolving the dispute have failed

Complainants should show good reason, backed with evidence, for concerns that they raise with the commission. The commission will expect complainants to raise all of their concerns in writing at the outset and not submit piecemeal complaints.

5. What can the commission do to help you towards a solution?

5.1 The short answer

If all parties are willing to cooperate, the commission may be able to provide a solution or mechanism for getting the charity back to a position of having properly appointed trustees.

5.2 In more detail

If the commission is presented with substantiated concerns about the validity of trustee appointments, it will deal with these first and only if all other methods of resolving the dispute have failed. Secondary complaints will generally not be dealt with until a valid trustee body is in place to take the charity forward. At that point, issues relating to the management and administration within the charity are matters for the charity trustees to address and not the commission.

If the commission decides that the concerns presented to it justify its involvement, its aim is to secure a positive outcome for the charity. The commission’s focus will be to find a workable solution to the problem and it expects all parties to commit to a way forward once agreed. The commission will also expect all those involved to act in accordance with our decision once made.

The means by which the commission provides a solution depends on the level of risk involved and the likelihood of a successful outcome.

Ways of putting the charity back on track include:

• signposting to mediation services
• making arrangements for the determination of who are the members of a charity
• making arrangements for the valid appointment of trustees
• making arrangements for fair and independently observed elections, including encouraging the parties to form an electoral commission and authorising that body to supervise the next elections
• providing advice and guidance to trustees regarding their duties and responsibilities
• providing advice and guidance to trustees about improvements to their governing document so that any future disputes can be resolved more easily.

Case study: complaints were received about a charity’s elections and there was some doubt over the appointment of the trustees. Both sides of the dispute were willing to co-operate and the commission sanctioned the calling of an election which was supervised by an independent observer. The charity now has a properly appointed group of trustees who can take any further issues forward.

6. When will the commission take regulatory action in a dispute case?

6.1 The short answer

When there is evidence of misconduct or mismanagement which puts the charity’s assets, beneficiaries, integrity and reputation at risk; when the charities is being run by individuals who are not entitled to run it and are unwilling to put the situation right; or when the charity can no longer operate.

6.2 In more detail

The commission will determine the most appropriate and proportionate course of regulatory action to take based on an assessment of the:

• particular circumstances
• the seriousness and scale of the problem
• the level of risk to the charity (activities, beneficiaries, property or reputation)
• available evidence
• likelihood of a successful outcome

In cases of serious regulatory concern, the commission’s assessment may lead to it opening a formal inquiry under section 46 of the Charities Act.

Deliberate wrongdoing, criminality and serious abuse will be dealt with rigorously and decisively. Where necessary, the commission will intervene to protect the charity by using the commission’s legal powers.

When charities, or those connected with them, have committed a criminal offence this is a matter for law enforcement agencies and the commission will refer suspicions of criminal activities to them as appropriate.

The commission still expects to be notified if the charity is subject to investigation by another regulator or a criminal investigation as a matter of course. Find out How to report a serious incident in your charity.

7. When the commission is not the right organisation to come to

7.1 The short answer

The commission will not become involved where a concern is about policies pursued or actions taken by the trustees within the law and the provisions of the charity’s governing document or when another organisation is best placed to deal with the concern (see end of guidance for list of useful contacts).

7.2 In more detail

Decisions about policies pursued or actions taken by the trustees within the law and the provisions of the charity’s governing document are for trustees to take (and justify), and they have very wide freedom to do so. The commission does not have discretion to overrule a charity’s decision, validly taken within its powers, on the grounds that others take a different view, however strongly held. Deciding policy is a key part of trustees’ freedoms and responsibilities, and may include:

• seeking resolution to the dispute including differences of opinion over spiritual or doctrinal matters within religious or other belief-based charities
• deciding how community facilities (such as a school, community centre or playing field) are used
• deciding how to consult users, user groups or supporter groups about decisions and policies of the charity they use or support
• the terms and conditions of occupancy or use of charity land, and (provided that legal and constitutional requirements are met) its disposal

The commission cannot become involved where the complaint concerns contractual or other property rights which are matters between the charity and a third party, for example:

• employment issues or claims of unfair dismissal
• disputes between charities and people or organisations which have entered into contracts with the charity, including landlord-and-tenant disputes

In addition, the commission cannot become involved where the issue is connected with a planning application or development control.

At the end of this document we have listed useful organisations that you might want to contact for further help or guidance.

8. Focus on positive outcomes

If the commission facilitates a solution which is then disrupted by continued dispute and lack of cooperation, it may have to bring an end to its involvement, even in some cases where the commission continues to have regulatory concerns. For example when the commission has authorised an election committee to call an election, but there is ongoing disagreement about who should be represented on this committee, the commission may decide to end its involvement.

The commission has a duty to ensure that its regulatory action is appropriate, proportionate and targeted where it is needed. Its continued involvement in a dispute can only be considered where a clear risk to the charity exists and where there is a good probability of a successful outcome. If the commission’s experience tells it that this probability is low, it may disengage. This could mean that the charity ceases to operate and winds-up or that the charity splits. As regulator, the commission cannot eliminate all failure and in some cases will have to tolerate this as the outcome.

The commission would of course support the charity in facilitating the transfer or split of its assets if needed.

9. Useful contacts

Charity Commission First Contact – advice and guidance regarding charities

• The essential trustee: what you need to know CC3
• Complaints about charities (CC47)
• Charities and meetings CC48
• Membership charities (RS7)
• Reporting Serious Incidents

Civil Mediation Council - provides resource for civil, commercial and workplace mediation in England and Wales

Website: www.civilmediation.org/

The National Council for Voluntary Organisations (NCVO) – has specialist teams that are able of provide information, advice and support to voluntary and community organisations

Website: www.ncvo-vol.org.uk

Helpline 0800 2798 798

National Association for Voluntary and Community Action – provides a directory of local Council for Voluntary Services – who act of local umbrella organisations for local charities and voluntary groups. They provide training and support to trustees.

Website: www.navca.org.uk

ACAS – for information on employment issues and disputes

Website: www.acas.org.uk/

Helpline 0300 123 1100

Homes England – government housing accelerator

Website: www.gov.uk/government/organisations/homes-england

Helpline: 0300 1234 500

Regulator of Social Housing – regulates registered providers of social housing

Website: www.gov.uk/government/organisations/regulator-of-social-housing

Helpline: 0300 124 5225

Care Quality Commission – regulatory body for care issues

Website: www.cqc.org.uk