Do Company Law Members Owe A Fiduciary Duty To Their Charitable Company?

• Published date: 19 August 2020
• Subject Matter: Corporate/Commercial Law, Charities & Non-Profits , Corporate and Company Law
• Law Firm: Wrigleys Solicitors
• Author: Ms Hayley Marsden

Court case confirms that members of charitable companies are fiduciaries and owe duties as such. We look at what this means for charitable companies.

What was the court case about?

The court case concerned the Children's Investment Fund Foundation (CIFF), founded by Sir Christopher Hohn and Ms Jamie Cooper, which became difficult to manage when their marriage broke down. To resolve the difficulties, Sir Christopher and Ms Cooper agreed that, in return for a grant of $360m to be paid by CIFF to Big Win Philanthropy (founded by Ms Cooper), Ms Cooper would resign as a member and trustee of CIFF. CIFF's members had to approve the grant. However, as Sir Christopher and Ms Cooper each had a conflict of interest, they had to absence themselves from the vote. It therefore fell to the one remaining member, Dr Marko Lehtimaki, to vote on the proposal. The Supreme Court found that Dr Lehtimaki was a fiduciary when acting as a member of CIFF and (finding that the grant was in the best interest of CIFF) ordered him to vote for the resolution approving the grant.

What does it mean for members of charitable companies?

The Supreme Court has confirmed that members of charitable companies owe a fiduciary duty to act with single-minded loyalty in the best interests of the purposes of the charity, in accordance with their governing document and in accordance with company, charity and other law.

They must also avoid any conflict of interest from their position. Practically, members must therefore declare any such conflicts and remove themselves from discussion and not participate in decisions of the members, where their interests (or those of a third party to which they are connected) conflict with those of the charitable company.

Finally, the Supreme Court said the duties owed by a member of a charitable company need to be considered according to the particular circumstances that apply and the governing document of the charity...