How Does The Charity Commission's Guidance Relate To Legacies?

Introduction

Over the summer the Charity Commission released new guidance, Charities and litigation: a guide for trustees (CC38). The guidance is accompanied by (i) a checklist of key actions for trustees when considering or faced with litigation and (ii) a Legal underpinning aimed largely at professional advisors which sets out the Charity Commission's view of the law 'underpinning' the guidance. The Charity Commission identifies two reasons for being interested in charities and litigation: 3.1 The Charity Commission (or the court) must authorise litigation known as 'charity proceedings'. 3.2 Litigation (whether the charity is bringing or defending the proceedings) 'can present significant risks' for charities. 'Charity proceedings' concern the internal administration of a charity, such as the removal of a trustee. It is the second reason that is relevant in the legacy context. The Charity Commission is also concerned to protect the reputation of charities. The legacy context has given rise to (usually ill informed) criticism of charities for pursuing certain court cases. Charity trustees and the decision to litigate - existing guidance

All charities have the power to take or defend legal action - this is done in the name of the charity for charitable companies, Royal Charter bodies and CIOs, or in the name of the charity trustees for unincorporated associations and trusts. Charity trustees must balance conflicting duties - the duty to safeguard charity assets may mean that charity trustees should take legal action to recover assets (including legacies), or that they should not take legal action, for example because of the costs relative to the amount at stake involved. Charity trustees must ensure that any decision to initiate or defend legal proceedings are taken in accordance with their legal duties. See the Charity Commission's updated (July 2015) guidance, The essential trustee: new guidance on trustees' responsibility. The Charity Commission's It's your decision: charity trustees and decision making provides helpful guidance. In summary, trustees should be properly informed, have considered all reasonable options, seek professional advice where needed and have managed any conflicts of interest or loyalty. On occasion, the Charity Commission is robust in the stance it takes over recovery of charity assets. In particular see The Charity Commission's policy on restitution and the recovery of charitable funds misappropriated or lost to charity in breach of trust. The new guidance

The Charity Commission's new guidance '...explains what charity trustees need to know when thinking about taking or defending legal action generally...' It sets out general principles which should guide trustees including trustees have a duty to protect or secure charity assets and, where necessary, to recover assets belonging to the charity - legal action may allow the trustees to do this. a decision to take or defend legal action must be made exclusively in the best interests of the charity and charity trustees should be able to explain and justify that decision. unless the charity has appropriate in-house...