Registered Social Landlords: The Need For Vigilance In Dealing With Non-Charitable Group Members

The launch on 13 February by the Charity Commission of consultation on draft guidance for managing relationships between charities and connected non-charitable organisations is a timely reminder of the governance issues facing charitable registered social landlords when handling their relationship with non-charitable group companies. Although the Charity Commission guidance will not have effect in Scotland it raises a number of issues of potential concern for RSLs, particularly as increasingly complex group structures, involving the use of non-charitable trading subsidiaries, are becoming more commonplace.

Increasingly RSLs have established non-charitable trading subsidiaries for the purpose of conducting activities inconsistent with their primary charitable functions, for accounting or other reasons. This can include, for example, companies engaged in development activity, joint ventures and renewable energy projects, established with a view to making profits that can be gift aided back to the parent RSL to support its core charitable activities. It is not unusual for RSLs to make substantial funding and other resources, such as shared staff and shared premises, available to such a subsidiary.

Key issues for the members of a RSL engaged in such activity include:-

The need to actively manage the relation with the subsidiary. The need to preserve clear separation and independence from the subsidiary, with separate boards and decision making functions. To recognise that the primary duties of the members are to the RSL. To identify and avoid conflicts of interest and to have clearly documented policies. The importance of clearly documenting the...