The use of large up-front fees and disproportionate deposits has already resulted in significant cost consequences for one care provider.
This is becoming more common as charities are called upon to do activities and services that may have been previously filled by, for example, local authorities. Charities are expected to adapt in order to meet the needs of beneficiaries and in order to do so, links with commercial and not-for-profit organisations emerge.
Following the Charity Commission’s recent regulatory report on Age UK’s partnership with energy company, E.ON, it has issued brief guidance to assist charities that partner with commercial organisations or are looking to do so in the future.
The Charity Commission is not trying to dissuade charities from entering into partnerships with commercial organisations - the Commission appreciates that such agreements can be beneficial to the charity through raising awareness and funds. However, when entering into agreements or partnership with commercial organisations, the trustees must be mindful of the risks to the charity’s reputation.
Commercial organisations may enter into agreements with the charity itself or the charity’s trading subsidiary.
The Charity Commission advises trustees to:
- take independent legal advice before entering into any agreement or partnership with the commercial organisation;
- carry out due diligence checks on the commercial organisation;
- be satisfied that the partnership would be in the best interests of the charity and put processes in place to allow the charity to regularly review whether it continues to be in the best interests of the charity during the term of the agreement;
- make sure all agreements between the parties are in writing;
- have the right to exercise control over any agreement or partnership;
- have considered the benefits and risks to the charity’s name and reputation of any commercial partnership;
- make clear to buyers/service users the nature of the agreement or partnership and the fee or commission received by the charity where products and/or services are being sold by or in the name of the charity; and
- ensure that the commercial organisation has confirmed that it has complied with its own regulatory requirements.
If the charity’s trading subsidiary enters into an agreement or partnership with a commercial organisation, as well as complying with the guidelines referred to above, the trustees will also need to:
- be mindful that any use of the charity’s name in marketing and such other commercial communications or exercise must be formally agreed and monitored by them;
- regularly monitor the performance of its trading subsidiary and the charity’s investments in the trading subsidiary;
- assert the rights of the (parent) charity so that the best interests of the charity are always maintained; and
- intervene (if it can) in the agreement between the trading subsidiary and the commercial organisation if the trustees believe that serious issues may arise which would affect the charity’s reputation or the way in which the agreement or partnership is being implemented is unsatisfactory.
The alert from the Charity Commission serves as a helpful reminder for trustees to review agreements and partnerships with commercial organisations, especially where such roles have previously been delegated to others, such as fundraising staff.
For more information
If you require further information about entering into an agreement or partnership with commercial organisations, please contact a member of the Charities Team on 0121 212 7450, firstname.lastname@example.org.
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