A recent decision in August 2017 of the High Court in England and Wales makes interesting reading for anyone who is a member of a charitable company limited by guarantee. In this case the English High Court held that the company members owed fiduciary duties to act in the best interests of the company when considering when to approve a payment to a director for loss of office (Children’s Investment Fund Foundation (UK) v Attorney General and Others ). This case establishes for the first time that the members of a charitable company are not free to exercise their rights in their own interests. The facts arose in the context where the court was asked to approve the making of a substantial grant by one charitable company to another in order to finalise the financial arrangements of a wealthy divorced couple. The court considered whether the grant was a payment for loss of office that required approval of both the company members and the Charity Commission for England and Wales under provisions in the Companies Act and the English Charities Act (we have equivalent provisions in the Northern Ireland charities legislation). In this case the High Court directed a company member to vote in favour of a resolution to approve the grant as it had decided the grant was in the best interest of the charity and that voting against it would be contrary to the members’ fiduciary duties. In the judgement the court also considered its jurisdiction over charitable companies and whether a grant to a connected charity constituted a material benefit to a director within the terms of a standard benefits provision in a charity’s governing document. Although an English case, this is of great interest to charity lawyers and to charity trustees, particularly when considering whether there are legislative consents required for transactions with a director.
The Charity Commission for Northern Ireland has guidance on consents required for charity companies and it is advisable to seek particular legal advice on any transaction involving a charity and its members or directors.
If you require any advice please contact Jenny Ebbage (firstname.lastname@example.org) or by telephone on 028 9032 1863.