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There has been interesting work done in England and Wales recently following the publication of the consultation on guidance “Charities that are connected with non-charitable organisations: maintaining your charity’s separation and independence”. Guidance from the Charity Commission for England and Wales is due by the end of 2018.

This will be important guidance for any charity trustee where their charity works closely with a non-charitable organisation. This could include working with a trading subsidiary or a partner. The draft consultation documents included a section on providing investment funding to a charity’s trading subsidiary. This included a number of checklists such as having read the guidance on investment to ensuring the investment fits with the charity’s current investment objectives, making the decision independently by following independent advice and considering the best interests of the charity only setting aside any interests or wishes of the non-charitable organisation and recording the full reasons for the decision taken.

Where there were trustees who were also directors of the trading subsidiary or connected in other ways, they should not be involved in the final deliberations and decisions about making the investment. In providing additional capital investment by way of a loan taking into account factors including the subsidiaries performance over an appropriate period, the reasons for requesting further investment and prospects for improving its performance. The trustees also had to show that they had considered various options such as winding-up the trading company, but that the final decision taken was solely in the charity’s best interests to make the investment and the decision and interest rate agreed made in accordance with all legal requirements.