Charity trustee disputes and the importance of resilient governance
24 October 2024
According to the Charity Commission’s sector overview, there are 924,162 charity trustees governing charities that are registered in England and Wales. The vast majority of those individuals will be acting on a voluntary basis, often making time for their trustee duties alongside other paid and voluntary roles. Trustees, of course, bring to the role a wide variety of previous experience which informs their views about how best to manage the charity and any challenges the charity might be facing.
Is disagreement amongst charity trustees a bad thing?
Given the number of people involved and the varied life experience they bring to the role, it is not surprising that there are occasions where charity trustees disagree. In fact, disagreement between trustees can be beneficial where it is constructive and generates important debate about the best course of action for the charity. Generally speaking, disagreements are resolved without significant issue, after a healthy and respectful debate and the decision ultimately being taken based on the majority view.
However, there are times when trustees are not able to resolve their disagreements, and they escalate into significant disputes that can be incredibly disruptive for the charity. Unfortunately, we have seen a marked increase in internal disputes within charities over recent years.
Resolving disputes
The tools available to a charity to resolve a dispute swiftly and with minimal impact on its operations will be heavily influenced by what provisions have been included in the governing documents of the charity and how effectively they can be utilised. Where there are no (or limited) tools in the governing document, trustees can find themselves unsure about what to do, what action they can take, and ultimately how to move forward.
In some cases, trustee disagreements can become so significant and embedded that they start to pull charity resources away from furthering their important charitable work, with significant time and energy spent focusing on resolving the dispute. In the early stages this may, for example, mean that trustees are spending a disproportionate amount of their time discussing the dispute, rather than discussing the strategic objectives of the charity. If the dispute cannot be resolved, the resources diverted to the dispute can quickly escalate to include significant time and money spent on investigating a matter and obtaining legal advice.
Ultimately, a dispute between the trustees has the potential to reach a point where the charity is no longer able to function effectively, and resolving the dispute therefore becomes the primary focus. If the dispute reaches this stage, there are likely to be significant resources diverted to dealing with the dispute and there is the real risk of a negative impact on the work of the charity and associated negative publicity. The charity is also likely to need to make a serious incident report to the Charity Commission.
The Actors’ Benevolent Fund
One of the more high-profile trustee disputes in recent years relates to The Actors’ Benevolent Fund (ABF).
ABF was originally founded in 1882 by Sir Henry Irving. In 1929 it was registered as a charitable company. The charity provides relief and assistance to actors and stage managers who cannot work due to accident, illness, or old age, along with support to their spouses, partners and dependants.
In 2022 a dispute arose within ABF in relation to proposed changes at the charity and the appointment and retirement/removal of its trustees (known within the charity as ‘Council Members’). It is reported that at the December 2022 AGM a vote took place that purported to remove several longstanding trustees from office and appoint new trustees in their place. Among those removed was the actor Dame Penelope Keith, who had been the President of ABF for 32 years.
These events were seen by some involved in the charity as a ‘takeover’ of the trustee board with the ‘ousted’ trustees arguing that the vote removing them was illegitimate. In the fall-out that followed the disputed vote two opposing factions became embedded within the charity, with some supporting the ousted trustees and some supporting the new trustees.
The Charity Commission was alerted to the issues within ABF and informed that, as a consequence of the disputes vote, the charity had no validly appointed trustees after the AGM. In April 2022 the Charity Commission opened a regulatory compliance case to investigate matters further.
In April 2023, despite identifying a breach in respect of the AGM process, the Charity Commission formally appointed those individuals who had received the most votes as trustees, with instructions that the charity must hold another trustee election by the end of the year. The Commission commented that the dispute “has not served the interests of the charity’s members or beneficiaries and has been harmful to charity’s reputation and its ability to operate effectively” and that “We hope and expect all parties to this dispute to move forward together in the interests of the charity and its beneficiaries”.
Now, you might think that was the end of the matter. But the dispute rumbled on.
The new ABF trustees made several statements in response, including that they would “work to modernise the charity” and “implement a Charity Commission action plan which was imposed because of failings of the funds’ previous leadership”. They also made reference to the previous trustee election process, saying “prior to the last AGM, the ABF had never had open elections nor allowed any member to stand feely to be a trustee”.
The removed trustees are reported as having said that the new board “hijacked” the charity and that ABF had been acting “unlawfully”.
Following the Commission’s decision to appoint the disputed trustees, a complaint was made to the Commission about its handling of the investigation. In response the Charity Commission undertook an internal review of its own investigation. That review concluded in January 2024 and many of the complaints from the former trustees were upheld. The review concluded that the ousted trustees had been treated “unfairly” and that the Commission had failed to engage with them when it should have. The Commission acknowledged that it had proceeded on the basis that the ousted trustees were removed from office at the disputed AGM without making a formal finding that their removal had been valid.
Still the matter was not resolved and rumbled on.
The results of the next trustee appointment vote were due to be announced at the charity’s AGM in January 2024. However, the announcement was delayed because irregularities were noted in the voting, particularly in relation to online voting. These irregularities were significant enough for the charity to contact the police. It was found that during the online vote 156 votes came from a single IP address, and 35 votes came from a second IP address. After some investigation the charity ultimately discounted 166 votes (enough to have a significant impact on the vote had they been counted) and confirmed the election of the current board of trustees.
Phew! Surely this means the charity is now on a solid footing to move forward. Or does it?
Just two months after his appointment, the new Chair of ABF (Lloyd Grossman) stood down citing time pressures. In addition, members of the original ousted group of trustees continue to express dissatisfaction at how the matter was handled and have indicated they might make further formal complaints.
Quite how or when this dispute will finally be put to rest, only time will tell.
The Birketts view
As with most relationships, no one ever thinks people are going to fall out until they do. When this happens amongst charity trustees, the consequences for a charity, its work and its beneficiaries can be significant, long-lasting, expensive and hugely disruptive.
Whilst the Charity Commission got involved in the ABF dispute, it will only do so in exceptional circumstances and generally expects trustees to resolve disputes themselves.
The starting point for trustees looking to resolve a dispute should always be the charity’s governing document and internal policies. Does your governing document include provisions that will help you to resolve a trustee dispute? If a matter needs investigating, do you have provisions or policies in place for how that investigation will be managed, who will be involved and whether the decision will be final or appealable? Do you have power to remove a trustee and, if so, what steps need to be taken to exercise those powers? Again, is that decision final or can the trustee appeal it, if so to whom?
Where you have provisions in your governing documents (particularly around trustee appointment and removal) it is important to ensure that they are clear. Where there is scope for different interpretation of the rules or if the procedures set out in your governing document are not clear or have steps missing, there exists the opportunity for further dispute to arise between the trustees as to the correct interpretation of the provisions. Steps should therefore be taken to ensure that provisions are as clear and complete as possible.
Trustees should also check that the procedures in the charity’s governing documents accurately reflect what the charity does in practice. If the charity does not follow the procedures in its governing document (either before or during a dispute) this can lead to a dispute snowballing and becoming a much bigger and more difficult issue to manage and resolve.
Whilst you cannot plan for every eventuality, you can help to avoid some disputes, or bring a dispute to a swift conclusion, by having clear, easy to follow, appropriate provisions in your governing documents. Trustees should therefore regularly review the charity’s governing documents through this lens and make any changes required to help with this. As a trustee board you can also regularly discuss how you would manage any potential disputes and put in place any necessary policies that might assist you.
Ultimately, everyone undertaking a role as a charity trustee should keep in mind that their duty is to act in the best interest of the charity, not their own best interests, and that lengthy disputes that distract from the charity’s purposes are never in the charity’s best interests.
If you would like assistance with managing a dispute or reviewing your governing documents or policies, please contact our Charities Team.
Sectors
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at October 2024.