We often help founders set up their charitable trust. They often have the same questions as the previous person we helped – so we have typed out some responses to typical questions here. If this helps you then feel free to share it with others as well and if you have a more detailed question not covered here then let us know and we can add the answer in.
Can a Charity Founder and the Board Chair also be the NGO Manager/CEO?
In theory this is possible but it is not best practise. Management (CEO role) is different to Governance (Chair role) and so there is a danger of blurring of the two roles. Also, if the founder is the CEO/Manager then they lose out on having a Chair who is able to advocate for them and provide good strategy. If they are the Chair then they would lose out on having an engaged and activated CEO. So it is best to split the roles up. The IOD have produced a lot of good material on topics of governance in Charities here.
If the Founder steps down as Chair but remains Manager, how can they be protected from being made redundant or forced out from the Charity
Often in the Trust Deed the Founder – in that document called the Settlor or Donor – have certain rights which are different to other Trustees. If they are a Trustee then they can usually not be removed as easily as other Trustees. However if the Founder is no longer a Trustee and is employed by the Trust then ultimately it is up to the Trustees to decide if they are doing a good job or if a change is needed. This may be a reason why the Founder would want to stay involved in the governance – but also underlines the importance of making the right choice of Trustees, but ultimately they have a duty to act in a way that helps the success of the Trust.
How can a Founder protect their connection to the Charity – for example does there need to be a clause that without them the Charity doesn’t continue? Or have a founding honorary role?
They could be appointed as Patron or a similar title for ongoing connection. It seems unlikely that future Trustees would force such a person out but they need to act for the best interests of the Trust not the individual who founded it. It is possible there could be good reasons for the Charity to move forward without a Founder eg criminal convictions or fraud by them. Hopefully the Founder will have entrusted the vision and articulated it so well that the Charity is not entirely linked with the Founder so that it can go on beyond the person and last much longer. Founders who hold on tightly to the entity can often find that this ultimately damages the overall potential – the Charity is more than a person and needs to be given room to grow and adapt in ways that are at present not known.
Would there need to be a process for recruitment for a Manager and the Chair so whoever would be a candidate couldn’t simply automatically become Manager?
This may come back to the distinction between management and governance mentioned earlier – Chair of the Board of Trustees should ideally be separate to the Manager/CEO role. Each position should be recruited for separately. In a small charity this may not be possible as the Founder/Chair/Manager can be blurred since someone – usually the one with the original vision – needs to actually drive it along at the start.
How to prevent conflicts of interest arising within the Charity and what are the risks?
Good practice is to have some independent Trustees involved in the Charity who will not be employed by the Trust or involved in other ways that the Founder might be. Also, a conflict of interest register should be kept where any conflicts are noted. Each meeting any conflicts should be raised as well. The risks of not disclosing conflicts is that there could be negative publicity later on if a person acts in a way that benefits them personally but is to the detriment of the Charity.
If there is also a related company to the Charity then should it be owned by the Charity?
It depends. Mainly the question to answer is about funding sources and use of money that comes in. If the Company is owned by the charity then there can be no private gain to an individual. Instead a Company can be owned separate to the Charity and the Charity can use the Company to perform some aspects of fulfilling the purposes. If this is the case then there needs to be independence on the Charitable Trust so decisions made that benefit the Company are made by people who will not privately benefit as eg Shareholders of the company. We described the options and considerations in more detail in a short podcast here.
We hope these responses are helpful and provide guidance on the interrelationship between a Founder, a Charity and other stakeholders. If you have any questions then let us know
This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Steven Moe – stevenmoe@parryfield.com, or Michael Belay – michaelbelay@parryfield.com at Parry Field Lawyers.
