Charity Commission Issues New Guidance for Charities on Taking & Defending Legal Proceedings

05 Aug, 2016

The Charity Commission (‘the commission’), the independent regulator of charities in England and Wales, has recently published ‘Charities and litigation – a guide for trustees (CC38)’.

The prospect of taking or defending legal proceedings is often a difficult and complex matter for trustees that can present significant risk to a charity. This brand new guidance clarifies the issues that trustees need to consider when faced with litigation and helps them comply with their legal obligations as well as their duty to act in the best interests of their charity.

Decisions on whether or not to take or defend legal action should be made in accordance with the principles set out in the commission’s existing guidance on decision making, ‘It’s your decision: charity trustees and decision making (CC27)’.

Trustees should also identify and address the potential risks and impact of litigation on their charity and its beneficiaries. In applying those principles to decisions involving litigation, the guidance highlights the need for trustees to take and consider legal advice, to assess the economic prospects of success or failure and the impact on the charity, and consider whether their intended actions are proportionate in all the circumstances and in the best interests of the charity. The guidance also indicates when trustees need to protect themselves against the adverse risk of costs and outlines alternative ways to resolve the issue in dispute that trustees should explore before legal action such as mediation and negotiation.

The guidance also contains detailed information on charity proceedings, a specific category of legal claim concerning the internal administration of charities which require authorisation from the commission. This includes how to make an application to seek the commission’s consent, to help trustees prepare for these typically time sensitive situations.

The commission finalised the guidance following valuable input from the Charity Law Association’s specialist working group.

Kenneth Dibble, Chief Legal Advisor at the Charity Commission said: “Legal action can present significant risk to a charity’s beneficiaries, assets, and reputation, but in some circumstances it may be the best or only option. This guidance aims to help trustee bodies reach a justified decision on litigation and crucially, to manage risk effectively by assessing the challenges and costs their charity might face and deciding how to deal with them.

“We encourage any trustees thinking of engaging in litigation to read our new guidance, apply the principles set out in our existing guidance on decision making, and to contact us as a matter of priority if they require our protection from adverse costs or authorisation to proceed.”

(Source: Charity Commission)

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