The Charity Commission of England and Wales has published a very helpful guidance “It’s your decision: charity trustees and decision making”. Although there are difference between English and Canadian law the guide provides lots of useful information on how directors of Canadian charities should make decisions.
“These are the principles that the courts have developed for reviewing decisions made by trustees. Trustees must:
act within their powers
act in good faith and only in the interests of the charity
make sure they are sufficiently informed take account of all relevant factors
ignore any irrelevant factors
manage conflicts of interest
make decisions that are within the range of decisions that a reasonable trustee body could make”
Furthermore the guidance notes:
“Trustees must take decisions in a way that meets the requirements of charity law and their governing document. This includes:
following any specific requirements in the governing document about making decisions and conducting meetings
taking decisions jointly (collectively),
making sure all trustees have the opportunity to participate
if using a power to take decisions outside of a meeting, strictly following the provisions of this power if delegating to staff or sub-committees,
having clear and robust reporting procedures and lines of accountability in place recording decisions properly, so there is no doubt about what was decided and why”
The guidance discusses the degree to which directors and trustees must be informed:
“B3. How do trustees make sure they are sufficiently informed?
Trustees need to be able to demonstrate that their decisions are based on sufficient and appropriate evidence. What this means in practice will depend on the circumstances. It includes deciding whether to take advice from a suitably qualified person. Factors such as:
the cost or value involved
the complexity of the issue
any controversy affecting the issue
the impact of the decision
how far reaching it is, and
how urgent it is
can have a bearing on what is adequate in the circumstances.
Trustees who are taking advice should do what they can to ensure that their adviser has sufficient expertise and is adequately and accurately informed about the matter. Whilst trustees remain responsible for the decision they take, if they have considered and acted on appropriate advice, this is likely to protect them.
We don’t expect trustees to see into the future. It is about what that they could reasonably have known or found out at the time. If something goes wrong or a decision is challenged, the courts and the Commission take account of the fact that most trustees are not legal or technical experts. Minutes, reports or other formal records should show, if appropriate, how the trustees obtained information and advice, and the options they explored.
Sometimes it might be helpful to consult stakeholders about important decisions. The people who are consulted should be clear that the final decision will be made by the trustees, but conducted well, consultation can help:
trustees make informed decisions, taking into account the views of others and assessing the impact of their proposed decision
those directly affected to be involved in decisions that affect them
show that there is openness and transparency about the proposals, particularly important where they will have significant impact (such as the withdrawal of a service)
the charity show that it listens and responds to comments and concerns when formulating decisions.”
“B4. What does it mean to take account of all relevant factors?
There may be a variety of factors to consider depending upon the circumstances and the importance of the decision. In some circumstances, the trustees may want to take advice on their responsibilities.
Depending on the circumstances, relevant factors could include, for example:
Is the proposed decision in the best interests of the charity? (This is always likely to be a key consideration).
If the proposed decision affects the charity’s activities, is it consistent with the charity’s objects?
Have the trustees had regard to the Commission’s public benefit guidance?
Do the trustees have all the powers they need to make and then carry out the decision?
Are there any alternatives to consider?
Do the trustees have sufficient professional or specialist advice to enable them to make an informed decision?
If they propose not to follow it in any regard, why is it in the best interests of the charity not to do so?
What are the risks/benefits of the proposed decision?
How could this affect the charity’s reputation?
Are there any steps the charity should take to manage or mitigate reputational risks?
Will the decision affect the future ability of the charity to further its purpose effectively?
If it will have a negative impact, can it still be clearly justified as being in the charity’s interests?
Does the charity have sufficient funds to carry through the decision and continue past implementation?
If the trustees have consulted the charity’s stakeholders, what have they learned from that consultation?
How much weight should they give to stakeholders’ views?
If the trustees commit to the proposed decision, will there be any opportunity to withdraw at a later stage without incurring costs or penalties which may be unaffordable?
Minutes or other formal records should show that the trustees actively considered these issues. The written record should be sufficient to allow someone to understand the issues, the decision and the reasons for it. Trustees may need to reconsider from time to time whether a decision is still in the best interests of the charity. This may be particularly important during an on-going project or activity where circumstances may change over time.”
To read the whole guidance see “It’s your decision: charity trustees and decision making” http://www.charitycommission.gov.uk/detailed-guidance/trustees-staff-and-volunteers/its-your-decision-charity-trustees-and-decision-making/
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.