Charity Law and Coronavirus

As you have read and heard countless times, no sector is unaffected by the coronavirus outbreak. While some may be able to mitigate the damage of the coronavirus outbreak on their livelihood, it is equally true that others are trapped with one eye on a potential relaxation of the lockdown rules to enable the tills to start ringing again. As you will appreciate, the charity sector is reliant on donations and support from areas of the economy which are taking extreme steps to protect against the challenging economic headwind facing us all.

The charitable sector is one which has seen funding and donations dry up overnight and the thoughts of charity trustees will begin to focus on how best to navigate this crisis with reduced income.

Turning first to board meetings, you will find many free platforms to use for a video conference call. Documents should be circulated in advance and each member should be capable of being seen and heard. It is recommended that, where possible, video calls are the preferred platform for holding a meeting. Your minutes should capture attendance and apologies with a confirmation of the manner of attendance. This, clearly, feeds into confirming the necessary quorum. Further, it is important to check that your constitution does not exclude remote meetings and voting. It is, of course, unlikely that modern drafting would prohibit meeting or voting remotely but the might not be said of slightly more dated documents. If you discover any such prohibition in your constitution or governing document, or indeed any prohibition which affects your business continuity, please do contact us.

Without wishing this to be an article about meetings, if you are required to have an AGM during lockdown it would be wise to review your constitution. You may find that there are implicit prohibitions to meeting virtually which may suggest that physical attendance is preferred. OSCR have confirmed they will take a proportionate stance to delaying an AGM but it would be wise to seek advice before doing so. We can review your constitution and propose any changes that will enable your charity to adapt to the challenging circumstances we find ourselves in.

Any meeting will likely focus on funding. While the usual sources of unrestricted funds have dried up, help is on hand through the national emergencies trust, third sector resilience fund, job retention scheme, and, of course, independent funders. Information is widely available and it is important that you and your trustees agree an ambitious fundraising strategy. There does seem to be a preference among funders (particularly the Scottish Government and various trusts or foundations) to lend support to charities that are engaged in supporting those affected by COVID19.

Of course, while you may have redoubled your fundraising efforts, income is reduced below the anticipated levels. As a trustee you will be aware of the distinction between restricted funds and unrestricted funds but that unrestricted funds will not always equal your available reserves, which you may be considering relying upon during the coronavirus lockdown. Unrestricted funds are those funds excluding total restricted funds and endowments. To calculate your available reserves, you must subtract from your unrestricted funds any fixed assets or funds already set aside within restricted funds. Your management account will be able to present this figure to the board along with the charity’s reserve policy. Using reserves should be seen as the last resort.

The use of reserves may be distressing and trustees will justifiably have one eye on their personal liability, which will vary depending on whether the organisation is a company, a SCIO or an unincorporated association or trust. Depending on the structure of your organisation, temporary moratoriums have been introduced to give greater flexibility to the insolvency and bankruptcy regimes. The temporary moratoriums are designed to ease any stress experienced by those who are concerned about personal liability and it is vital that, if you believe your charity is at risk or wrongfully trading, you and your board seek advice immediately.

Finally, as a trustee, it may be prudent to consider whether the wording of your constitution contains charitable purposes that are compatible with supporting efforts to combat the effects of coronavirus. The ability to evolve and pivot while opening your charity to additional funding may be a positive step in your charity’s development. Of course, the benefit of such flexibility transmits beyond the charity and onwards to vulnerable groups who may require additional assistance in the fight against the coronavirus pandemic.

The above is simply a high level summary of the immediate concerns facing most charities and leaves no room for nuance. Gilson Gray’s private client department advises the boards of leading charities and the majority of our solicitors have board-level experience in the third-sector. We understand the concerns felt by charities and are here to address specific matters or advise on strategy to enable your charity to navigate the pandemic.

The information and opinions contained in this article are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.