With some charities having to launch legal action to secure donations, most commonly over disputed wills and legacies, the Commission’s guide Charities and litigation: a guide for trustees (CC38) clarifies the issues that trustees need to consider when faced with litigation with advice on how to comply with legal obligations and act in the charity’s best interests.
The Commission states that decisions on whether or not to take or defend legal action should be made in accordance with the principles set out in its 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 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.
It 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 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.”
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