Managing conflicts of interest: how updated guidance affects charities

The Charity Commission (Commission) updated its guidance on identifying and managing conflicts of interest in a charity (Guidance) on 22 April 2026.

The update follows a consultation by the Commission about how it could further improve or clarify points of potential confusion for charities.

In this article, Samantha Pritchard, partner, and Jason Sinclair, trainee, both in our charities team consider the amended Guidance and flag some key takeaways for charities.

What is a conflict of interest?

Identifying and managing conflicts of interest is an important (and ongoing) duty of trustees. Conflicts of interest might arise in a number of circumstances, including when a trustees’ links and relationships outside of the charity impact their ability to act in the charity’s best interests. The Guidance describes conflicts as either “financial” or “loyalty” based. However, please bear in mind that charities with different legal structures may need to approach conflicts in different ways.

The Guidance provides that “financial” conflicts arise when a trustee (or a person/organisation connected to them, known as a “Connected Person”) could get money (or something of money’s value) from a decision that the trustees make. In these circumstances, the trustee will have a conflict between the charity’s best interests and their own interest. The size of the benefit does not matter – even if it is small, it is still a financial conflict.

On the other hand, a “loyalty” conflict can happen where a charity’s decision involves a Connected Person. If a trustees’ loyalty to the Connected Person could influence their decision-making, a conflict may arise. “Loyalty” conflicts may also arise where charities merge or change structure if there is an overlap of trustees, and not enough independent trustees to manage the conflict.  

It is very important that conflicts are carefully managed. Failing to do so could result in a decision being rendered legally invalid, resulting in a loss to the charity and the trustees. The Commission may also regard the lack of conflict management as evidence of misconduct or mismanagement.

Why were the changes made?

The revised Guidance follows a finding by the Commission that compliance cases in relation to alleged private benefit for trustees and those connected to them, linked to unmanaged conflicts, rose by nearly a quarter in one year (with a 23% rise). The Commission conducted a risk assessment and found that the main cause of such cases was not deliberate wrongdoing, but a lack of awareness. As such, the Commission released shorter and more precise Guidance to help flag the key considerations and steer trustees in the right direction.

The key changes 

The Commission’s new Guidance is shorter, clearer and provides common examples explaining when a conflict arises. The updated Guidance does not seek to change the legal framework surrounding conflicts of interest.

The Commission expects charities to take a proactive approach to tackling conflicts. In particular, the Guidance flags the importance of including relevant provisions within the charity’s governing document to tackle conflicts, noting that if the charity’s governing document does not contain provisions for dealing with conflict, or said provisions are ‘inadequate’, the charity simply must “change it”.

In addition, the Guidance makes clear that any trustee subject to a financial conflict should, as a minimum, leave the meeting whilst the discussion takes place. The charity should also have a robust conflict of interest policy with conflicts addressed on the agenda of every meeting and minutes evidencing who declared conflicts and why.  Charities should also consider whether a quorum can still be formed (and decisions validly passed) once any conflicted trustees have removed themselves.

The Guidance also includes 11 handy scenarios aimed at providing useful context to help trustees identify when potential conflicts could arise. Some of the examples include:

• The charity intends to lease the ground floor of its property, and one of the trustees owns a company which is considering applying to rent the space. The trustee who owns the company has a financial conflict so must not take part in the discussions relating to the lease.
  
  
• Some trustees want to rewire the village hall that their charity looks after. The preferred contractor is a longstanding friend of one of the trustees, but has no connection or financial interest to the friend’s business. This is a loyalty conflict which the trustees must manage.
  
  
• Following a storm, repairs are needed to a building. Trustee A offers to lend the money to the charity, interest-free, on the condition that there are 12 monthly repayments. Trustee A is married to trustee B. Trustee B is also the brother of trustee C. Trustee A and B have a financial conflict due to the loan, and the interdependency of being spouses. Trustee C has a loyalty conflict due to the familial connection.

Charities should consider the revised guidance and may wish to review their governing document and current conflicts of interest policies and procedures. 

If you need legal support in relation to the Guidance, or any other aspect of charity law, do not hesitate to contact Samantha Pritchard at [email protected] or 0191 211 7905.