Charity trustees must make their decisions only in the best interests of the charity and need to consider the issue of any potential conflicts of interest in order to eliminate them. Conflicts can arise for many different reasons. Trustees need to know how to identify and disclose conflicts of interest and thereafter either find an alternative way forward which does not involve the conflict or take appropriate steps to manage the conflict.
The governing document of a charity will often include a mechanism for authorising or dealing with conflicts but, if there is no such mechanism available, or if the mechanism does not address the particular conflict that arises, then the consent of the Charity Commission will be needed.
It is now best practice for charities to have a conflict of interest policy which explains to the trustees how, according to the terms of their governing document, they should identify and deal with any conflict.
A risk of not dealing with a conflict properly is that an unauthorised benefit received may need to be returned to the charity. For a professional trustee there is also a risk that the professional body will become involved. The Charity Commission will generally only intervene in the charity when there is clear evidence of serious misconduct or mismanagement.