Do we legally have to have a conflicts of interest policy?

England and Wales: This page sets out the position in full. Scotland: a different rule, and a stricter one for a SCIO — the constitution must contain conflict procedures from the day it is created, see below. Northern Ireland: the same answer, reached differently — CCNI calls the policy good practice and publishes its own four-step process instead.

Which is binding: the duty or the written policy?

The duty to manage conflicts binds every trustee. No provision requires a written conflict of interest policy. A conflict of interest is any case where a trustee’s own interests could pull against their duty to the charity. Their loyalty to someone else can do the same.

This page covers trustees in England and Wales, where the Charity Commission’s CC29 applies. It also covers Scotland and Northern Ireland. It assumes the board has already built its conflicts of interest register; the policy says what happens to each entry in it.

Start with the distinction. The rest of this page applies it. Having to do a thing and having to hold a written policy about it are separate duties. Charity law creates them separately.

For conflicts, the duty is real, unconditional and binding. A trustee must act in the charity’s interests and must not put themselves in a position where their own interest competes with that. It is a fiduciary duty. It applies to each charity of any size, and no policy is needed to create it.

The document is a different question. No provision requires a charity to hold a written conflicts of interest policy. The Charity Commission says you should have one, in its own words in CC29:

“You should have a conflict of interest policy to help you: ensure trustees understand what a conflict of interest is…”

Under the must/should convention the Commission itself sets out, that is a should. It is good practice the regulator expects and will judge you against, not a legal requirement. The register that sits behind it is in the same class.

So for most charities the answer is no, you do not legally have to have one. But you should have one anyway. Both halves are true. The page would mislead without either.

The exception: a charitable company that actually faces a conflict

A charitable company whose trustee faces a real conflict must add rules to its articles first, before the decision is taken.

Then there is the exception. It is why this page does not stop at good practice. Here is CC29 in full, with nothing removed:

“If a trustee does face a conflict, adding rules to the governing document is a legal requirement for charitable companies. Therefore if your charity is a company, you must amend your Articles of Association to add these rules before you make the decision which gives rise to the conflict of interest.”

Read the whole sentence. It has been widely quoted with the middle removed. Cutting it changes what it says. Three things carry the weight:

• It applies to charitable companies, not to every charity. A CIO or an unincorporated charity is not caught by this.
• It is conditional. The words are “if a trustee does face a conflict”. A company with no conflict in front of it has nothing to amend.
• The timing runs the wrong way round from most people’s instinct. The amendment has to happen before the decision that gives rise to the conflict — not once the board has decided and is tidying up.

CC29 calls this “a legal requirement” but does not say which one. It is Companies Act 2006 s.181(2), which rewrites two parts of s.175 for a company that is a charity. Under the substituted s.175(3), the duty to avoid conflicts falls away in a transaction only “if or to the extent that the company’s articles allow that duty to be so disapplied”. Under the substituted s.175(5), the directors may authorise a conflict only “where the company’s constitution includes provision enabling them to authorise the matter”.

That is why a policy cannot fill the gap. The board’s power to authorise the conflict has to come from the constitution. A policy is a board decision, and the board cannot give itself a power the articles withhold.

Amending articles is a change to the governing document. For a charitable company, some amendments are regulated alterations needing the Commission’s prior consent. Check which amendment route your charity uses before you start, not after.

What should a conflict of interest policy cover?

A useful conflict of interest policy answers four questions in advance. A policy written to meet a legal requirement that does not exist is often a downloaded template nobody reads. A policy written so a board can defend its decisions looks different. Settle the four while nobody is under pressure:

1. Who is caught. Not just trustees — the people and bodies connected to them. The conflicts of interest register page has the statutory lists.
2. When a declaration has to be made. The answer that works is “as soon as you know”, with a standing item at every meeting as the backstop.
3. What happens in the room. Whether the conflicted trustee leaves, whether they may speak first, whether they count towards the quorum. For a CIO the last of those is not yours to decide. The CIO regulations themselves exclude a conflicted trustee from the quorum.
4. What gets written down. The minute is the output. A policy that produces no record produces no evidence.

A conflict of loyalty is worth naming, because boards miss it. Nobody gains any money. A trustee also sits on the board of another body the charity is deciding about. It is a conflict, and the same process applies.

Where the policy runs out: paying a trustee

A conflicts policy is a process for handling a conflict. It does not authorise the thing the conflict is about; the rules on paying a trustee do that. Paying a trustee for goods or services needs its own statutory gateway: Charities Act 2011 s.185. All four of its conditions have to hold together. Two of them bear directly on conflicts:

C — immediately after the agreement, the paid and connected trustees constitute a MINORITY of those holding office.
D — the trusts of the charity contain no express provision prohibiting the payment.

Condition D is the one this page exists next to. If the governing document bans the payment, no policy and no process rescues it. And Condition C is maths, not judgement. A small board can fail it by being small.

The annual return asks about this directly. One of its questions covers What trustees were paid for (five options); whether any trustee resigned and took up employment. The conflicts register is where the answer comes from.

Scotland: conflict rules in every SCIO constitution

A SCIO’s constitution must contain procedures for dealing with conflicts from the day the SCIO is created.

Scotland differs here in structure, not in wording. The duty itself is statutory — s.66(1)(c) of the 2005 Act.

On top of that, a SCIO’s constitution must make provision for procedures for dealing with any conflict of interest. That comes from the Scottish Charitable Incorporated Organisations Regulations 2011, regulation 2(f). It applies from the moment the SCIO is created.

Compare the two systems side by side. They are mirror images:

• England and Wales is reactive. A charitable company needs the rules in its articles only once an actual conflict arises. Until then, nothing is required.
• Scotland is pre-emptive, for SCIOs. The rules have to be in the constitution before there is anything to apply them to. That is a condition of the constitution being valid at all.

For any other Scottish structure, OSCR recommends a written policy in the same terms the Commission uses for England and Wales. Its own guidance says to have a conflict of interest policy. The aim is that all the charity trustees understand what could be a conflict of interest. That is a should, not a must.

Northern Ireland: good practice and CCNI’s process

In Northern Ireland the written policy is good practice, and CCNI sets out a process to follow. CCNI does not cite a numbered conflicts provision. It treats the duty behind it as fiduciary. It says plainly that the paperwork is good practice:

"It's good practice to: have a conflicts of interest policy; keep a register of interests; ask new trustees to fill in a 'declaration of interests' form."

CCNI also sets out a four-step process. The other two regulators do not:

1. 1. Declare a conflict: as soon as possible, tell the other trustees you might have a conflict of interest.
2. 2. Leave the meeting: leave while the other trustees decide whether you should be present.
3. 3. Decide on next steps: trustees may decide there is no conflict (or it is too small to matter); may exclude you from the relevant discussion/vote; or, if serious or repeated, you might need to resign or stop the conflicting activity.
4. 4. Record the process: minute the conflict and what was done, and update the register of interests.

That is as good a skeleton for a policy as any template. And it is free.

One caution. This project’s research found no Northern Ireland equivalent of the England and Wales articles trigger. Company law is UK-wide and reserved. So the same s.181 analysis is highly likely to apply to a charitable company registered in Northern Ireland. But it was not separately checked against NI registrations. This page does not state it as settled.

Common mistake: a charitable company relying on a policy where it needs an articles amendment

A policy is quicker to adopt and feels the same. It is not.

CC29 is explicit that for charitable companies facing an actual conflict, adding the rules to the governing document is a legal requirement. The amendment must come before the decision that gives rise to the conflict.

The provision behind this is Companies Act 2006 s.181(2). Under it, the board can authorise a conflict only where the constitution already enables it. A board that adopts a policy and thinks it has dealt with the problem has dealt with a different problem.

Worked example

Saltmarsh Trust is a charitable company. Its board finds out that a trustee’s firm has been supplying the charity with services for two years. The charity has a conflicts of interest policy, adopted at the trustee’s own first meeting. The declarations were all made properly and minuted each time.

None of that is the problem. The articles contain no provision authorising the board to approve a conflict. So under the substituted s.175(5), the board never had the power to authorise this one. The policy recorded a decision the company could not make.

Two jobs follow, not one. The articles need amending for the future. The trustees need to check first whether that amendment is a regulated alteration needing the Commission’s consent.

Separately, the payments already made need their own authority. The amendment does not give it after the fact. At this point the charity needs a solicitor. The cost of the advice is lower than the cost of the two years.

With conflicts handled, the next policy in the sequence is the safeguarding policy.