Conflicts of interest in charities: unpacking the Charity Commission's revised CC29

Earlier this year, the Charity Commission published revised CC29 guidance on conflicts of interest for charity trustees. The updated guidance is intended to help trustees identify, avoid and manage conflicts of interest more clearly.

In this article, we examine what the new CC29 guidance says, how it fits with the underlying law on charity trustee conflicts of interest, and where it may create a degree of legal and practical uncertainty for trustees and boards.

Why the Charity Commission revised its CC29 conflicts of interest guidance

The Commission's rationale for re-working this guidance is understandable:

• Conflicts involving charity trustees and their outside interests are a recurring factor in many of the Commission's compliance cases. Half of the inquiry reports published so far this year cite failings to manage conflicts.
• Most unmanaged conflicts of interest arise from a lack of awareness, rather than deliberate wrongdoing. Research shows that many charity trustees are unsure how to recognise and deal with a conflict.
• Less than half of charity trustees report using Commission guidance at least once a year. The regulator is therefore on a mission to review and 'refresh' its existing core guidance, to make it shorter, clearer and more accessible to charity trustees.
• Other guidance that has recently undergone this treatment includes that on paying trustees, trustee decision-making and fundraising (see our article 'Charities: legal and regulatory update – hot topics and key takeaways').

New CC29 clearly ticks the last of these, it has been cut down from 35 pages to 21, is written in plain English and easier to navigate than its predecessor. However, in places legal accuracy and nuance have been sacrificed on the altar of brevity and simplicity.

What the law says about charity trustee conflicts of interest

The rules are rooted in case law that applies to any person who undertakes to act for or on behalf of another in circumstances that give rise to a relationship of trust and confidence (known as a 'fiduciary'). All charity trustees are fiduciaries and therefore owe an obligation of 'single-minded loyalty' to their charity.

Being a fiduciary requires following two distinct (but related) rules:

• No conflict rule: a charity trustee must not place themselves in a position where their personal interests, or their legal duties to another party, conflict with or possibly may conflict with, their legal duties to the charity. However, there must be a "real sensible possibility of conflict", so remote or trivial conflicts can be ignored.
• No-profit rule: a charity trustee (or anyone connected to them) must not receive any payment or other material benefit from the charity they manage and administer, without explicit authorisation (see our article 'Can the Charity Commission ease up on paying charity trustees?')

Both rules are strict and are designed to protect robust decision-making and, in the charity context, protect the integrity of trustees and charities. A charity trustee's good intentions and the effect of breaching the rules on the charity are ignored in assessing any breach.

The no-conflict duty applies to charity trustees of all types of legal structure used by charities (including charitable trusts, charitable incorporated organisations (CIOs) and Royal Charter Bodies). The duty is also supplemented by separate statutory requirements that apply to companies that will apply to directors of charitable companies. There are also some specific rules for CIOs.

How charity trustees should manage conflicts of interest

In practice, most conflicts can be managed by following three steps:

• Declare the conflict to ensure that unconflicted trustees are fully informed of the nature and extent of the conflicted trustee's interest. Trustees should be asked to complete a register of interests (annually) and declare any interests (at every meeting).
• Manage the conflict in accordance with rules set out in the charity's governing document or a conflicts of interest policy (or both). A conflicted trustee may need to abstain from voting and leave the meeting for the relevant part of the business or, as a last resort and where there is a particularly pervasive conflict that cannot be managed, resign.
• Record the conflict, usually in the minutes of trustees' meetings, providing a detailed written record of who was conflicted, the nature of the conflict, when the conflict was declared and the steps taken to address it.

Concerns about the revised CC29 conflicts of interest guidance

CC29 does not fundamentally change the approach to managing conflicts of interest (although three steps have become five – identify, declare, consider removing, manage and record). However, if taken at face value, the Commission's description of the rules strays from the underlying law and risks trustees taking an overly cautious approach to governance, which could impede effective decision-making.

For example, the guidance differentiates between two types of conflict – a financial conflict and a conflict of loyalty. A loyalty conflict is said to arise when a "charity's decision involves a person or organisation connected to a trustee", with examples of connected persons including a trustee's friends, relatives and an organisation that appointed them as a trustee.

This is compounded by the guidance giving as an example of a purported loyalty conflict where a longstanding friend of a trustee is selected as a preferred contractor to provide services to the charity (the trustee having no connection to the friend's business and there being no financial interdependence between them).

This confuses a conflict of loyalty (where a trustee has a conflicting legal duty to another party) with potential bias. While a trustee should be mindful not to allow their personal relationships to cloud their judgement, decision-making in many charities would become inhibited if trustees were conflicted out of all decisions involving their friends or relatives (who could also be fellow trustees).

Also, it is relatively common for governing documents to include powers for a third-party (such as a local authority) to appoint or elect charity trustees. Such appointees must act in the best interests of the charity and not the appointing third party. While situations where their duties to the charity and any duties owed to the third party must be avoided or appropriately managed, many such trustees will be entirely independent, and it is not correct to say that a conflict of loyalty arises in every case. Such a wide-ranging principle would, for example, cause major problems for many corporate foundations.

Similarly, the Commission's previous guidance said that it was open for trustees to decide that a conflict of loyalty was low risk and that the conflicted trustee could participate in the decision. The current guidance is more restrictive – it says that the affected trustee may be allowed to remain in the meeting only on the condition that they take no part in the decision or voting. This absolute ban on a conflicted trustee participating in a decision contradicts the rules in some charities' governing documents and may make it difficult for boards to deal with lower risk conflicts.

The guidance also fails to consider other options where it is not possible to manage a conflict using the five steps, such as by delegating the decision or by seeking authority from the Charity Commission.

Finally, the definition of a financial conflict used in CC29 goes beyond the legal principles and the different rules that apply to charitable companies and CIOs are almost entirely ignored. For those seeking to provide legal advice, the Commission has abandoned its helpful detailed companion resource setting out the legal underpinning for CC29.

What revised CC29 means for charity trustees

We do not envy the Commission's task in seeking to frame tricky legal concepts in a way that is easily digestible on a phone. The desire to produce more practical and user-friendly guidance is commendable and has obvious advantages. However, regulatory guidance that does not accurately reflect the law, at best, fails to do its job properly and, at worst, creates confusion as to what is required.

While the broad principles described in new CC29 are likely to serve charity trustees well in many straightforward situations where conflicts arise, the trend away from detailed, nuanced guidance seems destined to push those governing larger, more complex charities (particularly those within group structures or where there's a close relationship with a non-charitable organisation) towards either guessing how to navigate a nuanced and complex situation or needing professional advice.

Auditing compliance with conflict rules

This is an area of regulatory focus in which trustees can face criticism from the Commission if there is any evidence of unmanaged conflicts of interest and decisions tainted by conflict. Conducting a conflict audit periodically to assess policies and procedures, and review situations where conflicts have arisen (perhaps as part of a wider governance review) may help pick up relationships and situations that would otherwise be missed.

If you would like advice on how the conflicts of interest rules apply to your charity or managing conflicts more generally, please contact our Charities team.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2026