News and Events

Investigation into Charity Highlights Need for Independence

Setting up a charity or foundation to give back to the community? Partner at Andrew & Co Solicitors Catriona Wheeler highlights the importance of appointing independent charity trustees. 

The recent case involving Ferrexpo Plc has highlighted the responsibility of trustees of charities to show total independence.

The iron ore pellet maker, which has major assets in Ukraine, said the bank statements of the charity Blooming Land, which was set up mainly for its Corporate Social Responsibility (CSR) programme, “contained as yet unexplained discrepancies,” and has sent copies to its auditor Deloittes to carry out a review.

Funding for Blooming Land’s CSR activities is provided solely by one of the company’s units in Ukraine and Khimreaktiv LLC, an entity ultimately controlled by Ukrainian mogul and Ferrexpo’s Chief Executive Officer and owner Kostyantin Zhevago.

It's not unusual when a business becomes well established for its founder to want to give something back to the community by setting up a charitable foundation; perhaps to make general grants or give assistance in the training of those who are just starting their careers in the same line of business.

This can be a very worthwhile gesture, and we don’t know what has happened in this case, but the business owner must beware of trying to use a foundation to set their own agenda or advantage their business.

Charity law is very strict about benefits to trustees and the Charity Commission will ask questions on an application for registration about whether the organisation is being set up for a tax advantage or whether the organisation will employ its founder, trustees or organisations related to the founder or trustees. Independence of the charity must not only be on paper but must be apparent in all acts of the charity.

If the founder is a trustee, it is advisable that the other trustees not only have the skills and experience to make balanced and strategic decisions for the charity, but they also have some independence from the founder.

It would not be sensible to have the founder's solicitors, accountant, sister- in- law and a friend making up the board of trustees.

They might all be very public spirited and independent-minded people, but there is always the risk of unconscious bias, or a perception of bias to make decisions that the founder favours, rather than those in the true interests of the charity's purposes and its beneficiaries.

Find out more about our Charities Advice Service  - contact Catriona Wheeler by phone  01522 781472 or email