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'Founder Syndrome', Faith Charities, and Challenging Charity Commission Decisions

on Friday, 11 September 2020.

There were over 8000 applications to the Charity Commission to register new charities in 2019-2020. Behind each of those applications are the trustees and founders whose vision and hard work bring these new endeavours into being.

Enthusiasm, hard work and commitment to the charitable cause are at the heart of many charitable projects, and one of the joys of being a charity lawyer is meeting so many people who have these qualities in abundance. Despite their many qualities, or perhaps sometimes because of them, founders often struggle to find the right balance between the skills required to set up a charity and the often mundane and sometimes complex regulatory requirements that apply to charities once formed.

Founders have a particularly hard step to take at the point the charity is registered and begins to operate. Having brought a charity from vision to reality, they are to take a step backwards. The charity is to be independent, with an independent board taking equal and collective responsibility for its own independent decisions in its own independent interests. This independence is a key difference between private philanthropy and public charity. Charities with strong founders can struggle to distinguish between the founder's personal interests or vision from the corporate aims of the charity.

'Founder Syndrome'

One result is the well-recognised risk of 'founder syndrome' where a founder is a dominant figure in a charity and the board as a whole fails to fulfil its duties, instead 'rubber stamping' decisions of the founder. However, the situation can be more nuanced than is sometimes suggested. The apparent dominance of the founder may reflect the knowledge and experience that the founder has built up and the proper recognition of that knowledge and experience by conscientious trustees. This can be true even where some aspects of the charity's governance are plainly inadequate.

Given all this, it is not surprising that Commission case-officers are likely to investigate further where they believe a charity shows signs of founder syndrome or a dominant figure and that such investigations can be difficult for all those involved. The founder concerned will often feel that the accusation of excessive influence is misguided and unfair, Commission case-officers may struggle to be sure how far the allegedly dominant founder is influencing others, and the other charity trustees may struggle to ensure they fulfil their duties while continuing to manage the charity.

If you find yourself engaging with the Charity Commission in such circumstances, it can help to remember a few simple principles:

  • Remember the regulator is there, amongst other things, to encourage better administration of charities. It is committed to upholding that which is special about charity in the eyes of the public and its stated aims include giving charities the understanding and tools they need to succeed.
  • Be prepared for fairly technical and abstract regulatory language. Often the Charity Commission uses words which have developed subtle, precise meanings over years, decades or more. It is using them not because they are difficult, but because people do charitable things in so many different ways that a universal shorthand is needed to describe common themes.
  • Be clear about what the regulation expects of you or, if you are dealing with the Charity Commission, what it is asking for and why. Don't allow misunderstandings to escalate.
  • Remember that all the trustees are equally and collectively responsible for running the charity for the purposes in its constitution.

None of this is to say that the Charity Commission always gets it right. It doesn't. In a complex world, it couldn't, not every time - but it tries. Engaging positively but assertively with the Commission, with specialist advice where required, is often the quickest way to resolve the concerns that have arisen.

Possible Challenges

However, given the strong characters of many founders and the limited resources of the Commission, such regulatory interventions can become challenging. In such circumstances any resulting regulatory action may be challenged by the founder.

When the Commission does get it wrong, there are a number of ways for the trustees to challenge its decision, from using the Commission's own internal customer service or 'decision review' process to appealing to the Charity Tribunal. These procedures can be complex and it can feel like the scales are weighted in favour of the Charity Commission.

This is especially so where, as in the examples below, the charity concerned serves a minority community and the concerns of the Commission arise in part from a failure to understand the particular culture of that community. However, the effort can be worthwhile. Such challenges provide an opportunity for the issues to be considered afresh by the parties and, if necessary, the Tribunal.

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Are There Real-World Examples? Certainly

One of the earliest published decisions of the Charity Tribunal, in 2009, was a successful appeal by Nagendram Seeveratnam, a trustee of a Hindu charity, against the Charity Commission’s decision to remove him from his role as a trustee of that charity.

More recently, just a few weeks ago the Charity Tribunal published its decision of 31 July on The Sikh Channel Community Broadcasting Company's appeal against the Charity Commission's decision to appoint an 'interim manager', that is, a third party of the Charity Commission's choosing appointed to run some aspects of the charity's work.

The charity's appeal was successful. The Commission's decision to appoint an Interim Manager was quashed. This provides the charity trustees with an opportunity to bolster the charity's governance where necessary and identify a way forward which reflects their vision for the charity's future.

While the case related in part to the degree of involvement of the founder, the Tribunal found the trustees "were independently minded and not influenced by [the founder]." The Tribunal also found the trustees "demonstrated a genuine desire to act in the interests of the Charity" and that they would have responded positively to working with the Charity Commission to get the Charity back on track.

Why it is the Commission itself hadn't been persuaded of these things from the outset isn't made clear in the decision. In a paragraph that will be of interest to trustees of faith-based charities and other charities serving minority communities, the Tribunal Panel observed that:

"The Panel consider it to be most regrettable that the Charity Commission did not use its power under s. 76(3)(b) of the Charities Act 2011 to appoint new trustees, perhaps finding suitable persons from within the Sikh community. Such a step would strengthen the trustee board … and the Charity itself would then remain sensitive to the cultural needs of its beneficiaries."

Whatever the type of charity involved, if there are regulatory concerns about the role of its founder, it is important that the response takes into account the complex role of founders and the possibility that concerns about founder syndrome mask a more complex reality. If trustees believe the Charity Commission is unwilling or unable to see the full picture, they may wish to consider challenging the Commission's decision robustly.

For specialist advice on improving your charity's governance or responding to Charity Commission inquiries, please contact Shivaji Shiva in our Charity Law team on 07788 313298, or complete the form below.

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