Conflicts of interest, and how a small board handles them

Almost everyone on a small charity board is connected to the community the charity serves. That is usually why they joined. So conflicts of interest are normal, and having one is not a mark against anyone. Boards get into trouble when a conflict goes undeclared, or when it is declared and then quietly ignored.

What counts as a conflict

The Charity Commission splits conflicts into two kinds. A financial conflict arises when a trustee, or a person or organisation connected to them, could get money or something else of value. A conflict of loyalty arises when, for some other reason, a trustee might not be able to make the decision that is best for the charity.

Some examples that come up on small boards:

• The treasurer's accountancy firm is one of the quotes for the independent examination.
• A trustee's partner applies for the paid coordinator post.
• A trustee's company owns the building the charity rents.
• The chair also sits on the council committee that is deciding your grant.
• A trustee was nominated by the parish council, and the charity is negotiating a lease with that council.
• A trustee runs another group that is bidding for the same funding.

"Connected" reaches further than people expect. It covers close family, business partners and companies a trustee owns or runs. A useful test is whether a reasonable person looking in from outside would think the trustee's judgement could be swayed. If the answer is "possibly", treat it as a conflict and declare it.

The four steps

The Charity Commission and OSCR describe the process in slightly different words, but they ask boards to do the same four things.

1. Identify and declare. Keep a register of interests that every trustee completes on appointment and reviews at least once a year. Put "declarations of interest" as the first item on every agenda, so declaring is routine rather than awkward. If something comes up mid-meeting, declare it then, before the discussion starts.
2. Consider removing the conflict. Sometimes the cleanest answer is to take it away altogether: use a different supplier, or the trustee steps back from the other role. For a conflict that will keep recurring, this is often the only sensible option.
3. Manage it. The conflicted trustee leaves the room, or the call, for that item. They take no part in the discussion or the decision, do not vote, and are not counted in the quorum for that item. The remaining trustees decide on the charity's best interests alone.
4. Record it. The minutes should say what the conflict was, who it affected, when it was declared and how it was handled. Keep it factual. You are recording the decision and the process, not anyone's private circumstances.

When a trustee would benefit, declaring is not enough

This is the part most small boards miss. If a trustee, or someone connected to them, is going to receive money, goods or services from the charity, stepping out of the vote does not make it allowed. The benefit needs authority from one of three places: your governing document, the law, or the regulator.

In England and Wales, section 185 of the Charities Act 2011 gives a statutory power to pay a trustee for providing services, and, since changes made by the Charities Act 2022, goods. In Scotland, section 67 of the Charities and Trustee Investment (Scotland) Act 2005 does a similar job. The conditions are much the same in both:

• the maximum amount is set out in a written agreement, and it is reasonable;
• the other trustees are satisfied beforehand that it is in the charity's interests;
• fewer than half of the trustees are receiving payment under such arrangements;
• nothing in the governing document forbids it.

Neither power lets you pay someone simply for being a trustee. In England and Wales, section 185 does not cover employing a trustee either. Both need separate authority, which is rarely given to small charities.

If your charity is a company, the trustees are also directors, and the Companies Act 2006 adds its own duties: to avoid conflicts (section 175) and to declare an interest in a proposed transaction with the company (section 177). In a charitable company, the other directors can authorise a conflict only where the articles allow it (section 181), so check yours before relying on that route.

Scotland and Northern Ireland

Scotland's law deals head-on with one kind of conflict that is common in community bodies: where a trustee was appointed by another organisation. Section 66 of the 2005 Act says a trustee must put the charity's interests before those of whoever appointed them. Where another duty prevents that, the trustee must disclose the conflicting interest and stay out of the deliberation and decision. A breach counts as misconduct in the administration of the charity. OSCR's guidance sets out the process as identify, manage, record and learn, the last step meaning a board with recurring conflicts should look again at its policy.

In Northern Ireland the same principles apply. CCNI's Running your charity guidance on who trustees are and what they do is the place to start.

A quick check for your next meeting

• Do you have a register of interests, and when was it last updated?
• Is "declarations of interest" the first item on the agenda?
• What does your governing document say about conflicts and trustee benefit?
• Do your minutes record who left the room, and why?
• Is anyone connected to the board paid by the charity? If so, under what authority?

Our free conflicts of interest policy (Word) includes a declaration form and register you can adapt, and the board minutes template has declarations of interest built in as a standing item.

Sources: Charity Commission, Managing conflicts of interest in a charity and CC29; OSCR, Conflict of interest; Charities and Trustee Investment (Scotland) Act 2005, ss66–67; Charities Act 2011, s185; Companies Act 2006, ss175, 177 and 181.

This guide is general information for trustees and committee members, not legal advice, and every charity is different. Your governing document may set rules of its own, so check it, and confirm the position with the relevant regulator or a suitably qualified adviser before acting. Last reviewed September 2026.