A conflict of interest arises when what is best for your charity competes with a trustee’s own interests, or with the interests of someone connected to them. Managing it is a legal duty, and it belongs to the whole board rather than to the chair or to the trustee concerned. Handle it badly, and the decision may not stand. If the charity loses money as a result, the trustees may be jointly liable to make it good from their own pockets; and incorporating as a CIO or a charitable company does not shield them, because that protection falls away where trustees breach their duties.
The Charity Commission updated its guidance in April 2026, having found that compliance cases involving alleged abuse of charitable status for private benefit rose by 23% in a single year. Its own reading is that most unmanaged conflicts come from trustees failing to recognise one, rather than from anybody setting out to do wrong.
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What counts as a conflict, and the type boards miss
There are two kinds.
A financial conflict is where a trustee, or someone connected to them, stands to receive money or anything else of value from a decision the board is making. Providing goods or services to the charity. Being employed by it. Lending it money. Selling or leasing property to it, or renting from it. Holding a paid role in its trading company. Getting better access to a service the charity provides than other users get.
Two things about financial conflicts catch boards out, and both run against instinct. The size of the benefit is irrelevant – a small one is still a conflict. And it remains a conflict even where the charity is getting a bargain. A trustee offering work below market rate has a conflict, and the saving does not dissolve it.
A loyalty conflict is the one boards miss, because nobody gains a penny. It arises when the decision involves a person or organisation the trustee is tied to: a spouse or civil partner, immediate family or wider relatives, their employer, another charity where they are also a trustee, the body that appointed them, or a friend. The test is whether that other tie could influence the trustee’s judgement, or could reasonably be seen to.
The friend category surprises people. So does the other-charity one, and it holds even where the second charity does similar work. A trustee sitting on two boards bidding for the same contract has a serious loyalty conflict, because what they know from one seat could help the other.
Loyalty conflicts also surface when charities merge or change structure and share trustees across both boards, which can leave neither board with enough unconflicted people to decide anything.
The five steps the Commission now expects
Before any of them, check your governing document. It should set out when a conflict must be declared, whether the trustee leaves the discussion, whether they can vote, whether they count towards the quorum, and how the board can authorise a conflict. If it says nothing, or what it says is thin, change it now rather than when a conflict lands.
There is a hard requirement here for charitable companies. If a trustee faces a conflict and your articles have no adequate rules, you must amend the articles before taking the decision that gives rise to it. Not afterwards.
The Commission restructured its process in April 2026 from three steps to five.
Identify. Spot conflicts early, ideally as a standing item at the start of every board meeting. A register of interests helps, and so does making sure every trustee understands what a conflict actually is.
Declare. Tell the other trustees before any discussion of the matter begins, and record who declared what and why.
Consider removing it. This is the new step, and it is the one boards skip. Before working out how to manage a conflict, ask whether the charity would be better off without it. You might drop the proposal – paying an outside accountant rather than a trustee. Or the conflicted trustee might resign, leaving the rest of the board to decide freely. Managing a conflict indefinitely is not always the right answer, and the Commission now expects you to have asked the question.
Manage. For a financial conflict, the minimum is that the trustee declares it, leaves the discussion, takes no part in the decision, and is not counted in the quorum. That last one is easy to forget, and it can invalidate the whole decision. Loyalty conflicts allow more judgement: withdrawal for high-risk or contentious decisions, or letting the trustee contribute information and then leave, or for genuinely low-risk conflicts letting them stay while not voting.
Record. Note what the conflict was, who it affected, when it was declared, how you managed it, which rules you followed, and whether you took legal advice. Our trustees’ meeting minutes template sets out how to capture this properly, since incomplete recording is where most boards fall down.
One practical trap sits underneath all of this. Once conflicted trustees withdraw, you still need enough unconflicted trustees to be quorate. Boards where several members are related, or drawn from the same organisation, hit this regularly – and the answer is usually to recruit independent trustees before you need them.
Conflicts rarely arrive alone. A board that cannot reach a quorum once its conflicted members step out has a recruitment problem as much as a conflicts problem, and a founder being paid usually points to something unresolved in how the charity was set up. If either sounds close to home, a free 30-minute clarity call is a reasonable place to start.
Your register of interests, and the policy around it
The register records what each trustee is connected to: other trusteeships and directorships, their employer, businesses they own or influence, and family connections to suppliers, staff or beneficiaries. Collect it when a trustee joins and refresh it annually.
Ask about likely conflicts before you appoint somebody, not after. Where a candidate would be conflicted often or seriously, the right answer is sometimes not to appoint them at all – which is easier to say at the point of recruitment than a year in.
A written conflicts of interest policy sits around the register. It should point to the register, list what you collect and when, and set out your rules in terms consistent with the governing document. For charities that are not companies and whose governing documents are silent, the policy should explain how conflicts will be handled in the absence of any rules. The Chartered Governance Institute publishes a template policy, declaration form and register that most small charities can adapt.
Worth knowing: charity funds can properly be used to pay reasonable costs of training or resources on managing conflicts. Trustees sometimes assume this would itself be improper spending.
Paying a trustee, or a trustee’s company
Trustees are volunteers by default, and any payment or benefit to a trustee or a connected person needs legal authority before the money moves. That authority might come from your governing document, from a statutory power, or from the Commission.
The statutory power to pay a trustee for goods or services carries conditions, including that the trustee takes no part in the discussion or the decision to contract with them. Employing a trustee, or someone connected to a trustee, has its own rules, and a trustee’s relative applying for a job is a situation to think through before the advert goes out rather than after the interviews.
Picture a small charity that needs a new website. One trustee runs a web design firm and offers to build it at cost, saving the charity several hundred pounds. The board is pleased and agrees there and then. Nothing is minuted, because it does not feel like a conflict – the charity is plainly better off. It is a financial conflict all the same. The saving does not remove it; that trustee should not have been part of the decision, and paying them needs authority in place first. A ten-minute piece of process has become a decision that could be challenged.
When it has already gone wrong
Boards discover this in retrospect fairly often: a contract awarded, a payment made, a decision taken with a conflicted trustee in the room and nothing written down.
Put it right as soon as you find it. Establish what was decided and who was conflicted, take legal advice where money or property is involved, and consider whether the decision needs revisiting by an unconflicted board.
Then deal with the next one before it arrives. Start by reading what your governing document already says, because most model constitutions and articles contain conflicts rules and the real gap is that nobody has looked. Where the rules are genuinely missing or too thin, amending the document is a process in its own right, with requirements that depend on your legal form. Put a conflicts policy in place alongside it.
Then check whether it needs reporting. A conflict that was not identified or managed can be a matter of regulatory interest, and some situations meet the threshold for a serious incident report. That is a judgement worth taking advice on rather than guessing at.
This article is general information for UK charities and not advice on any specific situation. Where a conflict involves significant money, property, or a payment already made, take legal advice. Serious or complex conflicts, where the whole board is conflicted, or a decision carries real financial or reputational risk, may need authority from the Charity Commission, and that is not something to work out alone.
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