Captain Tom
Every now and then there is a news story that illustrates some of the traps that lie in wait for unwary charity trustees. In June, it was announced that the Charity Commission was opening an inquiry into the management of the Captain Tom Foundation.
Readers should note that this inquiry has nothing to do with the £38.9 million raised for NHS Charities Together in response to Captain Moore, at the age of 99 and recovering from a fractured hip, walking 100 laps of his garden. They should also bear in mind that the opening of an inquiry does not mean that there definitely has been any wrongdoing.
Early engagement with the Commission
The Foundation was set up as a charitable company in May 2020, with Captain Moore’s daughter, Hannah Ingram-Moore, and her husband Colin being appointed to the board in March 2021. The Charity Commission was at that stage asked for permission to employ Hannah as the Foundation’s CEO, to be paid £60,000 for three days a week. The request was modified to include a £100,000 salary for a five-day week. The Commission considered that the salary was “neither reasonable nor justifiable”, but in August 2021 agreed to her being employed on an interim basis at a salary of £85,000 pending the recruitment of a new CEO. Hannah had by that time already stepped down as a trustee, while Colin remained in office.
Payments to related parties
There was renewed interest in the Foundation in February when its accounts for the period to 31 May 2021 became available online, disclosing payments to Club Nook Limited and Maytrix Group Limited, both owned and controlled by Hannah and her husband Colin and which had met some of the Foundation’s costs in its early stages, which were now being reimbursed.
Maytrix Group was reimbursed £39,742, mainly for consultancy but also for website, photography, office rental and telephone costs. Club Nook was repaid £16,097 for transport, security and accommodation for Captain Moore as he travelled around the UK promoting the Foundation. The Charity Commission was satisfied that these amounts were reasonable reimbursement for expenses incurred in the formation of the Foundation and that conflicts of interest were properly identified and managed.
Trademarks
Shortly after the formation of the Foundation, applications were made for the registration of a number of trademarks incorporating Captain Moore’s name. These marks were registered not in the name of the Foundation, but in the name of Club Nook. We do not know why this decision was taken, but it appears to have led to a situation where licensing deals (to a drinks company and a publisher) would have allowed Club Nook to reap financial rewards, even if money was still likely to be raised for the Foundation.
The commercial use by charities of trademarks is a complex area, particularly when it comes to the tax treatment of the proceeds, and it is not unusual for a charity to set up a subsidiary company to carry out that sort of activity, on the basis that charities have limited powers to engage in trading operations. However, usually, the charity remains in control of the deals that are struck, and there is no private company sitting between the charity and the royalty-paying licensees.
Gin
In May, the Foundation hit the news again with a story about its dealings with Otterbeck Distillery. The distillery has for some time been selling gin carrying the “Captain Sir Tom” trademark, but when it launched a limited edition gin at £100 a bottle with the claim that all profits would go to the Foundation, another feature of charity law reared its head: there are rules that apply whenever a business tells its customers that money will go to a charity if they buy a particular product. These rules are aimed at:
- making sure consumers can see how their purchase will benefit the charity; and
- ensuring that proper agreements are in place between the charity and the business so that the charity can hold the business to account and receive the benefit it has been promised, in return for the commercial advantage of being associated with a good cause.
Again, this is not a simple set of rules and it is easy for trustees to get things wrong if they proceed without professional advice. In the Foundation’s case, the promotion of the £100 bottles of gin was withdrawn when it was pointed out that customers were not being given enough information about how much the Foundation would receive.
The significance of a formal inquiry
The Charity Commission has a range of tools at its disposal for dealing with charities where there appears to be mismanagement and/or misconduct. However, some of the more draconian powers can only be used once the Commission has opened a formal inquiry. These powers include:
- suspending or removing a trustee
- freezing bank accounts
- requiring information to be delivered
- appointing an interim manager to take over the running of the charity.
It is therefore striking that this formal step has now been taken, and the Commission’s press release makes it clear that there is concern that the Foundation may have suffered financial losses as a result of how the trustees have acted.
The opening of an inquiry does not mean that there has been wrongdoing but, in many cases, the Commission is able to resolve its concerns in a less formal manner, and the fact that an inquiry has been opened suggests that efforts to engage with the trustees may not have met with the sort of cooperation that the Commission might have liked.
The obvious question here is whether the trustees were under a duty to act in the best interests of the Foundation by ensuring that trademarks were registered in its name, rather than in the name of their company that could then receive profits that might otherwise have gone straight to the Foundation.
While the issues are rather different, the events in the Foundation’s brief history call to mind the early days of the Diana, Princess of Wales Memorial Fund in 1997, when the charity was registered in super-quick time in response to a surge of public sentiment and generosity, but there were then doubts as to whether it was being managed quite as it should be, with large sums being paid to a law firm for public relations work, to the extent that senior staff at the Commission wondered whether it was going to be the quickest ever trajectory from formation through registration to the opening of an inquiry.
On a more practical level, they illustrate some of the complexities of running a charity, particularly when there are valuable trademarks in play, and of the need to identify and manage conflicts of interest. They also provide a warning of the Charity Commission’s regulatory powers which can swing into action when things appear to go awry.
About the author: Paul Ridout is Partner at Hunters Law.
[ymal]
