The Charity Commission's recent inquiry into the Sikh Channel Community Broadcasting Company Limited (the 'Charity') serves as a useful reminder of trustees' duties to manage the charity's resources responsibly, ensure adequate financial controls are in place and manage conflicts of interest.
Case summary
The Charity was established in 2010 with objects to further 'the religious and charitable work of the Sikh religion and community'. Its activities included the operation of a television channel, fundraising for international aid programmes and running a centre examining issues around child sexual exploitation and grooming (the 'Centre').
The Commission first engaged with the Charity in 2019 in connection with its fundraising relationship with a third-party organisation which had held funds subject to a separate statutory enquiry.
The Charity had been involved in two fundraising partnerships with the third party:
- a fundraising event in 2018, following which the Charity transferred over £30,000 to the third party; and
- fundraising for the Centre, announced on the Charity's TV channel by the third party, through which over £240,000 (including Gift Aid) was raised.
The Charity possessed a trading subsidiary called The Sikh Channel Trading Company Limited and had links to a private company called Sikh Channel Aid, of which had the Charity's CEO acting as sole director. In 2019, the Commission received a complaint about the relationship between these companies and the Charity, alleging financial misconduct.
Following a compliance visit and inspection, the Commission opened a statutory enquiry into the Charity to investigate serious regulatory concerns in the following areas:
- the financial management of the Charity;
- whether there had been private benefit to the trustees or former trustees of the Charity;
- the Charity's activities and partnerships with other organisations;
- the conduct of the trustees; and
- whether the trustees had properly exercised their legal duties and responsibilities under charity law in the administration of charitable funds held by the organisation.
The inquiry found that the Charity's CEO had appointed himself as the paid CEO without an open recruitment process, resulting in unauthorised renumeration in breach of the Charity's governing document and charity law. Additionally, at the time of the appointment, the entire board was composed of relatives of the CEO, and therefore could not have made a quorate decision to appoint him.
Although the CEO resigned as a trustee, he continued to act as a de facto trustee and to exercise authority in the Charity's decision making. This included authorising a payment to a private company jointly owned by the CEO.
The Charity had also made loans to its trading subsidiary but the trustees and CEO were found to be unable to answer questions about the relationship between the Charity and its trading subsidiary or to justify how the loans were in the Charity's best interests.
The trustees had also had misled the public about the purpose of a fundraising appeal.
The Commission found misconduct and mismanagement in the Charity's administration by the trustees and the CEO.
All of the then-trustees resigned and a new board of trustees was appointed. The CEO gave a formal undertaking that he would not act, be appointed, or accept a position as trustee or senior manager of any charity (including non-registered charities) and would refrain from acting as a trustee or senior manager for a period of ten years without the Commission's permission. The Commission appointed interim managers, but their appointment was successfully appealed by the new trustees.
The new trustees made the decision to establish a Community Interest Company and transfer the Charity's remaining funds to it, and subsequently to dissolve the Charity.
Implications for charities
This inquiry serves as a reminder to trustees of their duties, including to:
- ensure that their charity maintains adequate financial controls and that the charity's financial governance is transparent;
- ensure that their charity's funds are used properly for legitimate charitable purposes, and are not misused;
- carry out appropriate due diligence on partners and grantees and carry out ongoing monitoring to ensure proper use of funds; and
- comply with the charity's governing document and the law, including in relation to private benefit and managing conflicts of interest.
This piece was co-authored by Ethan Lees, a trainee solicitor at the time of writing.
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