COVID-19 and charities: Commercial partnerships and charities
Whilst the government has promised that charities across the UK will receive a £750 million package of support, it is no secret that the true cost to the sector will be far in excess of that figure. With fundraising initiatives curtailed and immense pressure on income streams, it is not surprising that charities are exploring alternative support options, and that businesses are responding to the need by considering how they might be able to assist.
This set of FAQs continues the series for our charities COVID-19 Hub and considers the ways in which businesses and charities might work together, picking up on some of the issues we are seeing arise in practice.
Please do get in touch with your usual BDB Pitmans contact if there’s anything you would like to discuss in more detail.
1 What can businesses do to support charities during COVID-19 and beyond?
On 6 May 2020, the government released guidance for businesses seeking to help voluntary, community, and social enterprise organisations during the coronavirus (COVID-19) outbreak, encouraging businesses to consider how they might best support the charitable sector in its response to the pandemic.
The guidance sets out links to agencies and other guidance depending upon whether businesses can offer skills, services or assets, funds or encourage volunteers from their workforce.
Where businesses have identified staff who may have time to assist with volunteering efforts, it may be worth exploring existing partnerships or local community organisations. Alternatively, businesses can register their interest by completing the survey set up by Volunteering Matters, which has pooled the resources of the key sector bodies to co-ordinate the community volunteering response to COVID-19.
The government guidance also offers links to organisation such as the National Business Support Network which is matching business support to organisations in need. If a business is looking to reach out directly with financial support to a known charity partner or to a particular cause, then there are various options including:
- making a donation (ie of money, equipment, services);
- providing loan funding; and
- entering into a commercial arrangement under which the business will raise funds for a specific charity, or charities, through its business activities, for example, by donating a percentage of the proceeds of sale of items or services.
In any event, businesses should be aware of the tax incentives related to giving (on which there is HMRC guidance).
If part of the support provided by the business involves the commercial partner directly asking for donations, they will be regarded as a ‘third-party fundraiser’, which may trigger the operation of certain fundraising rules.
In particular, if the business will be promoting goods or services on the basis that it will make donations to the charity (or charities) then this is likely to constitute ‘commercial participation’ requiring both parties to take particular steps to ensure compliance, including compliance with the Fundraising Regulator’s Code.
Charities will need to ensure they comply with the associated rules under Part II of the Charities Act 1992 (including that there are proper written agreements in place) and there will be associated administrative costs and ongoing compliance involved in any such partnership. It is therefore worth discussing your proposals at an early stage, to ensure this is the most effective way of supporting the particular cause.
More details on the matters charities need to consider are set out below at question three.
2 Can we, as a business, set up a COVID-19 appeal?
Yes. We have seen various examples of businesses considering setting up their own appeals or taking steps to establish charitable entities in response to COVID-19.
The Fundraising Regulator has published some useful guidance, Setting up a Coronavirus appeal: What you need to know which is essential reading for any business wanting to go down this route in the current circumstances. All the usual considerations apply, not least first asking whether there is an existing charity or local community group which is already set up to fundraise and deliver the services you want your appeal to support.
By setting up an appeal it is important to be aware that you may be inadvertently setting up a charitable trust, which imposes legal and compliance responsibilities. Just as with other appeals, as above, if you are fundraising to support a response to COVID-19, you should be clear about the purpose of the campaign and about what will happen to any excess. This is important so that if your appeal results in excess funds being raised, then they can be applied more widely. Transparency is key so that donors know what they are being asked to support, and how their money will be used.
For more information, the Charity Commission also has guidance from 2012 on Disaster appeals more generally, which remains relevant to activities contemplated in response to COVID-19.
In some circumstances, it may be appropriate to establish a charitable vehicle for your immediate and longer term giving plans. This may be something you may already have been contemplating as part of formalising your CSR initiatives – however, as a first step it is of course worth considering whether there is another charitable organisation already providing the service you want to provide, and whether a simple donation to that entity would be more effective – whether through a global body, such as the WHO COVID-19 solidarity response fund or to a more local charity.
The Charity Commission for England and Wales has helpful guidance on setting up a charity, as does the Office for the Scottish Charity Regulator, or the Charity Commission for Northern Ireland if you are looking to start up a charity in that jurisdiction.
3 What do charities need to be aware of in entering into partnerships with business?
As mentioned in our earlier FAQS on Finance and Funding for Charities corporate partnerships may well be an option, but charities do need to exercise the usual caution when considering whether a proposal is the right fit and will work for them.
Given the ongoing financial uncertainties, it is particularly important to have undertaken checks to ensure the commercial partner will be able to deliver what they promise (in legal speak, doing your ‘due diligence’).
For charities which might already be in receipt of such offers, the Charity Commission’s Coronavirus (COVID-19) guidance for the charity sector contains guidance on working with a company or business to help with coronavirus. In particular, charities should ensure that:
- linking with a business for the agreed purpose is in the charity’s best interests and that the trustees support it;
- any activities the charity carries out under the arrangements fit with the charity’s purposes;
- the risks, as well as benefits, are identified, addressed, and reviewed; and
- any conflicts of interest are considered (eg existing relationships between the charity and the business) as well as any risks to the charity’s reputation.
Charities and potential commercial partners must also be aware of the rules on commercial participation and professional fundraising where a charity enters into a commercial partnership to raise money, as set out in detail in the Commission’s Guidance and Fundraising Regulator’s Code.
In particular, if the charity’s name/ brand is going to be associated with the commercial partner, it will be necessary to consider the associated licensing issues, as well as whether the charity will be expected to provide other services to the business as part of the arrangements, and whether it will be necessary to involve the charity’s trading subsidiary (if any).
Data protection considerations also remain relevant, for example if commercial partnership provides an opportunity to reach a wider donor base and there is any intention to share donor/ customer details under the arrangement. For more information regarding data protection regulation at this time, please see our update here.
If the offer of support is in the form of a loan, this is certainly something charities can consider, albeit there will be certain matters to address before entering into any formal loan facility (not least whether you have the power to borrow) – for more information on this, please see our FAQS on Finance and Funding, where we have addressed the question of loans from supporters.
The government is actively encouraging businesses to support the charity sector where possible, and so there are likely to be numerous short and longer term collaborations arising as a result of the current circumstances. Although the temptation may be to move full steam ahead with any partnership offered, it remains important for both businesses and charities to consider properly the proposition and to ensure that it is the most effective way forward, in the best interests of the charity, and that the benefits outweigh any risks. Any arrangements should then be properly recorded with the appropriate checks and balances put in place.
We hope you find the information above helpful. Please do feel free to let us know any particular questions you have and we will try to address them through our regular blogs.