Charities Bulletin – January 2010
Corporate Giving: Charitable Corporate Foundations
The number of corporate foundations in England and Wales is growing and currently stands at just over 100. Many of these organisations have high profile companies behind them; for example, the Shell Foundation which was set up with a $250m endowment from Shell. We examine some of the key considerations when forming a corporate foundation
Corporate foundations are formed for a variety of reasons. A foundation will not generally attract any additional tax benefits over normal charitable donations. However, establishing a foundation can:
- ensure the company has a focused and structured approach to giving;
- provide a transparent mechanism for doing beneficial work in the community; or
- provide a way of supporting a charitable cause whilst retaining anonymity and leaving decision making to others.
Where a foundation is formed, it is important to ensure that the foundation operates at arm's length from the founding company. Failure to ensure the independence of the foundation will jeopardise its charitable status and may damage the reputation of both entities. This independence must continue throughout the foundation's lifespan.
Key considerations include the following:
Naming the Foundation: A foundation can incorporate the name of the founding company. The charity trustees may even choose to use the company's logo. However, it is important to remember that the foundation and the company are two separate entities with different interests and objectives. Using the well known name or logo of the company which has established the foundation can be hugely advantageous to raising the foundation's profile. However, there are also potential difficulties attached to this including the protection of intellectual property and the potential for damaging confusion between the two entities. It is prudent to enter into licence agreements which set out the terms on which the names and logos can be used.
Donations: The company may make donations to the foundation with conditions that the donation is used for a specific purpose. It should, however, be remembered that the decision must ultimately be made by the trustees. It will be the responsibility of the trustees to decide if it is in the best interests of the charity to accept any condition attached to the donation.
Agreements: All agreements made between the company and the foundation should be formally documented. This should include agreements detailing ownership of things such as the premises the foundation operates out of and whether any of the equipment used by the foundation is on loan from the company or has been gifted.
Board Membership and Conflicts of Interest: It is important to ensure that the members of the foundation board are seen to be independent and that any conflicts of interest are managed. This is particularly important in light of the interaction between charity law and the duty to avoid conflicts of interest arising under the Companies Act 2006.
Charitable foundations can provide a flexible and managed approach to charitable giving. The Charity Commission has recently published helpful guidance on Corporate Foundations here.
For further information on establishing a corporate foundation, please contact Shivaji Shiva, head of charities at Michelmores, at shivaji.shiva@michelmores.com.
