The final part of this series takes a look at the role of trustees in the everyday management and running of a trading subsidiary.
Part 6
Role of the Trustees
The trustee must scrutinise numerous funding and general financial/legal matters when a subsidiary is established (see parts 3 & 4). But their role also extends to the running of the subsidiary itself. The extent to which they should interfere in the management of the trading subsidiary is a delicate matter which can have repercussions.
It will be standard practice for the charity as majority/sole shareholder to appoint trustees of the charity to directorship positions within the trading subsidiary. This will allow the charity to monitor the activities of the trading subsidiary. Such persons will have two distinct responsibilities, both to the charity and the trading subsidiary. They will therefore have to be mindful of any conflicts of interest which arise from their dual mandate.
Whilst a monitoring role will be acceptable if undertaken with adequate safeguards the charity should not become actively involved in the management of the charity. The subsidiary board should be independent of the parent charity and the charity should not dictate instructions to the subsidiary. If it does adopt such an active management role then serious liability issues can arise for the charity if the trading subsidiary falls into financial difficulties.
Therefore those with a dual role should be in the minority on the subsidiary board and should heed the advice of non-conflicted board members when any possible conflict arises. Only by engaging such governance procedures will the difficulties associated with a conflict of interest be avoided.
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