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Making investments as a charity

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The Charities (Protection and Social Investment) bill may make it easier for charities to socially invest as the finance lender. This is a new development and it’s important for charity managers and trustees to be aware of their duties and responsibilities if thinking about this.

Why a charity might make a social investment

A charity might want to make a financial investment in another charity or social enterprise to help further its own mission, through a partnership with an organisation with similar objectives.

This could be a way for a charity to generate unrestricted funds, as part of its income generating mix.

Trustee powers and responsibilities

The power is intended to supplement, rather than replace existing trustee powers, and means that, unless a charity is established by legislation or royal charter, its trustees will have a general statutory power to make such investments, in addition to any others. A charity can explicitly restrict this power in its objects.

The power excludes the use of permanent endowment funds for investment. It permits taking on liabilities where the social investment does not contravene any restriction on expenditure for a permanent endowment.

The duties outlined in the bill apply regardless of whether the social investment is made using the new power, and specify that charity trustees must consider the need for advice, and obtain it if necessary, to ensure the investment is in the interests of the charity, and must periodically review investments, and again obtain any advice necessary as part of this.

Page last edited Oct 22, 2015

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