Charitable foundations and private benefit: a slippery slope

A charity set up by UK billionaire Sir Jim Ratcliffe has made headlines following the conclusion of the Charity Commission’s regulatory compliance case into its operations.

Background

The Jim Ratcliffe Foundation is a charitable company limited by guarantee which was incorporated in February 2019.  The charity was funded with an initial donation of £22 million by Sir Jim Ratcliffe.  The objects of the charity are wide and include the advancement of any purposes which are charitable under the laws of England and Wales, including a focus on promoting amateur sport and improving the conditions of life of those in disadvantaged communities.

Between September 2019 and June 2020, the charity provided grants totalling €12,500,000 to the Club Des Sports Courchevel (CDS), a French charity that provides children and young people with the opportunity to enjoy subsidised alpine sports in Courchevel.

The grants were used towards the construction of a ski clubhouse building.  One room in the building was used by an exclusive members club that charged a €25,000 joining fee and an annual fee of €6,000.  The CDS charges its members much less - around £25 per month. 

Charity Commission response

When reported this raised concerns regarding private benefit and triggered media scrutiny and criticism of the charity.  The Guardian wrote, “Ratcliffe’s use of a UK charity to fund what appears to be a largely exclusive private members’ club raises questions about whether charitable funds have been used to fulfil its aim of providing a public benefit to a wide audience – or to support the hobby of one of the world’s richest people.” 

The Commission opened a regulatory compliance case in January 2023.  The Commission announced on 27 July that it did not find any evidence to uphold the allegations of wrong doing by the charity and had closed its regulatory compliance case. 

Here are the key takeaways for charity trustees and donors:

1. Trustees of grant-making charities should be alert to the risks to their charity when working with and making grants to other charities, particularly where the recipient charities are located in different jurisdictions and subject to different charity laws.  In its press release the Commission stressed the importance of using grant funding agreements in order to ensure that the end-use of the funds is for purposes which are charitable in England and Wales and consistent with the grant-making charity’s objects.

2. Trustees should not only be alert to actual conflicts of interest and loyalty, but also the risk that the public may perceive such a conflict to exist. The Commission noted that all of the current trustees of the charity were employed by companies that Sir Jim Ratcliffe was connected to.  We recommend that clients appoint at least one independent trustee when setting up their own foundation, an approach which the Commission has confirmed in its recent press release. 

3. This case serves as another example of the reputational risks that come along with having a charitable foundation, particularly where the foundation shares a name with its high-profile donor. Part of acting in the best interests of your charity is considering any reputational risks which may arise and how to mitigate these. 

4. As a regulator the Commission is bound to investigate complaints and allegations of wrongdoing.  We have seen first hand the emotional and financial impact that a regulatory compliance case can have on trustees, even where the Commission closes the case and declines to take further action, as here.  The best protection for trustees is to always give proper consideration to their charitable objects, to keep meticulous records of their decision making, due diligence, ongoing monitoring and evaluation and grant funding agreements and to ensure that their procedures align with the Commission’s recommended best practice.

If you would like to discuss any points raised in this article, please contact Catherine de Maid or Alyssa Haggarty.