1. Legal Issues for Corporate Fundraisers
19 June 2015
Victoria Schneider
Tate.
199999/0816
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2. What we will cover today
An introduction to:
Cause–related marketing
Commercial Participators
Sponsorship
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3. Fundraising Legal Framework and Guidance
Charities Act 1992 imposes obligation on “commercial participators” and “professional fundraisers”
Charitable Institutions (Fund-Raising) Regulations 1994
Charities Act 2006 – from 1st April 2006, amended those obligations and introduced a new obligation on charity trustees/employees in certain situations
The 1992 Act has not been consolidated into the Charities Act 2011
Office of Third Sector Guidance
April 2008 – final form guidance on statements by trustees and employees
December 2008 – final form guidance on Part 2 Charities Act 1992
Institute of Fundraising – Code of Fundraising Practice
Charity Commission – Charities and Fundraising CC20
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4. Two main forms of Corporate Fundraising
Cause Related Marketing
Business sponsorship
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5. Cause Related Marketing
Charity’s name associated with business’s services
Cause Related Marketing (CRM)
Examples
ghd - £10 from sale of ghd hair straighteners to Breakthrough Breast Cancer
Innocent drinks - 25p from sale of every Innocent drink to Age UK
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6. Be commercial (don’t undervalue) Reputation Suitable partner
CRM
First Thoughts
Logo is valuable asset
Mutual benefit
Be commercial (don’t undervalue)
Reputation
Suitable partner
Due diligence
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7. Corporate will usually be a “commercial participator”
CRM
More thoughts
Risk assessment
Ethical guidelines
Branding guidelines
Corporate will usually be a “commercial participator”
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8. What is a Commercial Participator?
s.58(1) 1992 Act
‘In relation to any charitable institution…any person …who:
carries on for a gain a business other than a fund- raising business, but
in the course of that business, engages in any promotional venture in the course of which it is represented that charitable contributions are to be given to or applied for the benefit of a charitable institution.
Exception: charity trading subsidiaries
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9. Very widely defined (s.58(6) 1992 Act) in any manner
To “represent”
Very widely defined (s.58(6) 1992 Act)
in any manner
expressly impliedly
speaking/newspaper/film/TV
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10. Examples Innocent Christmas Cards Charity of the Year
25p from sale of every Innocent drink to Age UK
Christmas Cards
10% to British Heart Foundation/ Marie Curie/ Mind/ NSPCC/ Shelter
Charity of the Year
Various fundraising events publicised with the corporates’ customers
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11. What are the consequences of being a commercial participator?
Need a written agreement with charity for which it is fundraising (cannot just be with trading subsidiary)
Commercial participator must make a statement each time it makes a solicitation
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12. Commercial Participator Statement (1)
Where any representation that charitable contributions are to be given to or applied for the benefit of a charitable institution, the representation shall be accompanied by a statement clearly indicating:
The name or names of the charities;
If more than one, the proportions in which the charities will benefit; and
The notifiable amount of money paid for goods or services which will be given to the charity;
The notifiable amount of the proceeds of any other promotional venture to be given to the charity; or
The notifiable amount of donations to be given by the commercial participator to the charity.
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13. Commercial Participator (2)
Notifiable amount - Section 60(3A) 1992 Act
Actual amount of remuneration if known
Estimated Amount – as accurately as reasonably possible
No longer in general terms
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14. Commercial Participator Statement - Examples
[X%] of the purchase price will be donated to [Charity]
For each item sold £[ ] will be donated to [charity]
OTS guidance:
[Company] will donate [x]% of profits from this promotional venture to [charity]. This is expected to be at least £[x].
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15. When should statement be made?
Should accompany representation
Oral representations – at same time as
Newspaper ad – contained in ad
Shops – statement made by clear & legible sign
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16. CRM – Commercial Participation Agreements (1)
Section 59(2) 1992 Act
Unlawful for CP to make representations that money going to charity without having written agreement in place
Charitable Institutions (Fund-Raising) Regulations 1994
Names and addresses of parties
Date agreement signed by each party
Duration of agreement
Arrangements for early termination
Any terms relating to variation
Statement of agreement's principal objectives and methods to be used in pursuance of objectives
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17. CRM – Commercial Participation Agreements (2)
Reg 5,1994 Regulations
CP must, on request and at all reasonable times, make available any books, documents, records which relate to charity and are kept for purpose of agreement
Reg 6 - money due to charity must be paid as soon as reasonably practicable after receipt, and:
"in any event not later than the expiration of 28 days after that receipt or such other period as may be agreed with the institution"
Criminal offence not to comply with Reg 5 and 6
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18. CRM – Commercial Participation Agreements (3)
How long arrangement
Early termination – reputational damage, charity objects
Unsold stock
Disputes
Obligations on business
Reputational damage
Make statement
Access financial records
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19. Reputational issues for charity
Penalties
Criminal offences committed by the commercial participator (although note s.60(9) 1992 Act in relation to breaches of ss.60(1) – (5))
Weak enforcement
Reputational issues for charity
Charity Commission
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20. CRM contracts: Charity Logo
How much for name & logo?
How wide licence?
Activities?
Geographical area
Exclusivity? - similar business
Branding guidelines
Approve materials in advance
Charity obligations
Charity logo
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21. CRM – Tax implications CRM = a commercial trade
Not primary purpose to trade in name / logo
Therefore, any profit will be taxed, unless it falls within an exemption
If not, use a trading company
Supply is also subject to VAT, (special case for banks & insurance companies)

22. Business name associated with charity’s services
Business Sponsorship
Business name associated with charity’s services
Business Sponsorship
Examples
Virgin London Marathon
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23. Charity accepts payment Charity does something in return
Business Sponsorship
Introduction
Sponsorship = reverse of CRM (i.e. business name associated with charity’s services)
Charity accepts payment
Charity does something in return
e.g. puts sponsor’s name/logo on materials or gives hospitality benefits i.e. provides advertising services to the sponsor
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24. Sponsorship – Contract Issues
The basics
What do you/they have to do
How much is being paid
Is VAT included
What are the payment dates
When does the contract run from and to
(some repeated below)
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25. Sponsorship – Contract Issues
Who is the sponsor (full details)
- limited company?
- partnership?
- individual?
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26. Sponsorship – Contract Issues
How long will the relationship last? (start and finish dates)
Is there agreement for earlier termination?
Consequences of termination
No variation without agreement
Does charity/trading company have to allow access to database or can it have access to corporate’s database?
Who will have IP rights to use any revised or new database?
Confidentiality
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27. Sponsorship – Contract Issues
Who owns the IP in materials produced (e.g. bank sponsoring new materials on debt)
How is charity to advertise the sponsor’s logo?
Does the sponsor also want to advertise their sponsorship: could they become a commercial participator?
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28. Business Sponsorship Direct Tax Issues
Profits do not derive from a primary purpose trade, therefore taxable
Consider size and place of sponsor’s logo
VAT issues for charity
Simple acknowledgement = no VAT
Placement of sponsor’s logo = VATable supply
But remember one-off fundraising events

29. If we have time…
Barry Bourbon is a biscuit maker and he wants to run a promotion whereby Charity X gets 15% of his net profits of his quarterly sales of Giant Chocolate Cookie Sandwich. It is a new line and he is not sure how well it is going to sell and is uncomfortable with the charity trying to pin him down to a percent or penny amount per Cookie Sandwich that the charity is going to receive. He is also a relatively new business and he is not really clear what his “costs” are going to be. Any thoughts?

30. Bates Wells & Braithwaite London LLP
Victoria Schneider
Bates Wells & Braithwaite London LLP
10 Queen Street Place, London EC4R 1BE
Tel:
Website:
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