Can a charity buy goods from a trustee's company?

Identify the supplier and check the payment power

Start by naming the goods seller, sourcing-service provider and intended payment recipient. Ask each to explain any connection to a trustee and any benefit the trustee could receive. Use our buying-route comparison to distinguish the seller from an agent arranging the purchase.

The statutory power covers goods and services supplied by trustees and legally defined connected persons. Check that the intended recipient falls within that definition and that your governing document contains no applicable prohibition. If you cannot use the statutory power, check for a suitable governing-document power; Charity Commission authority may be needed. Obtain legal advice where the relationship or wording is unclear.

Show why the connected supplier is the right choice

Under the statutory power, the purchase must be in the charity's best interests and the agreed payment must be reasonable. Take the Commission's guidance into account and use reasonable care and skill. Its guidance recommends other supplier quotations unless the amount is very small, and following your purchasing policy where you have one.

Compare offers against the same specification, inspection scope, delivery destination and arrangements for faulty goods. Use landed-cost guidance rather than comparing factory prices alone. Record why the charity needs the purchase and why the connected offer is preferable, including quality, delivery risk and support.

Keep conflicted trustees out of the decision

For the statutory power, identify every conflicted trustee. They must leave discussions and decisions about the payment and must not count towards the quorum. This covers proceeding, agreement terms and later changes or termination. They may provide information before leaving.

When the agreement is entered into, only a minority of trustees may be paid or benefit. Count trustees paid for other reasons and trustees connected to paid people or organisations; expense reimbursement does not count as trustee payment. Prepare the count and check that enough unconflicted trustees remain to decide.

Sign a separate agreement before work starts

Under the statutory power, a separate written agreement is required before receiving goods or services; meeting minutes are insufficient. It must describe the purchase accurately, name the provider and state the payment amount or maximum. Another trustee or someone authorised by the other trustees must sign it. The provider should also sign.

As a practical safeguard, complete it before sourcing work begins. Attach the product specification, approved sample details and inspection scope. Separate goods from sourcing services, identify who invoices each, and agree how extra costs, acceptance checks and early termination will be handled.

Keep the record and arrange disclosure

Keep a full record of decisions and reasons, plus any Commission authority. The written agreement forms part of the charity's financial records and must be kept for 6 years. Retain the comparison quotes, trustee-connection declarations, meeting attendance and invoices together so the accountant can trace the transaction.

Accrual accounts must disclose certain details of payments and benefits to trustees and connected persons; ask the accountant to check the applicable charity accounting rules. For receipts and payments accounts, Commission guidance says to include who was paid, why, how much and the payment power or authority.

If the charity is a charitable company, check whether additional company-law approvals apply. Where member approval is required, Commission authority must come first. The statutory goods-and-services power cannot be used for supplies to a charity's subsidiary; check that arrangement separately before ordering.