Mishcon de Reya page structure
Site header
Main menu
Main content section
Blurry green circles

COVID-19: To help, charities first need to survive

Posted on 14 April 2020

Charities have an important role to play in the fight against COVID-19, but to do so, first they need to survive it. 

Business as unusual

It is hard to imagine any business sector that remains unaffected by COVID-19.  The world beyond our quarantined front doors has become perilous and out of bounds – and perhaps all the more unnerving for being forbidden.  However, while our necessarily individual circumstances are challenging, they arise from a laudably robust communal response.  In tackling the virus, we have decided to put the most vulnerable and least economically active members of our society before the health of our economies.  In times where cynicism runs deep and trust in politics, business and charities is at an all-time low, this is remarkable.

This, and other demonstrations of our common humanity flowing over and around our economic and political constructs, will forge the path for necessary re-shaping and re-imagining of our world when the crisis caused by the virus finally recedes. The philanthropic sector is not immune from this human force, and how charities respond to the crisis will be directional in any reimagining of their role in society. 

This crisis has brought into sharp relief the symbiotic relationship between the public and charities.  Charities exist solely to act in the public benefit.  They depend on the public for financial support and a social licence to operate; the public relies on them to deliver critical services, especially where Government is unable or unwilling.

The public benefit

The present crisis is drawing heavily on charities focussed on the immediate issues, including NHS Charities, which provides critical support to NHS staff and volunteers, as well as patients and their families.  Naturally, Government, individual and business funding to these organisations has been immediate and generous.  On 8 April, the Chancellor announced a package of £750m coronavirus funding for frontline charities.  The Wellcome Trust has called on businesses to donate £6bn to a research fund, as "the only exit strategy" to save millions of lives and underpin a path to economic recovery. 

Outside public health, medicine and care, all charities have benefitted from Government support.  However, many of those who exist to serve some other public benefit now find themselves in extremely difficult positions, underpinned in most cases by serious financial uncertainty.

Charities are a special case in relation to COVID-19:  first, their very reason for being is to serve the public benefit – and the question as to whether, to what extent and how any charity may support the battle against COVID-19 is one that is now engaging every trustee across the country; secondly, the existence of the virus does not erase the myriad other critical needs that charities meet – and the aftermath of this crisis will leave much of society ever more reliant on the vital services these organisations provide; and thirdly, charities are especially vulnerable to the impact of the COVID-19 response – their funding relies on the munificence of donors, many of whom feel less able to be generous, and their endowments (for those lucky enough to have one) are sorely depleted by the collapse of the stock markets.

To survive today and build tomorrow, we need all our charities; and indeed, they need us for their survival.  In their deliberations, trustees need to include four key issues:

  • Finances: Like every business, charities are having to revise budgets and draw up contingency plans.  The key here is not to delay.  Cost savings that can be made today will prolong cash flow and financial certainty for the charity as we continue into indeterminate uncertain times.  Critical to this process is reviewing contracts, leases and funding agreements, to understand what can be exited and what can be relied upon. Force majeure and break clauses in particular merit close examination.  The board of many charities will have to consider how long the entity will be able to continue as a going concern, and what steps it should be taking to ensure not only the charity's survival, but more important, what it must do in the best interests of the charitable purposes for which the charity exists to support.
  • Staff: Charities often have a special relationship with their stakeholders. Legally, trustees need to be clear about the differences between employees and contractors, paid staff and volunteers.  Not only is this determinative of the worker's rights, but also of the eligibility of the charity to call on the Government's furlough scheme.  Dealing with staff in a time like this is an extremely difficult balance to strike, with trustees needing to think clearly about their duties to pursue charitable objectives, to the charity itself and to the people who make it what it is.
    There are logistical issues too – for those who can continue to work, do they have sufficient safeguarding structures in place when working from home or, if they are key workers, when working from their place(s) of work?  Issues surrounding data privacy or the ability to manage trustee meetings in the new homeworking, self-isolating environment for example, also all need to be assessed to ensure the charity maintains its operational standards.
  • Beneficiaries: All trusts require a clearly defined set of beneficiaries.  Charities, whether incorporated trusts or otherwise, must have defined charitable objects for the public benefit, which have been approved by the Charity Commission.  At times of crisis, trustees must be particularly mindful of the legal limits on to whom and for what they may apply the charity's funds.  While trustees may decide that, personally, they feel supporting a pressing need arising from the current pandemic is of paramount importance, they must consider whether or not they are legally able to do so, with reference to the trust deed or the Charity's constitution.
  • Endowments: Charities lucky enough to have endowments are likely to consider how these may now be deployed – either to support the charity's beneficiaries, or to keep the organisation going through times of financial uncertainty.  Trustees will want to take any such decision carefully.  Endowment funds invested in equities will inevitably have taken a significant tumble, and trustees will question whether now is the right time to sell investments at depressed valuations.  The nature of the endowment may also restrict the trustees in how they may access it, whether only the interest is available or the capital too, and if the latter, on what terms. This might be a critical call, especially if it goes to the financial survival of the Charity or its beneficiaries. 

The role of being a charitable trustee is a great privilege.  However, when the chips are down, the responsibility to make the right decisions for the charity, its staff and beneficiaries can weigh heavily. Today, charities need their trustees, and trustees need their communities, just like the rest of us. 

Practical guidance for COVID-19
Read the latest COVID-19 related updates on our hub.

How can we help you?

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

Crisis Hotline

I'm a client

I'm looking for advice

Something else