Legal Issues for Corporate Fundraisers 19 June 2015 Victoria Schneider Tate. 199999/0816 199999/0882 Breakfast Serial

What we will cover today An introduction to: Cause–related marketing Commercial Participators Sponsorship 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

Two main forms of Corporate Fundraising Cause Related Marketing Business sponsorship 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

Corporate will usually be a “commercial participator” CRM More thoughts Risk assessment Ethical guidelines Branding guidelines Corporate will usually be a “commercial participator” 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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. 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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]. http://www.cabinetoffice.gov.uk/media/110668/amended%20guidance%20final.pdf 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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)

Business name associated with charity’s services Business Sponsorship Business name associated with charity’s services Business Sponsorship Examples Virgin London Marathon 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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) 199999/0882 Breakfast Serial

Sponsorship – Contract Issues Who is the sponsor (full details) - limited company? - partnership? - individual? 199999/0882 Breakfast Serial

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 199999/0882 Breakfast Serial

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? 199999/0882 Breakfast Serial

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

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?

Bates Wells & Braithwaite London LLP Victoria Schneider Bates Wells & Braithwaite London LLP 10 Queen Street Place, London EC4R 1BE Tel: 020 7551 7777 Website: www.bwbllp.com Email: v.schneider@bwbllp.com 199999/0882 Breakfast Serial