Charities are requiring more legal support than ever before. Emily Corfe looks at some of the reasons why.  

The rise in the volume of legal support used by charities in recent years has been steady but unmistakable. After the sector’s rockiest year to date, the resulting juggle between greater regulation, stricter fundraising controls and the need to diversify income streams has meant that demand for expert legal advice has never been greater.

Feedback from legal advisers suggests that the top 350 charities are using more legal resources than they used to – prompting a significant change in the relationship between charity and lawyer. Charity Finance's own analysis of the accounts published by the top 350 charities appears to back this up, with many charities now using multiple legal firms (figures 1 and 3), and many legal firms increasing the number of top-350 charities they work with (figure 2).

Sam Macdonald, partner at one of the sector’s most widely-used charity law firms, Farrer & Co, tells Charity Finance his firm has seen a marked increase in charities seeking regulatory support, following a push for greater regulatory control by the Charity Commission. “It goes hand-in-hand with the Charity Commission’s shift in approach to regulation and focus on compliance as opposed to guidance,” says Macdonald.

But the development has led some charities to become “wary about their engagement with the Commission”, he said. “Legislation is brought in all the time – quite often without sufficient regard to the impact it will have on the charities. And so it is inevitable that the legal landscape they have to navigate becomes more complex, with a need for more expert help. Where legislation has not been properly thought through, that’s almost inevitably going to be to the disadvantage of charities.”

Susan Gent, chair of the Lawyers in Charities group, points out that the heavy use of legal support by today’s charities is a relatively new phenomenon for a sector that once relied mostly on part-time lawyers – if at all. “Just seven years ago, these positions were all part-time roles,” says Gent. “At that stage charities were just beginning to realise that they are actually large commercial organisations with a lot of contracts. They have to comply with more law than most organisations because not only do they have company law, they also have charity law.”

Gent says while more charities might have comfortably relied on fundraised income in the past, the need to raise “more and more money” has forced them to expand ways of doing that, with methods as diverse as brand licensing to commercial trade. “And as each charity extends, the contracts and the legal workload behind that has increased as well,” she says.

Today, according to Gent, large charities are highly likely to employ at least one internal legal staff member – and use multiple external firms, often on a more ad-hoc basis.

In the spotlight

Reasons cited by charities for needing greater legal support are wide and varied, although many can be traced back to events of last summer – fundraising, regulation and the need to toughen up or merge to compete for dwindling contracts in a tough financial climate.

Law firm Veale Wasbrough Vizards has noted heightened demand for legal services in response to this environment. Partner Con Alexander tells Charity Finance he has seen a “clear increase in demand” by charities involved with public fundraising as well as those facing financial difficulty “because there is so much spotlight on that”.

Shivaji Shiva, senior associate for Anthony Collins Solicitors, tells Charity Finance his firm has also seen increased demand for support with the creation of group structures and mergers, as well as complex governance advice “as charities delivering public services seek to reach the scale needed to survive in a world of fewer larger contracts”.

So often, charities are finding themselves facing the “difficult challenge” of delivering “consistently high-quality care and support to beneficiaries, while meeting the regulatory requirements of the Care Quality Commission, the Charity Commission and other regulators, and maintaining a distinctive organisational ethos,” he says.

The firm has also seen a rise in demand for property-related services, as charities attempt “to realise the asset value and look at lease options to deal with uncertain futures”, says Shiva.