In a time of increasing scrutiny over the cost-benefit analysis of corporate sponsorship and corporate entertaining, a number of businesses are looking to the corporate charity partnership to deliver brand benefits and awareness whilst at the same time providing donations to a charity where the business sees an alignment of values. It can be, if carefully managed, a win-win for both parties.
For those operating in the food and drink sector, charity partnerships can assist with developing CSR credentials and potentially increase employee engagement in a cause they can really get behind. For the charity, whilst it can mean a small share in your profits, your business will hopefully be assisting your chosen charity in reaching a wider audience, and more generally raising awareness of their 'cause'. As I say, a win-win for everyone!
One popular fundraising technique is by giving a donation to a named charity on the sale of your products. Many businesses, in simple terms, place the charity’s name and branding on their product(s) with the intention of sharing a percentage of the profit on the sale of that product with the charity.
Whilst there are obvious benefits, for those considering this as an option, there are perhaps some less well-known regulatory requirements that your business will need to deal with when entering into this type of donation arrangement with a charity.
Products indicating some or all of the proceeds of a sale are to be given to a charity
Probably one of the most well-known examples of the above type of arrangement is a high street retailer selling Christmas cards where a stated proportion of the sales of those cards is to be donated to a named charity. However, charity names have found their way on to all sorts of products including gin bottles, tins of biscuits and a whole host of food and drink products. Opting to donate to charities through sales of your products where a percentage of the sale of that product is donated to the named charity is a practice not unknown in the sector.
Where your business chooses to place the charity’s name and branding on one of your products with the intention of sharing a percentage of the profit on sale of that product with the charity, your business will be deemed, for the purposes of Scottish[1] charity legislation, to be what is termed a 'commercial participator'[2] and your business is required to enter into a 'commercial participator agreement' with the charity and required to pass any monies raised within a designated period[3].
The regulations and requirements – what do these mean for you?
The Charities and Trustees Investment (Scotland) Act 2005 makes clear there are two key areas to be addressed in any commercial participator arrangement. These relate to:
- written agreements between your business and the charity, and
- solicitation statements.
There must be a written agreement between the parties and the Charities and Benevolent Fundraising (Scotland) Regulations 2009 sets out what it needs to contain, including setting out who the parties are, its duration and conditions on variation and so on.
In particular, the agreement must set out:
- the main objectives of the agreement and the fundraising methods chosen;
- the details of how any split will be determined where there is more than one charity involved;
- how any remuneration or expenses that the commercial participator is to receive will be determined; and
- details of the payment amount where it is a proportion of proceeds from the sales or services or the percentage of donations made resulting from the sales or services.
Non-compliance could result in a fine of up to £5,000 and risk significant reputational damage.
The legislation also requires specific solicitation statements[4] to be made to the public where the commercial participator is making a donation to charities (these statements will vary depending on whether the ask is for a specific charity, or a general fundraising ask).
Where you are raising funds for a specific charity, a statement on your food or drink label will need to include:
- the name of the charitable organisation and its charity number(s) (including its English number, where it is dual registered);
- where fundraising relates to more than one charitable organisation, and details of the proportional split of each;
- if you are to receive remuneration (how that is determined); and
- the actual amount that will be donated to the charitable organisation[5].
The benefits of such agreements
While it may appear there is a fair bit to consider here, the benefit of a commercial participator arrangement is twofold: it likely increases donations for the charitable organisation alongside awareness raising of its cause whilst increase sales for the business, alongside enhancing goodwill by demonstrating community social responsibility.
You never know – it may even entice consumers to purchase your product over another’s well-known brand, knowing that a percentage or part of that will go to charity.
With some careful pre-planning, the advantages of commercial participator agreements are clear to see.
How can we help?
Please contact Valerie Armstrong-Surgenor if you would like assistance in relation to a commercial participator agreement or any related charity law queries.
Footnotes:
[1] Similar rules apply in England & Wales.
[2] Section 79 of the Charities and Trustees Investment (Scotland) Act 2005 (the Act) makes it clear that a “commercial participator” includes a company (or person) who carries on business for profit, whose business is not focused on fundraising, and as part of their business sales or service contributions will be made to a given charitable (or benevolent) organisation or applied for charitable, benevolent or philanthropic purposes.
[3] Commercial participators holding any money, for the benefit of the charity must, as soon as reasonably practicable after its receipt and in any event not later than 28 days after that receipt transfer to the charity or pay into an account of the charity.
[4] The nature of solicitation statements will vary depending on a number of factors.
[5] Other requirements may include stating the amount received for the goods provided by the commercial participator and the proceeds from any promotional venture undertaken by a commercial participator.
