The Charity Commission has ordered Mayfair Charities Ltd to appoint an independent trustee to avoid future conflicts of interest as it concludes its statutory inquiry into the charity.

The regulator opened an inquiry into the charity, which makes grants to Jewish organisations, in July 2012 to investigate complex financial relationships between the charity, its subsidiaries and a company connected to the trustees.  

Mayfair Charities Ltd’s trustees, Mr B S E Freshwater (chair), Mr D Davis and Mr S I Freshwater were all trustees of four charitable subsidiaries and connected to Freshwater Group.

Freshwater Group made a loan of £15m to one of the charity’s subsidiaries, Metropolitan Properties Co Ltd, which was repaid before the inquiry started.

In the inquiry report, which was published yesterday, the Commission said: “The inquiry was not satisfied that the trustees could demonstrate that the arrangement was supervised and monitored in a way that ensured the interests of the subsidiary company (and in turn the charity) were being properly protected.”

The report confirms that the charity intends to appoint a new trustee. There is no new trustee listed on the Charity Commission’s website and the charity could not be reached for comment.

Michelle Russell, head of investigations and enforcement at the Charity Commission, said: “This case is a timely reminder to all charities to be alert to and deal with conflict-of-interest situations. Conflicts of interest can lead to decisions that are not in the interests of the charity, which damage its reputation and public trust and confidence in the charity. It may mean those decisions are legally invalid or open to challenge.”

Loan to subsidiary

The relationships between the charity and its subsidiaries were also reviewed by the Commission.

The Commission had already been in engaged with Mayfair Charities Ltd on two separate occasions in 2001 and 2004 about a loan made in 1986 to one of its subsidiaries.

Interest amounting to £224,000 per year has been paid to Mayfair but no capital repayment has yet been made. The regulator reminded the charity that it should have been reviewing this situation.

Trustees have also been told to improve their record-keeping and documentation procedures, including grantmaking decisions and decisions to enter into loan arrangements.