Revelations that Prince Charles privately brokered a £1 million charity payment from the family of Osama bin Laden throw an unforgiving spotlight on the future king’s connections with Gulf philanthropy. They also raise legal questions about the power of trustees to refuse or accept gifts from controversial donors.

The Sunday Times reports that the money was temporarily deposited in a charity bank account awaiting a decision from trustees. Despite warnings, it is reported that Prince Charles felt embarrassed to hand the money back to Bakr bin Laden and his half-brother, Shafiq.

At law, the personal embarrassment of Prince Charles is irrelevant. Clarence House has said that the trustees accepted the gift after independent deliberation. This independent spirit is legally important – the trustees have full responsibility for decision-making. They independently balanced costs and detriments in good faith, so their decision will be lawful.

The board of trustees should make sure that it is studiously independent from the founder. All decisions must be made in the best interests of the charity.

While members of the British royal family have long had a close interest in charity, there is no such thing as a ‘royal charity’ at law. Basic charity law rules apply to the Prince of Wales’s Charitable Foundation, just as they would to any other charitable organisation.

If rather than acting independently, the trustees had passively followed the wishes of their founder, they would have been in breach of their duty to act in the best interests of the charity.

The trustees of the Prince of Wales’s Charitable Fund made a bad choice. After negative media coverage around the world, it is clear that their decision to accept the gift risked, and ultimately caused, very serious reputational damage to the organisation.

While there is no question that the donors have had any involvement with terrorism, the board should still have placed significant emphasis on reputational risk. The fall-out ought to have been clear, even without the benefit of hindsight.

Acceptance of the gift cannot easily be justified through philanthropic need. The Prince of Wales’s Charitable Fund is not short of cash. While the gift from the bin Laden family was large, money could have been found elsewhere.

Alongside other sources, the charity is funded by the Prince’s food business, Duchy Originals. Prince Charles also has a significant personal wealth. In common with all charities, the Prince of Wales’s Charitable Fund can receive donations free from tax.

The painful saga for the Prince of Wales’s Charitable Fund contains lessons for other foundations. Most importantly – the board of trustees should make sure that it is studiously independent from the founder. All decisions must be made in the best interests of the charity, and there should be a culture of free-minded deliberation.

Another general lesson is that while trustees are under no legal obligation to disclose their donors, bad news will often get out. Prudent trustees should not accept gifts if they think that there is a chance of a public relations crisis.

The law places onerous burdens on trustees, making them responsible for all decision-making. Trustees are normally volunteers, even in elite charities, and so this can sometimes seem unfair. But the role is not entirely without reward. It is high prestige, and in organisations such as the Prince of Wales’s Charitable Fund, it can provide a good opportunity for networking.

The overarching legal framework is designed to make sure that the reputation of the charity is protected, and also to make sure that the founder, even a royal founder, does not have undue influence over the charity board.

John Picton is a Senior Lecturer in Charity Law at the University of Liverpool, and on Twitter at @JohnPicton5.