Features
Duties of charity trustees
Around 850,000 individuals serve as charity trustees in England and Wales.
Hannah Morphet explains what their
duties are
Hannah Morphet
Trainee Solicitor
T: 020 7551 7636
[email protected]
Hannah is a second-year
trainee with an academic
background in politics.
Charity trusteeship is valuable, exciting and rewarding,
but it comes with duties and responsibilities. This
article outlines those duties and explains what can
happen, should things go wrong.
What are the duties?
Charity trustees are responsible for the charity’s
general management. They may have a hands-on role,
or they may delegate day-to-day activity to staff, but
they should always remember that they are ultimately
in charge – the buck stops with them.
The main duty of charity trustees is to use the charity’s
resources to further its purposes. To this end, trustees
should:
n be
clear about what their charity’s purposes are
(these are also called its ‘objects’) – check the
charity’s governing document; and
n always
consider whether the charity’s work is
furthering its purposes.
Make sure the charity is run properly
Trustees must ensure that the charity is run in
accordance with its constitution, charity law and
all other laws and regulations affecting its activities
– employment law, data protection, safeguarding
children and vulnerable adults, for example.
Act reasonably and prudently
The law imposes a duty of care on charity trustees,
otherwise known as a duty ‘to exercise such care
and skill as is reasonable in the circumstances’. The
duty is greater if a trustee has (or claims to have)
special knowledge or experience, or if their business
or profession means they can reasonably be expected
to have special knowledge or experience. In matters
where trustees are not expert, they are expected to
take appropriate advice.
Act collectively
Decisions and responsibilities are shared, so all
trustees should take an active role. Trustees can act
by majority (unless the constitution says otherwise),
but all the trustees are collectively responsible for
board decisions (unless they make it clear that they
disagree with a particular decision, but are overruled).
Some trustees may have particular roles; for instance,
the chair may be a figurehead for the organisation,
and the treasurer will be responsible for explaining
the financial situation to the other trustees. However,
responsibility for decision-making still lies with the
board as a whole.
Protect the charity’s assets
A charity’s assets include its cash, investments, land,
intellectual property, staff and reputation. Trustees
must:
n implement
appropriate financial procedures:
everything from budgeting to authorisation of
payments;
Trustees must ensure the charity complies with
rules on fundraising and take particular care when
dealing with third parties such as paid fundraisers or
commercial sponsors.
n act
within their powers in relation to investing
charity funds;
Trustees should be aware of the rules on campaigning
and political activity, particularly in the run-up to the
2015 general election, as there are some limits on
charity campaigning.
n manage
n comply
with special rules regarding selling,
letting and mortgaging of charity land;
their staff properly and comply with
employment law (breach of which may result in
a claim) and apply good practice in dealing with
volunteers; and
n recognise
Find out more
Charities and social enterprises need to be aware
of regulations and guidance that may affect their
activity in the run-up to the 2015 general election.
See the Charities and Electoral Commission’s
guidance on campaigning and political activity by
charities (CC9) at www.electoralcommission.org.uk
10 Employment Update | Autumn 2014
that the charity’s name and reputation
are valuable assets. The trustees must avoid activity
that might damage the charity’s reputation and
should consider legal protection of the charity’s
name and logo and any other intellectual property
rights.
Features
Act in the best interests of the charity
The interests of the charity are paramount. Trustees
should not allow their personal interests or views
to override this: they must exercise independent
judgement.
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Avoid any conflict of interest
The scope for trustees to receive personal benefit from
their charity is very limited: more detail on this is
available from BWB.
whether they have had regard to the statutory public
benefit guidance, in their annual report.
Find out more
For more information on public benefit, see
www.charitycommission.gov.uk/trustees-staff-andvolunteers/trustee-board/public-benefit-a-summary/
What if things go wrong?
Trustees must deal appropriately with any conflicts
arising between their personal interests and those of
the charity, and between duties they may owe to other
organisations and their duties to the charity.
Trustees are naturally concerned about the liabilities
they assume on becoming a charity trustee.
Fortunately, it is rare for trustees to be personally liable
as a result of involvement with a charity.
Accept ultimate responsibility
Finally, remember that it is the trustees who are
responsible for the vision, mission and management
of the charity and are therefore ultimately accountable
if things go wrong.
Breach of trust
All charity trustees are, in principle, vulnerable to
claims instigated by the Charity Commission or the
Attorney General (or the other trustees) if they breach
the duties outlined above, regardless of the charity’s
legal form.
Trustees of charitable companies have particular duties
imposed on them by company law but, for the most
part, the duties of charity trustees are largely the same
regardless of the charity’s legal form.
Find out more
See ‘The Call of Fiduciary Duty’, at http://www.
bwbllp.com/knowledge/2014/07/24/the-call-offiduciary-duty-gemma-boore
Public benefit
The Charity Commission expects trustees to run their
charity in a way that furthers its purposes for the
public benefit, and has published guidance giving
more detail about this ‘public benefit’ requirement. The
guidance identifies two key principles of public benefit:
n there
must be an identifiable benefit or benefits; and
n the
benefit must be to the public or a section of the
public.
All charity trustees are legally obliged to have regard to
the commission’s statutory guidance on public benefit
when exercising any relevant powers or duties. This
means all trustees should:
n be
briefed on the guidance;
how the guidance is relevant to their
particular charity; and
However, provided trustees have been acting
reasonably in running the charity, and have complied
with those duties, it is very unlikely that they will be
personally liable in these circumstances.
Trustees may consider taking out trustee indemnity
insurance, which can usually be funded from charity
resources. This is an insurance policy that can protect
the trustees from liability of this nature in certain
circumstances. The precise scope of the cover depends
on the terms of the individual policy.
Liabilities to third parties
Trustees of unincorporated charities (such as charitable
trusts and unincorporated associations) may be
vulnerable to personal liability if there is a legal claim
against the charity and the charity has no assets
to meet the claim. This is because unincorporated
charities do not have a separate legal personality, so all
the unincorporated charity’s contracts and relationships
are in fact relationships of the trustees personally.
Generally speaking, trustees of incorporated charities,
such as charitable companies and charitable
incorporated organisations (‘CIOs’) are less vulnerable
to third-party claims of this kind. For this reason,
many unincorporated charities consider incorporating.
n understand
n bear
the guidance in mind when reviewing and
planning activities.
Charity trustees are obliged to provide details about
the activities undertaken by the charity in pursuing
its aims for the public benefit, and a statement as to
Find out more
More detail on the duties of charity trustees
can be found in BWB’s free, pocket-sized booklet
on the duties of charity trustees, available at
www.bwbllp.com/file/duties-of-charity-trusteescolour-amended-version-pdf
Employment Update | Autumn 2014 11