In Those We Trust – A Guide To Charity Trustees

There are over 180,000 charities in England and Wales[1], which endeavour to benefit various sectors of society in unique ways. But the one thing they all have in common is they rely on the dedication, experience, time and effort of committed charity trustees. This article gives a brief picture of what a charity trustee is, who can become one and their duties and liabilities.

Charity trustees are the people who are responsible for the management of the charity; they ensure that it achieves what it was set up to do.

The Charity Commission’s publication, The Essential Trustee: What You Need To Know, summarises a trustees’ duties as follows:

“Trustees have and must accept ultimate responsibility for directing the affairs of a charity ensuring that it is solvent, well-run, and delivering the charitable outcomes for the benefit of the public for which it has been set up”.[2]

Trustees can be known by other titles such as:

• directors;
• board members;
• governors; and
• committee members.

Unless specifically agreed with a charity, most trustees perform their duties unpaid, although they can claim reasonable expenses incurred in the performance of their duties.

If the charity is a company or a Charitable Incorporated Organisation (CIO), an individual must be 16 years or over to be a trustee. For any other type of charity, such as a trust or an unincorporated association, the minimum age for eligibility as a trustee is 18 years.

In addition to age restrictions, a charity must also consider the following before appointing an individual as a trustee:

• Capacity: does the candidate possess the capacity and comprehension to manage their own affairs?
• Conflict of interest: would appointing a person as a trustee place that person in a situation where his or her personal interests conflict with the charity’s objectives? Will such a person be able to contribute to the charity if he or she is required to withdraw from certain aspects of the charity’s management as a result of his or her conflict of interest?
• Fit and proper persons test: the charity will need to determine whether a candidate would present any risk to the charity’s financial or tax position. Charities should require trustee candidates to provide a written declaration to confirm that, among other things, they have not been disqualified from being a trustee or participated in any fraudulent behaviour.
• Qualifications: a charity, whether in its governing document or other policies, may require candidates to meet additional criteria or have certain qualifications before being appointed as a trustee.

Under section 178 of the Charities Act 2011, a person is disqualified from being a trustee if:

• they have been convicted of a dishonesty or deception offence;
• they are an undischarged bankrupt;
• they have made arrangements with creditors from which they have not been discharged;
• the Charity Commission or the High Court has removed them from the office of trustee due to misconduct or mismanagement of a charity’s administration;
• they are subject to a disqualification order or disqualification undertaking under either the Company Directors Disqualification Act 1986,the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I.4)), or an order made under section 429(2) of the Insolvency Act 1986 (disabilities on revocation of county court administration order); or
• they have been removed, under section 34(5)(e) of the Charities and Trustee Investment (Scotland) Act 2005 (asp 10) (powers of the Court of Session) or the relevant earlier legislation (as defined by section 179(6)), from being concerned in the management or control of any body.

Trustees have six main duties:

1. ensure the charity is carrying out its purposes for the benefit of the public;
2. complying with the charity’s governing document and regulations;
3. act in the best interests of the charity;
4. manage the charity’s resources responsibly;
5. act with reasonable care and skill; and
6. ensure the charity complies with statutory accounting and reporting requirements.

Trustees work as a team, and if a majority agree with a proposed action, it can generally move forward. The specific procedures relating to the decision-making process should be detailed in the charity’s governing document.

When making decisions, trustees need to have regard to a number of factors. These are to:

• act within their powers, which are detailed in the charity’s governing document or otherwise the Charities Act 2011;
• act in good faith, and only in accordance with the charity’s interests;
• ensure that they are sufficiently informed on the matters to be decided on, including seeking professional advice where appropriate;
• take into account only relevant, and no irrelevant, matters when making a decision;
• mitigate and deal with any conflicts of interest; and
• make decisions that are within the scope of what is expected of a reasonable trustee body, taking into account the relevant circumstances. This will require trustees to identify the various decision-making options available to them, consider the same, whilst following the other principles of decision-making mentioned above.

Charity trustees can be held personally liable for their actions if they are undertaken improperly. They can be liable to:

• their own charity; or
• to a third party that has a legal claim against the charity which the charity cannot settle.

In addition to their position in a charity, trustees are often involved in other sectors of society or businesses. Where this is the case, trustees should be wary of any potential conflicts of interest that could arise between their duties to their charity and any other commitments they may have. A trustee is considered to have a conflict of interest if:

• the trustee may benefit financially, either directly or indirectly, from a decision he or she makes on behalf of the charity as a trustee; or
• the trustee’s duty to the charity competes with a duty he or she has towards a person or another

If you believe there may be a conflict of interest, you have a duty as a trustee to:

• identify the nature of the conflict and promptly disclose the same to the other charity trustees;
• find a way to avoid or mitigate the conflict; and
• record the details of the conflict and the steps taken by the trustees to avoid or mitigate it.

The charity’s governance document should specify how the trustees are to manage conflicts of interest.

It is also important to ensure that the charity’s accounts include details of payments and benefits to its charity trustees, or to people connected to them. The charity must explain why the payments were necessary and the legal authority it had to make them.

Being a charity trustee is a serious responsibility and compliance with a charity’s governance documents, and the law is imperative. An experienced charity solicitor can provide advice on ensuring you perform your duties appropriately.

Saracens Solicitors is a multi-service law firm based in London’s West End. We have dedicated and highly experienced charity law solicitors who can advise on all legal matters relating to the charity sector. For more information, please call our office on 020 3588 3500.

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284702/rs23text.pdf

[2] https://www.gov.uk/government/publications/the-essential-trustee-what-you-need-to-know-cc3/the-essential-trustee-what-you-need-to-know-what-you-need-to-do