Lynne Brooke is a solicitor with a wide knowledge of corporate and commercial law and is a trustee of Westminster Mencap and Kith & Kids and the Lifetime President of Disability Law service. In this Blog he writes about what to do if you’re considering a role as a Charity Trustee.
I have been involved in the Charity sector for over 40 years both as a legal adviser and as a Charity Trustee, and count many Charity Trustees as my friends.
Charity Trustees generally do a very good job, but it is easy to get it wrong; you may have read in the press about the recent problems at the Royal National Institute of Blind People.
My notes below have been designed to help someone thinking of becoming a Charity Trustee.
Trustees have overall control of a charity and are responsible for making sure it’s doing what it was set up to do. Trustees may be known by other titles, such as directors or committee members.
A Charity has a Governing document setting out the objects (i.e. the aims) of the Charity and other important provisions.
Where the Charity has no separate legal personality then its governing document is likely to be a Trust Deed and:
- the Trustees will generally hold the legal title to the Charity’s assets
- the Trustees will be directly personally liable to third parties in respect of contracts entered into by the Charity eg relating to employees, premises, and suppliers
- the Trustees will be personally at risk if the Charity runs out of funds and is unable to meet its liabilities.
- the Trustees should ensure where possible that contracts include a clause limiting the liability of the Trustees to the amount of the Charity’s assets.
Where the Charity has a separate legal personality, such as a charitable company limited by guarantee or Charitable Incorporated Organisation then its governing document is likely to be the entities Constitution and:
- the separate legal personality will generally hold the legal title to the Charity’s assets
- the Trustees will not be personally liable to third parties in respect of contracts entered into by the Charity.
Given the differences in personal liability, once you have become a Charity Trustee it is worth considering changing the Charity so it has a separate legal personality.
Before becoming a Charity Trustee:
- familiarise yourself with the Charity’s Governing document, and keep it readily available for your reference as you should know its contents and comply with it
- familiarise yourself with the Charity Commission Guides which are available on its website and in particular read the ‘Essential Trustee’ Guide
- check that the Charity has appropriate insurance and its scope/caveats in respect of its activities
- check if the Charity is be permitted by its Governing Document to indemnify its Trustees who have acted in good faith and in accordance with their duties
- if the Charity has Trustee Indemnity Insurance, which gives Charity Trustees limited protection, check its scope/caveats, and whether you have to pay towards the premium
Becoming a Charity Trustee can be an extraordinarily rewarding experience but it is it is an important and serious role so if you decide to become a Charity Trustee remember:
- keep the Charity’s governing documents readily available at all time so you can refer to them and make sure everything done complies with them
- you may be subject to personal legal action by the Charity Commission or fellow trustees for breach of trust
- you may incur personal liability if the charity operates while it is insolvent. If there is any such risk the Trustees should protect the Charity and themselves by instructing an experienced insolvency practitioner at an early stage to monitor and formally advise; letting matters drift without such advice is a recipe for incurring personal liability.
Lynne Brooke is a solicitor with a wide knowledge of corporate and commercial law and is a trustee of Westminster Mencap and Kith & Kids and the Lifetime President of Disability Law service.
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