NIDOS/OSCR Governance Workshop - Trustee Remuneration

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Presentation on trustee remuneration from the 'Good Practice for Trustees and Governance' workshop run by NIDOS and OSCR on 21st January 2010.

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NIDOS/OSCR Governance Workshop - Trustee Remuneration

  1. 1. Charity trustee remuneration Payments and benefits to charity trustees and those connected with them
  2. 2. Charity trustee remuneration <ul><li>What is meant by remuneration? </li></ul><ul><li>Payment or benefit in kind received directly or indirectly by a charity trustee: </li></ul><ul><ul><li>for being a charity trustee </li></ul></ul><ul><ul><li>for being an employee of the charity </li></ul></ul><ul><ul><li>for other services to or on behalf of the charity </li></ul></ul>
  3. 3. Charity trustee remuneration <ul><li>What is meant by remuneration? </li></ul><ul><li>DIRECT – payment made to or benefit given directly to the charity trustee in person </li></ul><ul><li>INDIRECT – payment made to another person or business with whom the charity trustee is connected and from whom the charity trustee might derive benefit </li></ul>
  4. 4. Charity trustee remuneration <ul><li>What is meant by a connected person? </li></ul><ul><ul><li>immediate family members of the trustee including domestic partners and their immediate families </li></ul></ul><ul><ul><li>companies, businesses and other organisations controlled by the trustee or by an immediate family member or in which the trustee and / or family member has a substantial interest </li></ul></ul><ul><ul><li>a Scottish partnership in which the trustee or a connected person is a partner </li></ul></ul>
  5. 5. Charity trustee remuneration <ul><li>What are the conditions under which remuneration is allowed? </li></ul><ul><ul><li>the maximum amount of remuneration is set out in a written agreement between the charity and the service provider and is reasonable in the circumstances </li></ul></ul><ul><ul><li>trustees agree that it is in the interests of the charity for the services to be provided by the service provider for this amount </li></ul></ul><ul><ul><li>only a minimum of the trustees will receive remuneration under the agreement once entered into </li></ul></ul><ul><ul><li>the charity’s governing document does not expressly prohibit the remuneration </li></ul></ul>
  6. 6. Charity trustee remuneration <ul><li>Are there exceptions to these conditions? </li></ul><ul><ul><li>where the governing document of a charity includes a specific provision authorising remuneration that was in force on 15 November 2004 </li></ul></ul><ul><ul><li>where remuneration is allowed by another enactment or by order of the Court of Session </li></ul></ul>
  7. 7. Charity trustee remuneration <ul><li>Examples of remuneration that may be allowed </li></ul><ul><ul><li>a charity pays its treasurer a modest honorarium </li></ul></ul><ul><ul><li>a local tradesman provides services to a charity of which he is a trustee </li></ul></ul><ul><ul><li>a charity pays a reasonable market rent to a trustee for an office she owns </li></ul></ul><ul><ul><li>an employee of a charity is appointed to its board of trustees as a staff representative </li></ul></ul><ul><ul><li>a local lawyer is a charity trustee and her firm is engaged by the charity to provide services at an agreed price </li></ul></ul>
  8. 8. Trustee indemnity insurance <ul><li>also called trustee liability insurance or directors’ and officers’ insurance (D&O) </li></ul><ul><li>covers some of the losses caused by trustees (governing body members) to their own charity </li></ul><ul><ul><li>accidental or unintended breaches of trust </li></ul></ul><ul><ul><li>legal costs of defending proceedings </li></ul></ul><ul><ul><li>breach of confidentiality </li></ul></ul><ul><ul><li>breach of copyright </li></ul></ul><ul><ul><li>loss of documents </li></ul></ul><ul><li>often combined with other insurances such as professional indemnity, public and employer’s liability </li></ul>What is trustee indemnity insurance?
  9. 9. Trustee indemnity insurance <ul><li>What is not covered? </li></ul><ul><ul><li>liabilities to third parties (eg. breaches of contract) </li></ul></ul><ul><ul><li>redundancy or severance payments to employees </li></ul></ul><ul><ul><li>penalties (fines) for breaches of statutory duty </li></ul></ul><ul><ul><li>losses resulting from fraudulent or dishonest acts </li></ul></ul><ul><ul><li>losses resulting from failure to insure or underinsurance of the charity’s assets </li></ul></ul><ul><ul><li>losses resulting from any act the trustees knew to be a breach of trust, or committee in reckless disregard of whether it was in breach of trust </li></ul></ul>
  10. 10. Trustee indemnity insurance <ul><li>Is trustee indemnity insurance allowed? </li></ul><ul><ul><li>it depends who pays for it! (the trustees or the charity) </li></ul></ul><ul><ul><li>s67 of the Act places restrictions on the remuneration of trustees, including: </li></ul></ul><ul><ul><ul><li>the constitution must not expressly forbid payments </li></ul></ul></ul><ul><ul><ul><li>the majority of trustees may not benefit from any payment </li></ul></ul></ul><ul><ul><li>s68 of the Act defines remuneration as including ‘direct and indirect benefits in kind’. </li></ul></ul><ul><ul><li>trustee indemnity insurance falls within the definition </li></ul></ul><ul><ul><li>because it benefits all the trustees it breaches s67 </li></ul></ul>
  11. 11. Trustee indemnity insurance <ul><ul><li>What is the current position? </li></ul></ul><ul><ul><li>OSCR and Parliament have agreed that issues arising from ss67-68 of the Act in relation to trustee indemnity insurance were ‘unintended’ </li></ul></ul><ul><ul><li>the Act is meant to improve the operating environment for charities and OSCR has no wish to deter potential or present trustees </li></ul></ul><ul><ul><li>Commitment to amend the legislation when suitable parliamentary time can be found </li></ul></ul>
  12. 12. Trustee indemnity insurance <ul><ul><li>What is OSCR’s current position? </li></ul></ul><ul><ul><li>OSCR will continue to make charities aware of the requirements of ss67-68 </li></ul></ul><ul><ul><li>it does not have the same power as Charity Commission to grant individual consent to charities taking out trustee indemnity insurance </li></ul></ul><ul><ul><li>it will not take action against charities breaching these sections by paying for trustee indemnity insurance </li></ul></ul><ul><ul><li>it will not turn down new applicants for charitable status whose constitutions contain provision for the insurance </li></ul></ul>

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