IBB SOLICITORS CHARITIES TEAM

Briefing

The Charity Commission publishes CC3 The Essential Trustee: What
you need to know...
IBB SOLICITORS CHARITIES TEAM

Duties of charity trustees / 2

What are the principal
duties of charity trustees?
The over...
IBB SOLICITORS CHARITIES TEAM

Duties of charity trustees / 3

What do charity trustees need to know?
There is a wide vari...
IBB SOLICITORS CHARITIES TEAM

Duties of charity trustees / 4

How should trustees
operate?
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Trustees need to m...
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Charity Trustees Responsibilities and Duties: Are You Aware?

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Becoming a charity trustee is a fufuling undertaking, however there are roles and responsibilities that are associated with this undertaking. For information on Charity Law and Charity Trustee responsibilies and duties contact IBB's Charity Law specialists on: http://www.ibblaw.co.uk/services/charities

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Charity Trustees Responsibilities and Duties: Are You Aware?

  1. 1. IBB SOLICITORS CHARITIES TEAM Briefing The Charity Commission publishes CC3 The Essential Trustee: What you need to know, which provides detailed guidance on the duties and responsibilities of charity trustees. This article is intended to provide you with an outline of those duties and as a helpful reference tool to help charity trustees in their role. duties of charity trustees Who is a charity trustee? Charity trustees are the people who have a general control and management of a charity’s administration and are the people who are ultimately responsible for the charity. They may not necessarily be referred to as the trustees but may be known by another name such as the Management Committee, the Council, the Board, the Directors. Who can be a charity trustee? This will be determined by the charity’s governing document. Depending upon how the charity is established, this will either be its Constitution, Charter, Rules or its Memorandum and Articles of Association. In theory anyone can become a charity trustee but your constitution may impose some restrictions. There are also some individuals who will be disqualified from acting as a charity trustee because they have been convicted of an offence involving dishonesty or deception. When appointing new trustees, it is good practice to ask the new trustee to sign a Declaration of Eligibility confirming that they are eligible to act and that (where relevant) the necessary DBS checks have been undertaken. This briefing note is only intended to provide general guidance and is not intended to constitute legal advice.
  2. 2. IBB SOLICITORS CHARITIES TEAM Duties of charity trustees / 2 What are the principal duties of charity trustees? The overriding duty of all charity trustees is to advance the purposes of their charity. In fulfilling that duty they have a number of underlying basic responsibilities: • • • Trustees are responsible for the proper administration of their • charity This means that trustees must ensure that the charity’s assets and resources are used only for the purposes of the charity and that the charity is run in accordance with its constitution, charity law and all other relevant laws and regulations. • Trustees are responsible for the everything that the charity does This means that the charity trustees are responsible for the vision, mission and management of the charity. Though they may delegate certain functions to the staff, it is the trustees who are accountable should things go wrong. • Trustees have to act reasonably and prudently in all matters relating to their charity In exercising their duties the trustees have to act with such skill • and care as is reasonable in the circumstances. This standard of care will be higher if the trustee has any special knowledge or experience in a particular area, or if their experience means that they should be reasonably be expected to have such knowledge or experience. If Trustees do not have the necessary expertise amongst themselves on a particular matter, then they are expected to take appropriate advice. Trustee must safeguard and protect the assets of the charity This applies to investments, property, cash and other property as well as its less tangible assets such as its intellectual property, its core staff team and critically, its reputation. Trustees have a duty to act collectively This means that decisions and responsibilities are shared and all trustees are collectively responsible. All trustees should take an active role and no one trustee has any more authority than any other. Trustees must act in the best interests of their charity This means that the interests of the charity come first. Trustees must not allow their personal interests or views to get in the way and must at all times exercise independent judgment. Trustees must avoid any conflict of interest between their personal interests and those of the charity Trustees need to be alert to any potential or actual conflicts of interest between their own personal interests and those of the charity and must identify, manage and record those conflicts appropriately. This extended to conflicts of loyalty and not just situations in which the trustee may gain a direct or indirect benefit or advantage.
  3. 3. IBB SOLICITORS CHARITIES TEAM Duties of charity trustees / 3 What do charity trustees need to know? There is a wide variety of issues that may affect a charitable organisation and trustees are expected to ensure that they are being dealt with properly. In this section we have included an alphabetical list of issues of which trustees need to be aware. Campaigning and Political Activity: Charities that campaign need to ensure that they stay within the rules. Guidance is available at CC9: Speaking Out Guidance on Campaigning and Political Activity by Charities. Charitable objects: Funds can only be applied for a charity’s purposes. These are the objects set out in your constitution (not your wider mission statement). If your activities develop beyond your objects you will need to apply to the Charity Commission amend your objects as spending monies outside of your objects may be a breach of trust. Employment: Charities are employers just like any other and must comply fully with their legal obligations as an employer. Equalities: Charity trustees need to comply with the Equalities legislation both in their role as employer and in the way in which they provide benefits to their users. If they restrict benefits to those who share a protected characteristic, they will need to be able to show how they fall within one of the relevant exemptions. Financial Procedures: Charities need to ensure that they have appropriate and proportionate procedures in place to protect the charity’s assets. The Charity Commission’s Guidance CC8: Internal Controls for Charities provides further advice and also contains a helpful checklist for trustees to use. Fundraising: The rules and regulations can be complex. CC20 Charities and Fundraising provides guidance on how to get it right. Investment: There are specific duties which apply in relation to the investment of a charity’s funds. CC14 summarises the legal and practical aspects of charity investment and the Charity Finance Group guide provides assistance to charities who need help with preparing their investment policy. Land: Special rules apply when a charity is selling or disposing of land and charity trustees who own property need to ensure they understand when they will need a qualified surveyor’s report and when they may need to ask the Charity Commission to make an order. Further information can be found in CC28: Sales, leases, transfers or mortgages – what trustees need to know. Payment of Trustees: Trustees cannot generally be paid for acting as trustee and may only be paid for providing goods or services if the charity has followed the proper procedure. Public Benefit: All charities have to be have charitable objects which are for the public benefit and the Charity Commission requires all charity trustees to have regard to their Public Benefit Guidance and to report on how the charity is operating for the public benefit. Reports and Accounts: All charities must prepare accounts and must make them available on request. Depending on its size and form a charity may also require an independent examination or an audit. Reputation: A charity’s reputation is one of its most important assets and charity trustees should consider how best to protect their brand at all times. Reserves: a charity’s funds are supposed to be used for its charitable purposes and charities cannot sit on funds without a clear rationale for doing so. Trading: Charities cannot trade unless they do so in order to promote their charitable objectives (not just in order to fundraise). Trustees will need to know when they can sell Christmas cards or other branded merchandise and when they cross the threshold and will need to set up a separate trading company.
  4. 4. IBB SOLICITORS CHARITIES TEAM Duties of charity trustees / 4 How should trustees operate? • • • Trustees need to meet sufficiently often to ensure that they are properly discharging their responsibilities. There is often a minimum number of meetings prescribed in a charity’s governing document. Trustees should ensure that if they delegate to others they are clear about what is being delegated and the limits of that delegation. If they are delegating decision making powers, they must be clear that they have the necessary power to do so. Trustees may choose to adopt a number of policies for example on managing conflicts, investment, trustee recruitment etc., to assist with the efficient management and administration of the charity. What about the liability of charity trustees? Trustees are naturally concerned about potential personal liabilities that may arise. The extent of a trustees’ personal liability will depend upon the legal form of the charity and whether or not the charity is unincorporated. If a charity is unincorporated, the trustees may find themselves personally liable members of: to the extent the liabilities of the charity exceed its assets. However in a charitable company or other incorporated entity, the trustees of the charity will generally be protected from personal liability, save for situations of insolvency where wrongful trading or fraudulent trading issues may arise. Where the trustees are in breach of their duties and as a result the charity suffers a loss, then the trustees may become personally liable to make good that loss. Having said that it is rare for charity trustees to be held personally liable for a breach of duty or breach of trust where they have acted in good faith. Many charities will take trustee indemnity insurance to provide the trustees with some comfort in this regard – though the terms of any policy should be carefully considered to ensure that it provides the type of cover that is appropriate. If you or your Trustees would like to discuss the issues raised by this note and the potential issues in your charity, please contact: Jo Coleman, Partner, IBB Solicitors Charities team 01895 207809 jo.coleman@ibblaw.co.uk This briefing note is only intended to provide general guidance and is not intended to constitute legal advice. © 2013 08456 381381 ibblaw.co.uk

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