Being a charity trustee is a serious role, with important responsibilities. It should not be entered into lightly, nor is it something to be scared of.
On the downside, the Charity Commission is placing an ever increasing emphasis on the role of trustees in ensuring charities are run well, not least after scandals in areas such as fundraising and safeguarding. In 2017, the Charity Commission gained new discretionary powers to disqualify people from acting as a trustee, and included the extremely broad and subjective criterion of "past or continuing conduct, whether or not in relation to a charity, that is, or is likely to be, damaging to public trust and confidence in a charity or charities". And most recently, the grounds for automatic disqualification have also been extended. There is a real risk this extra attention on the role of trustees, while necessary, will put people off taking up the role. (I know of one charity that recently decided to close primarily because the trustees felt their their role had become too onerous.)
On the upside, apart from the very high profile example of Kids Company trustees, there have been very few examples of trustees being disqualified or otherwise sanctioned, except (of course) for obviously fraudulent or criminal behaviour - in fact I can't think of any.
So what are the real risks?
Essentially, as long as trustees act in good faith and do everything reasonable to comply with their legal duties, the risks are usually incredibly low. The problem that I find all too often, however, is that trustees don't know what their legal duties are or what they mean (a view supported by the 2017 research report "Taken on Trust"). You simply can't comply with your duties if you don't know what they are. In short, the six general duties for charity trustees are to:
- Ensure the charity carries out only its purposes and for the public benefit.
- Ensure compliance with the charity's governing document and the law.
- Act in the best interests of the charity's beneficiaries now and in the future.
- Manage the charity’s resources responsibly.
- Apply their knowledge and experience with care and skill.
- Ensure the charity is accountable.
In my view, all Trustee Boards should have regular training (or at least time to reflect) on these duties and what good governance looks like. For a small charity this need not take very long; we deliver a simple 2-3 hour workshop for trustees that covers both trustees' duties and a high level review of good governance practice (based on the 2017 Charity Governance Code).
Making sure trustees understand their duties and how to comply with them is by far the most important step you can take to protect them from personal liabilities.
The other key area of risk run by charity trustees is the potential personal liabilities that come with the role, in any form of charity.
For incorporated charities (generally charitable companies and charitable incorporated organisations), this only really arises if trustees do not comply with their duties and the charity becomes insolvent or loses money as a result.
For unincorporated charities (generally members associations and trusts), the risks can be much higher because if anyone sues or otherwise seeks redress for anything the charity has done (e.g. if they are injured while on an activity run by the charity) they can only sue the trustees. This is because the charity has no legal personality of its own.
In many such charities (such as grant-making trusts) those risks are also very low and can, usually, be insured against (if you can afford it). However, for a significant minority it is really worth considering incorporating the charity either as a company or a charitable incorporated organisation (CIO). An incorporated charity has its own legal personality and so, if someone does successfully sue the charity then, providing the trustees complied with their legal duties, they are very unlikely to face any personal liabilities.
Incorporating a charity can be a bit of a palaver but, once done, the running costs for the charity will usually be no different than they were before and trustees will be better protected against personal losses. Our resources page on charity structures gives a bit more detail on the forms of charity that are generally available.
To find out more about trustee risks and liabilities, including our training offers or the support we can provide for incorporating a charity, please contact us at firstname.lastname@example.org to arrange free initial telephone discussion.