Date 3 October 2006
Many trustees of charities, are or have previously been, company directors. Experience gained as a director can be invaluable when it comes to fulfilling the role of a trustee. Although certain charities can be incorporated as companies, this article highlights the main duties and responsibilities of unincorporated charity trustees and the similarities with the role of company director.
Compliance with the law and governing documents
In the same way that a company has to comply with the Companies Act and its own Memorandum and Articles of Association, trustees must ensure the charity complies with The Charities Act 1993, The Trustee Act 2000 and the charity’s governing documents. The latter may be a trust deed, a Constitution or Rules. There are further requirements set out by the Charity Commission – the regulatory body.
Decision Making
Those used to making decisions within the boardroom should find the decision-making process of trustees quite similar. Decisions should be made by all the trustees acting as a team, even if certain trustees have more responsibility than others e.g. as Chair or Treasurer. However this does not mean that decisions must be unanimous, in most cases a majority will suffice.
Trustees may split themselves into groups in order to look at different issues or projects but, again, any decisions to be made following subsequent feedback is to be made collectively.
Day-to-day decisions may be delegated to employees of the charity provided that clear procedures are in place for reporting back to the trustees and the nature of their authority is clearly defined in writing.
Managing the Finances
Charities must keep full and accurate accounts and the trustees are under a duty to ensure this happens. Whereas directors are accountable to the company, trustees are accountable both to the beneficiaries of the charity and to the donors. As a result the accounts must be available to the public on request. Depending on the level of finance within the charity, the accounts may have to be externally audited and an Annual Return sent to the Charity Commission. Trustees who have been company directors should be familiar with overseeing such accounting procedures.
All the charity’s property must be under the control of the trustees. If this includes land or buildings these must be used for the charity’s purposes and if let, this should be for the best possible return. The property should be maintained in good condition with the appropriate insurance in place. Although company directors may have valuable experience in letting property, they will now need to ensure that all dealings with charity property are in accordance with the charity’s objects.
Trustees will be responsible for applying the charity’s income. This must be done fairly and must be spent on those entitled to it as beneficiaries under the governing document.
Duty of Care
The fiduciary duties owed by a director to a company are the same as those owed by a trustee to the beneficiaries of the charity. A trustee must not place himself in a position where his own interests conflict with those of the charity nor obtain any personal gain from his position (unless given express authority). Further, a trustee owes undivided loyalty to the beneficiaries and must not use any confidential charity information unless to benefit the charity concerned.
Liability
If the Trustees act unlawfully, imprudently or in breach of the charity’s governing document they risk being held personally liable for any loss incurred by the charity. This is similar to a company director who acts illegally or beyond his actual authority.
Of course the main difference between trustees and company directors, is that the latter get paid, although as you will read in ‘The Charities Bill’ article it is being proposed that there will be a statutory right to remunerate trustees, should the Bill be enacted.
For more detailed guidance on the responsibilities of trustees see www.charity-commission.gov.uk or contact Chris Wilks at chris.wilks@salaw.com or on 01727 798083.
© SA Law 2006
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.