It’s a minefield. The path a charity trustee follows is strewn with legal traps to ensnare the unwary and widely reported charity collapses suggest it’s all too easy to be caught out. High-profile scandals, including those engulfing Oxfam, The Presidents Club and Kids Company (the former trustees of the latter remain under threat of temporary disqualification from running or controlling companies) risk discouraging other current or future charity trustees.
In fact, being a charity trustee is invariably enriching, stimulating and worthwhile. And the vast majority of trustees fulfil their duties without censure or criticism or legal mishap. The successful trustee knows and understands their legal duties and responsibilities, keeps abreast of developments in relevant law and best practice and knows where to seek guidance. Muddle and mistake, not malice, account for most problems, but the alert trustee does their utmost to avoid this.
A trustee’s fundamental duty is to act in the best interests of their charity. This means acting only in furtherance of the charity’s objects and in the best interests of the charity’s beneficiaries. Kept always in the forefront of a trustee’s mind, that duty should not prove difficult to fulfil. But the forest of regulation surrounding charities may hinder a trustee’s ability to see the wood from the trees.
A prospective trustee should seek to understand the role in general terms by reviewing the Charity Commission’s guidance The Essential Trustee (CC3) and the principles and recommended practice espoused by the new Charity Governance Code. They should also prepare and protect themselves by undertaking appropriate due diligence prior to accepting a particular trustee role. The charity concerned should assist with this, and alarm bells should sound if they are unwilling to do so.
• Check the charity’s entry on the Charity Commission’s website: has it filed its annual report and accounts on time? Are trustee and constitutional details up to date?
• Understand the charity’s legal structure: is it incorporated or unincorporated? If the former, the charity has its own legal personality and carries out activities and enters into contracts in its own name, affording the trustees the protection of limited liability. Charity trustees of incorporated charities are usually also company directors and must comply with company law duties as well as those of charity law. If the charity is unincorporated, it has no legal personality of its own and can only act in the names of its individual trustees. This means that the trustees enter into contracts themselves and are personally liable: if, for example, an employee successfully sued the charity and the charity lacked sufficient funds to pay the sum awarded, the trustees would have to meet the costs.
• Ask for a copy of the constitution: has it been reviewed recently? A well-run charity reviews and updates its constitution regularly, to ensure compliance with current law and best practice.
• Consider whether the charity’s activities fall within its objects: does the charity’s work correlate with what it was actually set up to do? The objects will be stated in the constitution and on the Charity Commission’s website and the charity’s activities must further those objects.
• Review recent annual reports and the latest accounts and ask to see the management accounts: even without an accountant’s knowledge, it should be possible to gauge the charity’s general financial position and senior staff or other trustees should be happy to answer queries or provide further explanation.
• Meet current trustees: are they fully engaged with and properly informed about the charity? Do they have regard to Charity Commission guidance and the Charity Governance Code? Trustees are non-executive, but are ultimately collectively responsible and should be “eyes on, hands off”.
• Assess realistically the necessary time commitment: it is never enough simply to attend a quarterly board meeting – there will be papers to read, sub-committee meetings, discussion between meetings, and ongoing trustee training.
• Ignore concerns: probe, and seek a professional’s view if unsure.
• Assume that because it’s in aid of a good cause, there will be leniency: the cry of “but we’re a charity!” amounts to little by way of defence or satisfactory explanation.
Having become a charity trustee, remain vigilant. The above checklist remains relevant and merits regular review in the context of the charity’s operations. A wealth of online guidance (including the examples mentioned above) and training opportunities are available from charity regulators, umbrella organisations and experienced charity professionals. Don’t be discouraged by recent scandals and focus instead on the overwhelmingly positive experience offered by the role of charity trustee.
Jayne Adams is a partner at law firm McCarthy Denning. She is also a member of the Charity Law Association and the Association of Charity Chairs.