There are six key duties to which anybody who is a charity trustee must adhere. Anybody appointed as the trustee of a charity must always have the charity’s best interests at heart. Here, we highlight the duties that a charity trustee has and must adhere to in order to retain their position and to ensure that the charity operates in a legal and responsible manner.
Before we begin, here are two commonly asked questions which may be helpful to those looking to appoint trustees or become a charity trustee for the first time.
What is a trustee of a charity?
A charity trustee is a person who shares responsibility with group of other trustees to govern and steer the direction of a charity towards its goals.
Trustees have legal responsibility over the operation of the charity. They must also be dedicated to furthering the cause that the charity has been set up to support.
If the charity is set up as a limited company then the trustees will also be directors of the company and will also have statutory duties as directors under the Companies Act 2006.
How many trustees should a charity have?
Government guidance suggests a minimum of three trustees who are in no way connected with each other and who display a wide range of skills and expertise. There is no maximum and so this will vary depending on the size or scale of the charity. Be mindful, however, that the board of trustees should be kept relatively small to enable effective decision-making and so that meetings can be arranged with ease.
Perhaps the most vital element you should look for in a trustee is that they wholeheartedly support the charity, its purpose and goals. This way, you can be sure they will be committed to the charity’s cause.
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The Duties of a Trustee
1) Ensure the charity is carrying out its purpose for the public benefit
When appointed as a charity trustee, you must ensure you understand the charity’s purposes and objectives and who its beneficiaries are. What will the charity do for or with these beneficiaries?
These purposes should be clearly laid out in the charity’s governing document. Additionally, if there are any restrictions on the type of work that the charity can carry out, these should also be clarified.
We would encourage trustees to ensure that their charity’s objectives are reviewed relatively often in order to ensure that are accurate and appropriate. Remembering that all charities must be set up for the public benefit, it is important to be clear on how it will benefit the public. As a trustee you should focus on what the charity can achieve, and how it will get there.
2) Compliance with the charity’s governing documents & the Law
Every charity trustee should have a copy of and be familiar with the contents of its governing document. In addition to the purpose of the charity, this document should also contain the following:
- Who the trustees are, how they were appointed and what happens if or when they are removed
- Any other members of the charity, who they are and who can become a member
Governing documents are legal documents. There are specific processes that must be followed in order to amend them. As such, it is important to seek legal advice when needed, to ensure compliance.
All charities set up in England & Wales must register with the Charity Commission (aside from some exceptions). The Commission must be informed of any changes to information on this register, such as a change of trustees and changes to your governing document. In some circumstances consent from the Charity Commission before changes can be made.
It is a legal requirement for all charities to keep financial records and to prepare annual reports. Trustees have the responsibility of arranging for financial records and other accounting information to be kept safe for a specific period of time.
Other legal considerations to consider include:
- Equality
- Data Protection
- Property / Premises
- Employment
- Safeguarding
You don’t have to be a legal expert to be a trustee, but having a trusted legal partner to advise on potential risks for your charity and ensuring that it adheres to the relevant rules and regulations, is invaluable.
3) Acting in the charity’s best interests
Only individuals who are a charity trustee can be involved in the decision making around what will be best in helping the charity to carry out its purposes.
When planning for the future of the charity, consider:
- Keeping the purposes and goals at the forefront of every decision or proposal
- Short and long term approaches
- Informed decisions at every stage; seeking external professional guidance if needed
- Taking into account all trustees’ opinions and challenging prejudice or assumptions
- Avoiding conflicts of interests
Remember that decisions don’t have to be unanimous to go ahead but do need to be made in accordance with your charity’s governing document. They should, however have a majority of supporters and support the best interests of the charity. Once a decision has been made, all trustees must comply.
If there is a significant decision to be made, or there is a lot of disagreement, keep a record of the discussion. Should there be a dispute further down the line, this will help to explain how and why decisions were made.
4) Managing the charity’s resources responsibly
As a charity trustee, you have a duty of prudence. Ensure that all outgoings are necessary and appropriate and that there is a sound judgement to back up each decision.
The assets of a charity must only be used to support its stated purposes. Having an understanding of risk management is important. While you don’t need to be completely averse to risk, it helps to thoroughly assess any potential impact before investing or borrowing.
The Charity Commission provides very helpful guidance on risk management. This can help trustees to develop a risk policy that can be followed in any decision making process.
When fundraising, it helps to maximise all possible income generation streams. This is, as long as they are legitimate. To ensure longevity and a regular stream of incoming funds, it is best practice to spread the risk in case certain streams of fundraising are lost.
Again, there are legalities to consider, such as fundraising regulations and other financial controls that should be put in place. It helps to have a close relationship with the charity’s financial and legal advisors to assist you with compliance or avoiding potential breaches.
5) Acting with reasonable care and skill
You have a duty of care toward the charity of which you are a trustee. You must be able to dedicate adequate time and energy to your position. This not only means making yourself available to attend meetings but also ensuring that you are prepared for those meetings, and that you contribute to discussions, generate ideas, challenge decisions and problem solve where necessary.
The Trustee Act 2000 states that a charity trustee must “exercise such care and skill as is reasonable in the circumstances”. The Charity Commission may get involved if it believes that trustees are not fulfilling their duties adequately.
If an issue does arise which relates to a matter in respect of which no trustee has expertise or experience, be open to taking professional advice where needed, in order to support the best interests of the charity.
While we hope that all decisions are the right ones, and that everything else runs smoothly, there is always the risk of something not going to plan.
If something does go wrong, trustees should:
- do what they can do minimise further damage
- report to the police or the Charity Commission or other regulator if necessary
- prepare communications to members, supporters, volunteers & staff
- seek legal and/or financial advice where needed
6) Ensuring the charity is accountable
Trustees must be able to demonstrate their compliance with relevant regulations and the law. They should be confident that the charity is running effectively towards its goals.
In addition to compliance with charity laws and their duties within the charity, trustees must ensure that it complies with statutory accounting and reporting requirements relevant to the type of charity they are running.
In addition, trustees must ensure that their charity is accountable to its members (if the charity has a separate class of members). They must also ensure that if responsibility is delegated, that those to whom it is delegated remain accountable to the trustees, as they remain ultimately responsible.
Speak with an expert
There is a lot to understand and to look out for as a charity trustee. Whether you are looking to become one, are a charity having recently appointed a trustee, or are looking for support in training your trustees or updating your governing documents, we can help.
Our team of charity law specialists can support you at any stage of the charity’s lifecycle.
Call us on 0161 969 3131 or fill in our contact form and we’ll be in touch.