Jenny Ebbage, Partner, Edwards & Co. Solicitors is a specialist in charity law and company law and writes on the roles and duties of a charity trustee of a company
If you sit on the board of a commercial company you will know your legal duties, responsibilities and liabilities as a company director. If the company has charity status, there are additional considerations.
The statutory legal duties of a director are codified in the Companies Act 2006: to act within your powers; to promote the success of the company; to exercise independent judgement; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties; and to declare interests in a proposed transaction or agreement.
When you take up a seat on the board of a company which is a charity, you are also a charity trustee at law. As a charity trustee you have additional duties: to safeguard and protect the charity’s assets – “the Stewardship Role”; to act collectively with the other trustees; you must always act in the best interests of the charity; you are responsible for the proper administration of the charity; you must avoid conflicts of interest between your personal interests (and persons connected to you) and those of the charity; you are ultimately responsible for everything the charity does and you must act reasonably and prudently in all matters.
Charity trustees are responsible for the general control and management of the administration of the charity.
Charity trustees are accountable to the regulator, the Charity Commission for Northern Ireland (the Commission) and have responsibilities under the Charities Act (NI) 2008 which includes registering the charity; reporting and submitting annual accounts; producing a Trustees’ Annual Report (demonstrating compliance with the public benefit requirement) and submitting an Annual Monitoring Return.
You need to understand the Articles of Association and especially the charitable purposes since you must work to advance and promote these purposes for the public benefit only.
You may need to seek consents from the Commission, for example, to make “regulated alterations” to the Articles such as changing the objects/charitable purposes, dissolution clause or member or trustee benefits.
You may need an authorisation from the Commission, for example, when making an ex gratia payment. Strict rules apply to remuneration and payments being made to charity trustees or those connected with them.
You cannot be paid for serving as a charity trustee as such but some payments are allowed if strict conditions are met.
You must understand the powers set out in the Articles and ensure that a quorum is present at board meetings, read and understand your board papers, be financially aware and carefully manage conflicts of interest.
You must also manage the composition of the board (minimum and maximum numbers) and retirements by rotation or fixed terms of office.
Good governance is essential and sound record keeping, minutes and records of resolutions and decisions is your proof that you have acted responsibly and properly.
Charity trustees should report to the Commission on any serious incidents that arise and declare these in the Annual Monitoring Return. Concerns raised about a charity to the Commission may prompt an investigation and lead to a statutory inquiry.
This can have personal consequences for individual charity trustees. The Commission can remove a charity trustee where it has found misconduct or mismanagement in the administration of the charity and found it necessary or desirable to remove that person for the purpose of protecting the property of the charity or securing a proper application of that property.
A person who has been removed is disqualified from being a charity trustee. Several removal orders have been made already.
You should read the Commission’s guidance “Running your Charity” and the mandatory “Public Benefit Guidance” in order to understand you roles and responsibilities. The Commission produces thematic reports providing a useful tool for board workshops.
As with all board positions, there is a risk of personal liability but a prudent board member acting lawfully and in accordance with the Articles and who knows their duties and responsibilities should be able to manage and minimise any personal risk.
If there is a breach of trust or a breach of duty, it is possible for a director to be personally liable and have to make good the loss to the charity.
Regular board training and a governance review including policies, codes of conduct and regular review of the Articles can help the board understand and implement good governance and understand further the role of being a charity trustee.
Charity trustees should seek professional advice on all matters where there may be a risk to the charity or where they may be in breach of their duties.