Accepting a trustee role in a charity: Knowing your statutory duties

While trustees generally understand before taking on the role that it is unpaid and will require a commitment of time and skills, it is easy to overlook that there are also specific legal obligations associated with these roles. Failure to understand these obligations can expose charity trustees to personal liability as well as reputational damage. Before accepting appointment as a charity trustee, an individual should consider the relevant statutory obligations.

Charity trustees should govern and manage their charities under the general and statutory obligations set out in the Companies Act, Charities Act, and Trustee Act. These obligations may vary depending on how the charity is set up, whether as a charitable incorporated organisation (CIO), a charitable company (i.e. private company by guarantee without share capital), or an unincorporated association or trust.

Overview of general duties for charity trustees

The Charity Commission summarises general duties and has published guidance summarising core legal duties for trustees (The Essential Trustee) covering six areas for all charities, whether registered with the Charity Commission or not:

1. Ensure the charity is carrying out its purposes for the public benefit
2. Comply with the charity’s governing document and the law
3. Act in the charity’s best interests
4. Manage the charity’s resources responsibly
5. Act with reasonable care and skill
6. Ensure the charity is accountable

Overview of statutory duties for charity trustees

Failure to meet these obligations can result in personal liability and an obligation to compensate the charity for losses suffered.

While charity trustees are encouraged by the Charity Commission to carry out their general duties, they are also required to fulfil their statutory duties under various regulations. Below is an overview of the statutory duties that a charity trustee may be subject to:

[1] Unincorporated associations are required to register with the Charity Commission if their annual income exceeds £5,000.

[2] Charity is defined ‘an institution is established for charitable purposes only’ as under Section 1 of Charities Act  2011. All charities, regardless of whether they are registered with the Charity Commission, are subject to the Charity Act.

Companies Act

A charitable company is usually incorporated as a private company limited by guarantee. Directors of companies registered at Companies House are subject to the general statutory duties set out in sections 171–177 of the Companies Act 2006, together with the supplementary provisions contained in sections 178–182 of the same Act.

Charities Act

Unlike the Companies Act, the Charities Act does not set out directors’ duties in a single codified list. Instead, it imposes comparable general and statutory duties on charity trustees across various sections of the Act. For example, this includes duties relating to keeping accounting records (section 8), preparing annual reports and accounts (section 8), safeguarding and correctly applying charitable assets related to loans and land (section 124 and section 117, respectively), and managing conflicts of interest related to trustee remuneration and connected persons (Sections 185–188).

Trustee Act

Trustee general and statutory duties are covered in the Trustee Act 2000, and include duties of care (part I), investment (part II), acquisition of land (part III), and remuneration (part V).

Other requirements

In addition to understanding their statutory obligations and guidance in the government’s guidance documents, trustees also need to understand the following in order to perform their duties:

• The charity’s governing document (i.e. a CIO governing document, articles of association, or a trust deed).
• The charity’s purpose(s).
• Other legal requirements applicable to the charity, such as employment law and health and safety regulations.
• Guidance issued by the Charity Commission.

Case study: Managing conflicts of interest

All trustees have a legal duty to act solely in the best interests of their charity. Failure to manage conflicts of interest may result in reputational damage to both the trustees and the charity.

One widely reported case involved a charity which became the centre of a national scandal due to failures in managing conflicts of interest, where two family members (Trustees A and B) served as trustees of the Charity. During the inquiry, the Charity Commission interviewed Trustees A and B, as well as the independent trustees.

The Charity Commission found that the trustees, including the independent trustees, did not adequately manage conflicts of interest. This was because Trustees A and B failed to inform the full board, particularly the unconflicted trustees, when entering commercial transactions on behalf of the Charity, and that they indirectly and directly benefited personally from these transactions.

Following its investigation, the Charity Commission took regulatory action against Trustees A and B. They were disqualified from acting as charity trustees and from holding any senior management position in a charity for periods of eight and ten years, respectively.

Key lessons for independent trustees include being aware, while serving as trustees, that the charity should not have close links to non‑charitable entities, and that its governance processes must be sufficient to manage conflicts of interest, particularly those involving non‑charitable entities connected to the charity.

Who is it applicable to?

This applies to all trustees of charities incorporated and registered in England and Wales.

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