Contents

* Introduction
* Who are the trustees of a charity?
* What are custodian trustees?
* Nominated Trustees
* Disqualification - Can anyone be a trustee?
* Appointing a Trustee
* What skills are needed from the new trustee?
* How do you find a new trustee?
* How do you know whether someone is suitable?
* Appointing the New trustee
* Induction for a new trustee
* How does a trustee resign?
* What should the remaining trustees do when a trustee leaves office?
* Trustee's Liability
* Introduction
* Contractual Liability
* Liability for breach of trust

• Other types of liability
• Relation of ‘Parish’ Projects, as distinct from Independent Organisations or users of Parish Buildings
• Pastoral Administration
• Why does pastoral re-organisation happen?
• Where do the Church Commissioners come into the picture?
• Parsonages and glebe

Introduction

Over a million adults of all ages, social backgrounds and walks of life become trustees. Many people become involved in the running of a charity and thus become a charity trustee. Many trustees are unaware that they are trustees. Lack of knowledge about the duties and responsibilities of charity trusteeship may not just affect the way in which the charity is run, but can also have personal consequences for the trustees themselves. They may not be called by that name. Anyone responsible for controlling the management and administration of a charity are its trustees.

Who are the trustees of a charity?

Charities can be run in many different ways. This will depend upon the type of document that contains the rules for running a particular charity (the charity's governing document). The charity trustees are the people responsible under these rules for controlling the management and administration of the charity, regardless of what they are called. Here are some examples:

Type of charity Governing document Usual title of the charity trustees
Unincorporated association or society Constitution or rule The Executive or Management Committee
Charitable company Memorandum and articles of association Directors
Charitable trust Trust deed or will Trustees, Governors

What are custodian trustees?

For this reason, its land or investments must be held by individuals or an incorporated body on its behalf. Some charities have custodian trustees. For example, the Parish of East Ham • Parochial Church Council are also Trustees of Fellowship House. The job of a custodian trustee is very different to the job of the charity/managing trustee. The function of custodian trustees is simply to hold the legal title to the charity's property or investments. Custodian trustees have no role in the charity's management. They must act on the instructions of the charity trustees, unless they are told to do something that is not allowed by the governing document or by charity law.
There are advantages of using custodian trustees; extra security against fraud as the funds are held by a third party, and, avoiding the need to transfer the assets each time the individual managing trustees change. A disadvantage is the fact that some custodian trustees (for example a commercial body such as a bank) may charge yearly fees.

If a charity holds land, and it does not have a custodian trustee, there is another way to avoid the need for new deeds to be made when the charity trustees change. Land can be vested in the Official Custodian for Charities. This is a member of staff at the Charity Commission who has been specially appointed in order to hold title to land on behalf of charities. Once the Charity Commission have made an order vesting the title to a charity's land in the Official Custodian, there is no danger that the charity land could remain vested in people who are no longer involved with the charity and who may be difficult to trace. Vesting in the Official Custodian simplifies the ownership of the charity land (such as selling or leasing it) and may make dealing with the land less troublesome and expensive. For example, in the case of unregistered land the number of deeds to be produced will be reduced and there will be no need to prove the deaths of previous trustees. The services of the Official Custodian for Charities are free. More information can be obtained by ringing the Official Custodian helpline on 020 7210 4646 or leaflet CC13 The Official Custodian for Charities' Land Holding Service, available from the Charity Commission.

Nominated Trustees

The trustees of a charity are the people who, are responsible for the general control and management of the charity. Sometimes an individual is nominated by an outside organisation to be a trustee of a charity. The usual reason for this is to give a voice in running the charity to a member of a group which has as interest in its work, such as a user or a funder. For instance, some of the members of the committee of management of a village hall charity may be nominated by regular users of the hall such as a playgroup. The trustees of a recreation ground charity may include nominated trustees from sports clubs who use its playing fields. A local authority may want to nominate one or a number of trustees onto the governing body of a charity which operates in its area and for which it has provided funding. The nominated Trustees in the case of the Parish of East Ham • Parochial Church Council are the Team Rector and the Parish Wardens, as distinct from the District Church Wardens for each Church.
So what is the difference between a trustee who has been selected by the trustees themselves (or elected by the members of the charity) and one who has been nominated by an outside organisation? The answer is none. Nominated trustees may be appointed in a different way but they have the same legal duties and responsibilities as any other charity trustee.

Nominated trustees can be a valuable asset for a charity because they can bring an outside viewpoint to the charity preventing a trustee body from becoming too inward-looking. However, nominated trustees will need to be aware that having two roles may bring conflicting demands, especially where the nominated trustee is also a member of the outside organisation that nominates him or her. For instance a trustee nominated by the local authority will need to recognise that the interests of the charity and its beneficiaries may not be the same as those of the local authority and its tax and rate payers. It is not the role of the nominated trustee to represent the interests of the organisation which nominated him or her. All trustees must act solely in the best interests of the charity.

Where a potential conflict of interest for a trustee arises on a particular issue, s/he should not take part in the discussions or vote on that issue. For example if you are a local councillor and also a trustee of a charity which is negotiating the sale of land to the local authority for development, you should not vote on the issue and should withdraw from any meeting at which the proposed sale is considered. You may also need to consider, with the charity's legal advisers, whether on such a major issue the Charity Commission should be asked to authorise such a transaction. Without that authority, the presence on the trustee body of trustees with conflicts of interest may lead, in some circumstances, to the transaction being invalidated.

Disqualified - Can anyone be a trustee?

Generally speaking anyone who is 18 years or over can be a trustee. However, certain people are legally disqualified from continuing to be, or from becoming a trustee. Obviously this will only effect a small minority of people. People who are disqualified are those who

* have been convicted at any time of any offence involving deception or dishonesty, unless the conviction is legally regarded as spent; or
* are undischarged bankrupts; or
* have made compositions or arrangements with their creditors from which they have not been discharged; or
* have at any time been removed by the Commissioners or by the court in England, Wales (or by the Court of Sessions in Scotland) from being a trustee because of misconduct; or
* are disqualified from being company directors; or
* are subject to an order made under s. 429(2) (b) of the Insolvency Act 1986.

Appointing a Trustee

The Charity Commission knows that it can be a difficult task for charities to find and train new trustees. However, the Charity Commission believe that carefully choosing and training your trustees will help your organisation run more efficiently and effectively. Being a charity trustee is both demanding and worthwhile. Trustees must be selected for what they can contribute to the charity. They should not be appointed for their status or position in the community alone. Trustees must be able - and willing - to give time to the efficient administration of the charity and the fulfilment of its trusts. They should be selected on the basis of their relevant experience and skills and must be prepared to take an active part in the running of the charity. They can be users of the charity services if arrangements are made to avoid conflicts or interest such as trustees voting for something from which they will personally and directly benefit.

What skills are needed from the new trustee?

Prospective trustees should be selected for their ability to make an effective contribution to your charity in terms of skills and experience.

Firstly you should consider the current skills on your trustee body. It is a good idea to assess the skills and experience you currently have on your trustee body. You should count skills such as the ability to organise fund-raising events; book-keeping; or management skills. A person's experience of working for another charity will be valuable, as will the experience of someone who has been in the same position as the users of your charity's services or who is a user and who fully understands their needs.

Secondly, you should assess what skills are lacking from the trustee body. You can then set out a list of skills that you would want from a new trustee. Some of the skills may be essential whereas others may be just desirable. A number of charities have drawn up a job description for a prospective trustee like they would for staff. A ‘Stweardship Campaign’ audit is one good way of ascertaining skill needs and skills available.

Thirdly, you may wish to consider the current balance of your trustee body. It can be very useful to have a diverse board in terms of age, sex, race, background and skills. If your charity has an equal opportunities policy it should apply just as much to the trustees as it does to staff.

How do you find a new trustee?

Once you have agreed on the skills you are looking for you can start drawing up a list of possible candidates. The traditional method of recruiting new trustees has been by word of mouth. People recruited in this way are often known to existing trustees. However, one of the disadvantages of this method is that you may recruit to type. This method also restricts the field from which trustees can be drawn.

You could consider approaching local firms of accountants or solicitors, and asking local businesses whether they have people with the willingness and ability to act as trustees for your charity. You could also approach other charities who may have ex-trustees whose term of office has expired.

The Parish might like to consider holding a charity open day where you can show potential trustees what your Parish does.

How do you know whether someone is suitable?

It is important to make potential trustees aware of their duties and responsibilities but at the same time not to be too discouraging. You should also make clear to people the amount of commitment involved in being a trustee, including the average amount of time that you would expect them to spend on to the charity each week or month.

When you have found one or a number of possible recruits you will need to consider whether their skills match the requirements of your charity. The person or persons concerned will also need to judge whether you are a suitable organisation for them. You could refer to your original specification of the skill requirements that you have for a new trustee or trustees.

There are certain people who are disqualified from becoming a trustee of a charity. You will need to check that the person that you select does not fall into one of the disqualified categories.

You will also need to make sure that the potential new trustee does not have any personal or business interests that might conflict with the charity's interests.

Appointing the new Trustee

After you have selected your new trustee, he or she must be formally appointed. The way in which trustees should be appointed will be set out within your charity's governing document. New trustees should sign the charity's minute book to show that they accept their appointment and are aware of their duties.

Induction for a new Trustee

Existing trustees should ensure that new trustees have a clear understanding of the work of the charity and what will be expected of them. You should provide them with a copy of the charity's governing document. It would also be helpful to provide copies of the latest annual report and give details of the property (such as buildings) and other resources (such as investments) that belong to the charity. The new trustee should be introduced to the original trustees and should be given an opportunity to ask about the charity's activities and funding.

As a general rule decisions concerning the charity must be taken by the trustees acting together. As a trustee body you should ensure, where property of the charity is held in the names of individual trustees, that all the property of the charity is transferred into the names of the people who are the charity trustees at the time.

How does a trustee resign?

There may be provisions in the governing document to cover the resignation of a trustee and the appointment of a successor. If there are not, then the law provides that where a trustee wants to be discharged from his duties, the remaining trustees can appoint a new trustee in his or her place. Basically, therefore, you can resign at any time although you should make sure that you give sufficient notice to the remaining trustees.

It is important that a charity maintains a balance between existing experience and new recruits.

A charity can consider devising a rota of resignations and successions to allow for experience and to prevent a vacuum from developing. This rota system is particularly suited for charities that appoint their trustees by elections which are contested each year. Any rota system must not be inconsistent with any existing provisions either in the governing document or in law, and it may be necessary for the trustees to consider amending the governing document in some cases. A fixed term of office, of for instance a period of 3 years, can be included as a provision within a governing document.

What should the remaining trustees do when a trustee leaves office?

Where the trustees of a charity hold property in their own individual names, it is particularly important to ensure that such property is transferred into the sole names of the continuing trustees since this will not be automatic but needs some further action taken. The procedure for effecting such a transfer will either be set out in the governing document or in the general law.

The remaining trustees will now have to consider the terms of the governing document and then, as appropriate, carefully choose, appoint and train a new trustee.

Trustees' Liability

* Introduction
* Contractual Liability
* Liability for breach of trust
* Other types of liability

Introduction

Some charity trustees, and people thinking about becoming trustees, are nowadays influenced by the thought that they might be personally liable if things go wrong with the charity. What they fear is that, if they make a mistake in the running of the charity or if it gets into debt, they might have to make good any loss or shortfall out of their own private resources. While for a few people this can be a real worry that leads them to resign their trusteeship, it is in fact extremely rare for a trustee to be made personally liable in this way. Generally the law protects trustees who have acted reasonably from the consequences of honest mistakes, and trustees can take their own measures to reduce the risk still further.

Leaflet CC49 - Charities and Insurance describes the range of different types of insurance, including indemnity insurance, that trustees will need to consider taking out, available from the Charity Commission. The Parish/PCC might wish to consider adopting such cover through our Insurers, (Ecclesatical Insurance Office), as some stage to protect the liability of individual volunteer PCC Committee members?

Contractual Liability

Many charities need to enter into contracts in order to carry out their work. Most commonly, charities enter into contracts with suppliers of goods or services. This can range from an agreement with a local shop to photocopy the charity's newsletter to a multi-million pound contract for the purchase or construction of new premises for the charity. If the charity is an incorporated charity - a charitable company - then the contract is between the charity, as a legal entity in its own right, and the supplier. Since it is the charity, and not its trustees personally, who are party to the contact the trustees have no personal liability under the contract. (That said, directors of a company may be ordered by the Court to contribute to the company's assets in some circumstances if the company continues to trade after it has become reasonably clear that the company is heading for insolvency).

By contrast, unincorporated charities - mainly trusts and associations - do not have their own legal personality and it is the individual trustees rather than the charity who are party to the contract. Provided that they acted properly in entering into the contract they can of course use the charity's resources to meet their obligations under it. But if the charity does not have enough funds to meet these obligations then the liability to do so remains with the trustees personally.

Because the trustees of a charitable company are less exposed than the trustees of a trust or an association to personal liability arising under a contact, some charitable trusts and associations think about converting themselves into charitable companies.

For a charity that regularly enters into large contracts this might well be an appropriate move. But trustees considering it should be aware that becoming a charitable company will bring the charity within the scope of company law, which imposes its own range of extra duties and expense. The Charity Commission advises that trustees take professional advice, from someone knowledgeable about both charity and company law, before deciding whether or not to convert their trust or association into a charitable company.

Trustees of unincorporated charities can sometimes put themselves on a similar footing to charitable companies, by making it a term of any contract they enter into that their liability under the contract will be limited to the value of the charity's assets. This means that they will not incur any personal liability if the charity's resources are not large enough to meet the trustees' obligations under the contract.

Liability for breach of trust

All trustees must administer their charity in accordance with the terms of its governing document (i.e. its constitution, trust deed, or memorandum and articles) and with the requirements of charity law. A charity's governing document sets out the charity's objects and powers that the trustees can exercise in pursuing those objects. A breach of trust occurs when trustees act in a way that is contrary to the terms of their governing document, or when they fail to perform their duties as trustees. Using the charity's resources for some purpose not within the charity's objects (what it has been set up to do) is a breach of trust as is, for instance, investing the charity's money in a type of investment not permitted under the investment rules applying to the charity. Our leaflet CC14 Investment of Charitable Funds: Basic principles looks at investment rules in more detail.

When trustees commit a breach of trust which results in some financial loss to the charity, they become liable to make good that loss.

Trustees who are familiar with the contents of their charity's governing document, and who have acquired a reasonable knowledge of the law as it applies to their charity, are very unlikely to commit a breach of trust. Trustees can reduce the likelihood even further by taking and following professional advice or consulting us on any point on which they are unsure. In the last resort, the Court is able to excuse a trustee from liability if it is satisfied that he or she acted honestly and reasonably and ought fairly to be excused.

Some trustees think of taking out indemnity insurance (sometimes called liability insurance) to protect themselves from personal liability arising from any breaches of trust. Leaflet CC49 Charities and Insurance looks at liability insurance in detail. In appropriate cases charity funds can be used to pay for trustee indemnity insurance either directly or by reimbursing the premiums, available from the Charity Commission. Since the trustees will be conferring a benefit upon themselves if they use the charity's funds in this way, they will need authority to do so. Unless the charity's governing document already contains a provision expressly allowing the trustees to use the charity's funds to pay for indemnity insurance, they will need to ask us to give them the necessary authority.

When considering whether providing indemnity insurance at the charity's expense is appropriate, trustees should take into account:

* the degree of risk to which they are exposed;
* the value of the indemnity required;
* the cost of the insurance premiums; and
* whether the insurance is in the interests of the charity.

Where indemnity insurance is taken out, the policy must include an exclusion clause on the following lines:

The Insurers shall not be liable for loss arising from any act or omission which the trustee knew to be a breach of trust or breach of duty or which was committed by the trustee in reckless disregard or whether it was a breach of trust or breach of duty or not .

Other types of liability

Charities are no different from other organisations in the duty of care owed to their employees and to members of the public visiting charity's premises. Charities that employ staff are required by law to have employer's liability insurance, and charity vehicles must be insured in accordance with the legal requirements.

Trustees have a duty to safeguard the property of their charity, and it is important that they insure it adequately. If they do not do so, and the property is lost or devalued, the trustees may be personally liable for the loss.

Relation of ‘Parish’ Projects, as distinct from Independent Organisations or users of Parish Buildings:

In contrast to ‘centre users’ or independent organisations who use Parish facilities, (but are not a part of, or accountable to the Parish/PCC), there are groups of the parish which, in effect operate ‘projects’, which are pieces of work/Christian outreach on behalf of the Parish/PCC. The Night Shelter, for example, is not an independent body; it is project of the PCC who are ultimately responsible. The Night Shelter comes under the same criteria as other projects, (e.g. St Mary’s fabric fund), as the work of the Church overall. It regularly reports to both the PCC and St Bart’s DCC as it functions in the Centre. The accounts are presented to the PCC as are Gift Aid returns which are submitted with Parish Gift Aid forms – a totally different phenomena with any group, organisation or user who, in effect, (whilst welcomed and valued parts of the work in the Centre), are hirers, irrespective of whether they pay a booking fee or not. Therefore the ultimate responsibilities for these ‘projects’, including its finances, debts, liabilities, surpluses, are the responsibility of the Parish of East Ham PCC, albeit that the PCC can, (and does from time to time), delegate certain responsibilities to either the respective DCC’s or sub-committee/working parties, with limited powers, as it still remains the ultimate responsibility of the PCC as the governing body of the Parish.

The only group which once use to be accountable to the Parish/PCC, including finance, but which no longer does so is the Fellowship House Children’s Centre. This is because it has since established its own charitable status and is registered as a charitable organisation under the Charities Acts. Therefore this is a separate body with its own Management Committee to whom it is accountable.

Pastoral Administration

Since 1969 the Church of England has worked under the Pastoral Measure to make better use of its Clergy, money and buildings in providing a nationwide Ministry. It can do this, for instance, through:

* the creation of new parishes;
* the setting up of team or group ministries;
* the joining of two or more benefices;
* the closing of a church which is no longer needed as a place of worship.

Why does pastoral re-organisation happen?

Clergy numbers, patterns of Church attendance and population are changing all the time. New pastoral arrangements need to allow for this.

Where do the Church Commissioners come into the picture?

All proposals come from the diocese following wide consultation with local and other interests as provided by the Pastoral Measure. The Church Commissioners' role is to:

* prepare a draft scheme to implement the diocese's proposals;
* publish the details of the scheme locally and consider any representations for and against;
* submit the scheme, subject to considering any objections, to the Privy Council Office for confirmation, after which it takes legal effect.

The Pastoral Measure is under review. The Church Commissioners and the Archbishops' Council will work with dioceses and others in devising a new framework for pastoral restructuring for the next 20 or 30 years.

Parsonages and glebe

The Church Commissioners also offer advice on parsonage design. Their consent is needed for parsonage and (Diocesan-owned) glebe transactions which do not meet standard criteria. Again, any representations are considered first.

For general enquiries please contact the Church of England switchboard on (020) 7898 1000.

Further details about the work and history of the Commissioners are available from our Policy Unit. Tel. +44 (0)20 7898-1619/20/23 or e-mail Commissioners.mailto:enquiry@c-of-e.org.uk.

 

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