Charity Trustees – Appreciating the Risk

Head of LCF Law Personal Law Department and charities advisor Neil Shaw, gives an overview of a recent case at The Charity Commission which highlighted the personal risks that can come with acting as a trustee of a charity.

The case concerned the Earl of Chester's Fund which was registered with The Charity Commission in 2007 for any charitable purpose (other than the advancement of religion) within the county of Cheshire or for the benefit of persons residing in that county. The charity operates as a grant making trust.

In early 2015 The Charity Commission received a complaint that the charity had awarded a grant of £24,000 to a non-charitable company which was linked to one of the trustees. Although charities can fund non-charitable organisations they should only do so where those organisations further their charitable purposes.

The trustees explained to The Charity Commission that the company concerned provided support for the long term unemployed and ex-offenders through the provision of employment opportunities but The Charity Commission decided that there was no restriction on what the grant could be used for and that it could not therefore be shown that it was specifically in furtherance of the charity's objects. The fact that one of the trustees had a personal interest in the company also gave rise to a breach of trust because the charity's governing documents restricted trustee benefits. The Charity Commission did not consider that the trustees had taken sufficient steps to gain a detailed knowledge of the non-charitable company or to satisfy themselves that the grant would be used for one of the charity's charitable purposes or monitored. The outcome was that the trustees accepted that the grant was made in error and repaid £24,000 to the charity.

The Charity Commission's report on the case lists the following six lessons for charity trustees:

• Make sure that your charity is carrying out the purposes for which it is set up and no other purpose.
• Comply with your charity's governing document.
• Act in your charity's best interests and deal appropriately with conflicts of interests.
• Make balanced and adequately informed decisions in the interests of the charity.
• Grant makers must carry out appropriate due diligence and monitoring.
• Where trustees act in breach of their duties, as well as impacting on the charity it may have financial consequences for them personally.

The case demonstrates the importance of charity trustees taking proper professional advice on their duties and obligations.

LCF Law has a depth of knowledge in this area built up over many years.

Several of the firm's partners act as trustees for charities or advisers for the trustees of charities and amongst other such clients we have acted for many years for the trustees of one of Yorkshire's largest grant making charities.

Neil Shaw is an Partner and Head of our Personal Law Department and is based in Bradford and Ilkley

He has over 25 years' experience in advising people about Wills, Trusts and estate planning.

Neil's wealth of knowledge and understanding in what are sensitive and emotive issues enables him to provide appropriate solutions to client's concerns allowing them to get on with the important things in their lives confident that their affairs are in order.

For further advice on the above topic or any related issue please contact Neil Shaw on 01274 386 992 or ku.oc1714658235.fcl@1714658235wahsn1714658235