charity trustees and trustees (96)
by Roderick Ramage, solicitor, www.law-office.co.uk
first published by distribution to professional contacts on 1 January 2024
This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.
structure of a typical unincorporated association such as a club is simple.
The founders agree, probably informally, to form it and adopt a set of
rules, which is the contract between the members. The association is not and cannot be a party
to the contract, because it is not a legal person. The members elect some of their number to be
a committee to manage it and, as (again) the association is not a legal person
but just a body of natural persons, they, or sometimes the committee, appoint
trustees to hold its property and investments.
The members of the committee or some of them could also be the trustees,
but it is not uncommon for the trustees or some of them not to be members. As a simplistic description, an association
of this kind consists of three components, supporters and participators
(members), doers (committee) and trustees.
(Of course the members of an unincorporated association may be or
include legal persons.)
is not quite so simple if an association with members is a charity under the
Charities Act 2011. The scope for
confusion is that charities have charity trustees and might also have trustees. Although part 9 (charity trustees, trustees
and auditors etc) shows that the ChA 2011 recognises that these terms (trustees
and charity trustees) are not synonymous, it is not always apparent to trustees
(or perhaps even to some of the Charity Commission’s own employees) that the
terms are not synonymous. The ChA 2011
s177 defines charity trustees as
“the persons having the general
control and management of the administration of a charity”.
In my above
simplistic description, for the doers in the case of a charity substitute
“charity trustees” for “committee”.
is unlikely to be a problem for charities without a separate trustee or board
of trustees, but if a charity has a sperate trustee body, it is important to
distinguish those who are charity trustees from those, if any, who are trustees
but not charity trustees. Until the
definitions are clarified by the courts, my starting point when assessing the
distinction is to assume that:
(a) the committee members and officers of a
typical unincorporated charity, are charity trustees and similarly the persons,
who, in an incorporated charity, normally a Charitable Incorporated Body (CIO)
registered under the ChA 2011 or a company registered under the Companies Acts
2004 (or earlier legislation), might have been called directors, are charity
(e) trustees who are merely custodians of the
charity’s investments and property and are accountable to the charity for them
are trustees but not charity trustees; and
(g) charity trustees, where the charity’s
property and investments are held by trustees are, on the face of it, not
trustees of the property and investments.
One area in
which the difference can be important is investment. The ChA 2011 is silent on the general duties
of trustees in relation to investments and the duty to take advice, which are
governed by the Trustee Act 2000. The
2000 Act however applies to trustees in normal sense of the word, which can but
does not necessarily include charity trustees.
Another area in
which the difference is in charity mergers, including, eg, a transfer from one
charity to another. By the ChA 2011,
s310, a pre-merger vesting declaration, the use of which is not compulsory, can
be (or seem to be) attractive, because its effect is to vest, with a few
exceptions, all the transferor’s property in the transferee. The declaration is made by a deed executed by
the charity trustees, or, if enabled by s333 only some of them on behalf of
scope for fraud
trustee of charities, particularly of small and medium sized trustees tend to
lack much aptitude for “corporate housekeeping” and are sometimes antipathetic
to it as a distraction from their charitable purposes, which makes them
vulnerable to fraud. It is not unknown
for established charity trustees to welcome “new blood”, whose willingness and
efficiency results in the latter, sooner or later, taking control, but who have
ulterior motives, not always for personal gain but for the benefit for some
other charity, in with which the newcomers were already active. In the two such cases in which I have and am
still acting, the change of control in one was gradual over five or six months,
while the other was achieved as many months.
In this kind of
situation the pre-merger vesting declaration is a gift to fraudsters, because
the automatic vesting effected by it overrides not only the charity’s own
trustees, in whom its property might be vested, but also any independent
custodian, including the Official Custodian for Charities (ChA 2011, s21).
So how did the
trustee and charity trustee dichotomy come about?
Report (1952, Cmd 8710), many of the findings and recommendations of which
influenced or were incorporated into the ChA 1960, does not use the term
“charity trustees”, but defines “trustees” on p208 as
The body of governors or trustees
responsible for the administration of a charitable trust. In the
recommendations made in the Report, it is assumed that they will act on a
majority vote: that unanimity is not necessary, e.g. in reaching a decision to
apply for a scheme.
recommendation, the linking of trusteeship and administration, appears to be
the origin of s64 of the ChA 1960 (now s177 of the ChA 2011), namely that the
trustees of a charity are the body responsible for its administration.
is likely therefore that, in the drafting of the ChA 1960, the word “charity”
was added to the word “trustees” in order to distinguish the trustees of a
charity from trustees in the normal sense of the word, rather than to codify
the meaning of the expression “charity trustees” when used in the existing law.
an article first published in New Law Journal on 25 June 2021.)
copyright Roderick Ramage
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