Trustees’ legal duties. An overview and discussion.

April 2024.

A summary of the Charity Commission’s guidance on the six key legal and regulatory duties for trustees, along with prompts for possible confirmatory or exploratory discussion which could be had by your Board — see those by using the arrows to see the second slide for each.

The official guidance can be found here: The essential trustee: what you need to know, what you need to do - GOV.UK (www.gov.uk).

Content on this page is intended to constitute a high-level overview or reminder of key responsibilities, and is not a complete record of Board obligations. “You” is used below to refer to your Board collectively.

  • Duty 1: Ensure your charity is carrying out purposes for public benefit.

    You must ensure your charity is carrying out the purposes for which it is set up (for public benefit) and no other purpose. This means:

    — Ensuring you understand your charity’s purposes as set out in its governing document.
    — Forming clear plans for what your charity will do and achieve.
    — Explaining or being able to show if asked, how all of your charity’s activities are intended to further or support its purposes.
    — Understanding how your charity benefits the public by carrying out its purpose.
    — Spending your charity’s funds on the wrong purpose is a serious matter, in some cases you might be liable personally for financial repercussions of your charity’s activities.

    Use the arrow to swipe right for potential questions for your Board to discuss arising from duty 1.

  • Questions for Board discussion on Duty 1:

    • Are all its current activities clearly in line with our charity’s formal, written purpose?

    • Are there any future plans which could be interpreted as furthering different aims?

    • Does our charity produce reliable information regarding outcomes and impact, that could assure any stakeholder that our charity is furthering its purpose?

    • Are there any updates needed to our charity’s governing documents, purpose, or strategy document(s), since they were first created?

  • Duty 2 – Comply with your charity’s governing document, and the law.

    You have a duty to ensure your charity’s governing document is complied with, and the laws and applicable regulations are adhered to:
    — To ensure your charity complies with the terms of its governing document.
    — To comply with the requirements of charity law and other regulations.

    The charity should take reasonable steps to find out about legal requirements, for example by reading relevant guidance or taking appropriate advice when appropriate.

  • Questions for Board discussion on Duty 2:

    Have we all seen and can we all access a copy of our charity’s governing document?

    Do we have an up-to-date record of laws and regulations which apply to each aspect of our charity’s activities, along with explanation as to how compliance is achieved with each?

    Which of us will keep this under review, prompting us to consider, for example, new regulation as it’s introduced or any legal implications of new activities?

    Does our charity have access to the right legal advice?

  • Duty 3 - Act in your charity’s best interests.

    As a Board, you must:
    — Do what you (and no one else) decides will best enable the charity to carry out its purposes.
    — Make balanced and adequately informed decisions jointly as a Board, thinking about both short and long term consequences.
    — Avoid or manage any circumstance whereby the duty of a trustee conflicts with personal interest(s) or loyalty to another person or body.
    — Not receive any benefit from the charity unless it’s properly authorised and clearly in the charity’s interests – this also includes anyone who’s financially connected to you – such as a partner, dependent child or business partner.

  • Questions for Board discussion on Duty 3:

    How likely is it that our charity transacts with a related party, for example a company linked with a family member of one of our senior management team (or one of us), and this go unnoticed/ undisclosed in the annual accounts?

    Does our charity have a clear policy in writing on conflicts of interest and how these are managed?

    Do we all (and senior management) complete annual declarations of interest and do we include details of more distant potential related parties, for example business interests of family members beyond spouses, for best practice? Are conflicts of interest a standing agenda point our Board’s meeting agenda?

    Are we confident there is not undue influence from any third-party over Board decisions?

  • Duty 4 - Manage your charity’s resources responsibly.

    You must act responsibly, reasonably and honestly – in a way that would be considered prudent, and based on sound judgement, you must:
    — Ensure your charity’s assets are only used to support or carry out its purposes.
    — Avoid exposing your charity’s assets, beneficiaries or reputation to undue risk.
    — Not over-commit the charity’s funds.
    — Take special care when investing or borrowing.
    — Comply with any restrictions on spending funds or selling land.

    You should put appropriate procedures and safeguards in place and take reasonable steps to make sure these are followed. Otherwise there is a risk of making the charity vulnerable to fraud or theft, or other kinds of abuse.

  • Questions inspired by Duty 4:

    • How confident is the Board that the charity’s funds are secure? Are there dual-authorisation controls over payments, adequate segregation of duties over procurements, robust cash counting controls etc.

    • What is the Board’s policy around investments and cash? Is the level of risk exposure suitable for the charity’s assets?

    • How confident is the Board it truly understands the charity’s financial position, do management acchunts contain sufficient infromation (e.g. a balance sheet) to facilitate this? What would need to happen for the charity to become insolvent?

    • How up-to-date is the charity’s risk register and are there mitigating actions in each area which are sufficiently robust and operational?

    • What is the charity’s reserves policy and when was this last revisited? Does this set out a prudent approach to ensuring the ongoing solvency of the charity whilst also achieving timely distribution of funds to beneficiaries? Does it allow for the costs of winding up if needed?

  • Duty 5 - Act with reasonable care and skill.

    As parties responsible for governing the charity, you must:
    — Use reasonable care and skill, putting into practice skills and experience and taking appropriate advice when necessary.
    — Give enough time, thought and energy to the trustee role, for example by preparing for, attending and actively participating in meetings.

  • Questions on duty 5:

    To what extent do each of us feel able to dedicate sufficient time to our role and managing the charity’s affairs?

    Is there a good mix of skills and backgrounds on our Board, and a variety of experience levels?

    Are our meetings sufficiently regular (with enough time allowed) to discuss pertinent issues and key considerations fully?

    Could there be any benefit in reorganising our charity’s governance structure e.g. to incorporate subcommittees or working groups?

  • Duty 6 - Ensure your charity is accountable.

    You must ensure your charity complies with statutory accounting and reporting requirements, and also:

    — Be able to demonstrate that your charity is complying with the law, is well run and effective.
    — Ensure there’s appropriate accountability to members, if the charity has a membership separate from the trustees.
    — Ensure there’s accountability within the charity, particularly where there is delegation of authority/ responsibility for particular tasks or decisions to staff or volunteers.

  • Questions on Duty 6:

    Is someone responsible for ensuring the charity’s year-end annual report and accounts and submissions to the regulator are compliant and made on time? Does an external party need to be engaged for an IE or audit, or for other support?

    How detailed will the trustees’ annual report be, will it be both a compliance document as a key impact report or will supporters look elsewhere for this?

    Is the charity’s website up-to-date with recent going’s on – is there other record and visibility to external stakeholders of the continued achievement of the charity’s impact goals and public benefit?

    How effective is our Board in holding members of senior management including its CEO (or equivalent) to account?