Liabilities of charity trustees, and how trustees are determined
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stoozie1
Posts: 656 Forumite
Hi,
I have been reading around these issues for around 18 months, so I do understand a bit of the law, but I need further clarity.
I understand that in the event of the dissolution of an UNincorporated charity, all debts outstanding after dissolution would fall jointly and severally to the trustees.
Could someone explain what happens to the debts in the case of an incorporated charity?
In the event that a debt falls to a trustee, I understand that it is not necessarily who is on paper the trustee, but anyone acting as a trustee/manager/director. I need to understand what tests would be applied to determine whether a volunteer who had not signed up as a trustee was a trustee for the purposes of establishing their liability for debts.
Thank you for any help or support.
I have been reading around these issues for around 18 months, so I do understand a bit of the law, but I need further clarity.
I understand that in the event of the dissolution of an UNincorporated charity, all debts outstanding after dissolution would fall jointly and severally to the trustees.
Could someone explain what happens to the debts in the case of an incorporated charity?
In the event that a debt falls to a trustee, I understand that it is not necessarily who is on paper the trustee, but anyone acting as a trustee/manager/director. I need to understand what tests would be applied to determine whether a volunteer who had not signed up as a trustee was a trustee for the purposes of establishing their liability for debts.
Thank you for any help or support.
Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £2670
Target 2018: 24k Jan 2018- £560 April £2670
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Comments
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take proper legal advice or ask the Charity Commission, after all they are the regulators who will "do" you0
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I am not an expert, and if you have a question about a specific situation I'd strongly recommend proper legal advice (the kind you pay for), but ...I understand that in the event of the dissolution of an UNincorporated charity, all debts outstanding after dissolution would fall jointly and severally to the trustees.
Could someone explain what happens to the debts in the case of an incorporated charity?
I believe - but am not certain - that the protection offered by a limited company only applies as long as the directors have not acted fraudulently or dishonestly.
And I am not sure of the arrangements with the 'new' options like CIO, CIC etc.In the event that a debt falls to a trustee, I understand that it is not necessarily who is on paper the trustee, but anyone acting as a trustee/manager/director. I need to understand what tests would be applied to determine whether a volunteer who had not signed up as a trustee was a trustee for the purposes of establishing their liability for debts.
For example, we were looking at a contract at work a while ago. We wanted to terminate it early, and I pointed out that it had not been signed by a manager, but by someone at my level - which should not have happened. My manager didn't want to use this in negotiations with the company, because they said if we terminated for that reason, the company could go after the individual for payment of the balance.Signature removed for peace of mind0 -
Its on the charity commission website but frustratingly I can't find it now!
It also says that for an INcorporated charity, the debts/losses would be met from the charity's corporate assets, but the situations I am envisaging wouldn't be covered by the assets. (The charity's assets are very small).Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
this link says the same thing though: https://knowhownonprofit.org/leadership/governance/getting-started-in-governance/trusteesSave 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
re: previous points, unfortunately no, the Charities Commission said they were unable to advise.
Yes I could pay for legal advice. I am not working at the moment though (I have 4 small children) so am trying to avoid large costs if I can avoid them.Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
I can tell you that if the charity has also been set up as a limited company, then there will be a governing document which sets out what happens if the charity ceases to exist. In the case of the one I work for, we have a membership as well as trustees / directors, and the members are liable to contribute £1 in the event that we're wound up. All the trustees / directors are also members.
but in the event of being wound up, who then pays the company's debts if not the directors/trustees?Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
but in the event of being wound up, who then pays the company's debts if not the directors/trustees?
No-one. That's the point of a limited company. It means the liability of members (shareholders, members, whatever) is limited to the value of the shareholding or guarantee.A kind word lasts a minute, a skelped erse is sair for a day.0 -
So employees made redundant and with a notice period just walk away with nothing, or someone who sued the business for 120k damages, likewise?
I'm not disagreeing, I just genuinely don't understand and am worried.Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
So employees made redundant and with a notice period just walk away with nothing, or someone who sued the business for 120k damages, likewise?
I'm not disagreeing, I just genuinely don't understand and am worried.
unincorporated means it is not established as a limited company. that was your original question. In that case the trustees are liable
if the charity is incorporated as a "company limited by guarantee" that means it is a company! A company can be founded with "charitable purposes" and therefore be "not for profit", ie cannot pay money out to anyone other than those for whom its charitable purposes say it will financially support. If the company wishes to attain full blown registered charity status with the charity Commission then that too is possible but obviously more onerous.
For a company limited by guarantee, its members are obliged to contribute the amount guaranteed in the event of the company's liquidation. Typically that is either £1 or £5 depending on the memorandum and articles of association of the company when it was formed.0 -
Thanks. I was referring to the case of an incorporated charity which I understood had a status of limitation similar to a limited company.Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700
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