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    • stoozie1
    • By stoozie1 16th Jul 17, 4:15 PM
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    stoozie1
    Liabilities of charity trustees, and how trustees are determined
    • #1
    • 16th Jul 17, 4:15 PM
    Liabilities of charity trustees, and how trustees are determined 16th Jul 17 at 4:15 PM
    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.
Page 2
    • Savvy_Sue
    • By Savvy_Sue 17th Jul 17, 9:16 PM
    • 37,733 Posts
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    Savvy_Sue
    So employees made redundant and with a notice period just walk away with nothing, or someone who sued the business for 120k damages, likewise?
    Originally posted by stoozie1
    Two separate situations:

    1. Employees entitled to redundancy can claim that from the government.
    2. Someone who sues a limited company without knowing if it's going to be able to pay up has been badly advised, because there's no guarantee they will get what they are awarded.
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    • darkfield
    • By darkfield 18th Jul 17, 9:28 AM
    • 107 Posts
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    darkfield
    ...
    I don't feel that I have, and I feel I can evidence that I have not, but some of the volunteer jobs I have been doing for the charity could possibly be made to seem that I have if a court/whoever needed someone to call that in the unfortunate event.
    Originally posted by stoozie1
    Even you seem confused, hence the advice given in post#2 is most appropriate.

    If a decision needs to be made, then it's not just about what evidence you may have, but how that evidence is presented.

    Remember, you won't have to prove anything; it will be for the claimant to prove the claim. Your role will be to try to cast sufficient doubt on the claim made (in the event you elect to defend such a claim). Sometimes it's best to admit (if you are guilty) than endure a long court case and the resulatnt penalty if the claimant proves their case.
    Agagin, a decision a legal adviser will assist you with
    Last edited by darkfield; 18-07-2017 at 9:31 AM.
    • 00ec25
    • By 00ec25 18th Jul 17, 11:25 AM
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    00ec25
    many thanks. If anyone has any official links supporting this, I would be most reassured.

    Can I re-raise my other question in the OP about how someone would be defined as a director/trustee, without signing anything to say that. How would the 'performing the role' test be applied?
    Originally posted by stoozie1
    can we start again please and this time list facts so we have the full picture, not just vague worries:
    • your personal circumstances are such that you are doing voluntary work but are worried that you may be exposed to the debts of the organisation you work for because you think you may be a trustee.
    • your OP refers to it being an incorporated charity.
    so we will concern ourselves only with incorporated charity status...

    https://www.gov.uk/guidance/how-to-set-up-a-charity-cc21a
    STEP 1: is the charity registered with the charity commission: Yes/No? By law it must be registered if it is an incorporated body. See big grey box labelled "legal requirement"

    STEP3 - you state it is an "incorporated body". have your 18 months of reading established if it is a charitable incorporated organisation (CIO) or a charitable company limited by guarantee. That will determine the nature of the governing document since a Ltd Co will have articles of association that also meet company law requirements. A CIO may simply have a constitution.

    STEP 4: to be a charity in the first place it must have a governing document which sets out a) its charitable purpose(s) and b) how and WHO runs it
    Your charity’s governing document is the legal document that creates the charity and says how it should be run by setting out:
    who runs it (‘trustees’) and who can be a member (if appropriate)
    ....
    trustees are the people who run a charity.


    QED you are a trustee if you have been appointed to be one according to the governing document. If you are still unsure then the governing document cannot be well written and I would struggle to understand how the Charity Commission has accepted the registration of the incorporated body in the first place. The governing document is the single most important thing they consider when you apply for charitable status (been there, done that!)

    https://www.gov.uk/guidance/charity-types-how-to-choose-a-structure
    see big grey box near top of page:
    If a charity structure is a corporate body, generally its trustees aren’t personally liable for what it does.

    The word "generally" is used because the Charity Commission will sue a trustee who has acted "in breach of trust"
    Risks and trustee liability
    You can be liable to your charity if you act unlawfully or negligently as a trustee. Although your charity might run up debts or other liabilities as a result of decisions you make, you and the other trustees won’t be liable if you have:
    • acted lawfully, responsibly and reasonably
    • followed the rules in your charity’s governing document
    • taken reasonable steps to manage risks
    But if you can’t prove this, you could be ‘in breach of trust’ to your own charity. Trustees act jointly when running a charity, so the trustees as a group would be liable to repay any loss to the charity.


    and as previously linked, if you are a trustee then you need to understand this inside out:
    https://www.gov.uk/government/publications/the-essential-trustee-what-you-need-to-know-cc3

    (Although any sensible organisation would have specialist trustee liability insurance in place anyway as a further safeguard - like we do)
    Last edited by 00ec25; 18-07-2017 at 11:44 AM.
    • stoozie1
    • By stoozie1 18th Jul 17, 7:20 PM
    • 344 Posts
    • 187 Thanks
    stoozie1
    can we start again please and this time list facts so we have the full picture, not just vague worries:

    I can give some more facts, but not all of them. Hopefully it will be enough for people to help me.
    • your personal circumstances are such that you are doing voluntary work but are worried that you may be exposed to the debts of the organisation you work for because you think you may be a trustee.
    • your OP refers to it being an incorporated charity.

    I did not mean to communicate that in my OP, no. The charity is at present UNincorporated, but will work towards becoming a CIO commencing September. I hope it will be completed by March 2018.


    so we will concern ourselves only with incorporated charity status...

    https://www.gov.uk/guidance/how-to-set-up-a-charity-cc21a
    STEP 1: is the charity registered with the charity commission: Yes/No? By law it must be registered if it is an incorporated body. See big grey box labelled "legal requirement"

    yes the charity is registered with the charities commission

    STEP3 - you state it is an "incorporated body". have your 18 months of reading established if it is a charitable incorporated organisation (CIO) or a charitable company limited by guarantee. That will determine the nature of the governing document since a Ltd Co will have articles of association that also meet company law requirements. A CIO may simply have a constitution.

    It is neither, that part didn't need to form any part of my research .

    STEP 4: to be a charity in the first place it must have a governing document which sets out a) its charitable purpose(s) and b) how and WHO runs it
    Your charity’s governing document is the legal document that creates the charity and says how it should be run by setting out:
    who runs it (‘trustees’) and who can be a member (if appropriate)
    ....
    trustees are the people who run a charity.


    QED you are a trustee if you have been appointed to be one according to the governing document. If you are still unsure then the governing document cannot be well written and I would struggle to understand how the Charity Commission has accepted the registration of the incorporated body in the first place. The governing document is the single most important thing they consider when you apply for charitable status (been there, done that!)

    The constitution is very well written, I resigned a trustee position last year, and the body of people who took on the management of it have never formally registered themselves as trustees of it, though one is listed on the Charity Commissions website as a trustee. De facto then, it is possible a finger could be pointed at someone who used to be a trustee and is still serving the organisation in some tasks which used to form part of the trustee role.

    https://www.gov.uk/guidance/charity-types-how-to-choose-a-structure
    see big grey box near top of page:
    If a charity structure is a corporate body, generally its trustees aren’t personally liable for what it does.

    The word "generally" is used because the Charity Commission will sue a trustee who has acted "in breach of trust"
    Risks and trustee liability
    You can be liable to your charity if you act unlawfully or negligently as a trustee. Although your charity might run up debts or other liabilities as a result of decisions you make, you and the other trustees won’t be liable if you have:
    • acted lawfully, responsibly and reasonably
    • followed the rules in your charity’s governing document
    • taken reasonable steps to manage risks
    But if you can’t prove this, you could be ‘in breach of trust’ to your own charity. Trustees act jointly when running a charity, so the trustees as a group would be liable to repay any loss to the charity.


    and as previously linked, if you are a trustee then you need to understand this inside out:
    https://www.gov.uk/government/publications/the-essential-trustee-what-you-need-to-know-cc3

    (Although any sensible organisation would have specialist trustee liability insurance in place anyway as a further safeguard - like we do)

    we do too. And are currently discovering how very few things they actually will pay out for. I hope yours are better and that you never have to test this.
    Originally posted by 00ec25
    lengthening message
    Last edited by stoozie1; 18-07-2017 at 7:43 PM.
    • stoozie1
    • By stoozie1 18th Jul 17, 9:24 PM
    • 344 Posts
    • 187 Thanks
    stoozie1
    Have you been involved in voting at board meetings? Making decisions? Not just presenting options, but making decisions? the whole 'role of trustees' section seems to me to make it clear.
    this quote is from savvy sue but my phone has truncated the link unfortunately.

    Thanks.

    There have been meetings about the charity (amongst other things) within the organisation who assumed management, so I could argue those were the board meetings. However I have also had meetings with them. I have always tried very hard to speak as, and have audit trail of 'as you've asked me, this is my opinion, but obviously you will make the final management decision' type emails.
    • Savvy_Sue
    • By Savvy_Sue 18th Jul 17, 10:57 PM
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    Savvy_Sue
    OK, a final question. You are expressing worries which seem to indicate that someone might be claiming against the charity, which would leave the charity insolvent. Legal advice is essential if I've read that right. I really don't see how you / they can register to gain personal protection from something they can see coming ...
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    • stoozie1
    • By stoozie1 18th Jul 17, 11:01 PM
    • 344 Posts
    • 187 Thanks
    stoozie1
    Thanks again.

    No no-one has made a claim against the charity, and yes they wouldn't incorporate to avoid that.
    • 00ec25
    • By 00ec25 19th Jul 17, 12:50 AM
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    00ec25
    Thanks again.

    No no-one has made a claim against the charity, and yes they wouldn't incorporate to avoid that.
    Originally posted by stoozie1
    then what is the purpose of this thread ?

    you have been given the link explaining how a trustee is determined

    you have been given the link explaining the liability of a trustee for an unincorporated (registered) charity

    we cannot read the minutes of the meetings you attended to determine if you have performed any management or trustee duties and therefore whether your role remains that of trustee, despite your protestation that you resigned.

    you have stated a timeline whereupon the charity will be incorporated, and therefore attain limited liability status to better protect its trustees - which may or may not include you by that time.

    if you have further concerns about your personal position then take proper legal advice as suggested in post #2. i appreciate you stated that your personal finances will not run to a personal legal bill but I really don't see what else we can help you with. Only you can decide if you are running a risk as only you have knowledge of the facts of what you are doing, in what context, and with whom.
    Last edited by 00ec25; 19-07-2017 at 12:58 AM.
    • stoozie1
    • By stoozie1 19th Jul 17, 7:02 AM
    • 344 Posts
    • 187 Thanks
    stoozie1
    Yes that's fine I just wondered if there was a legal test which would be applied if there was difficulty establishing who were the charity's trustees.

    I'm not sure why you've said I've made a 'protestation' that I've resigned as a trustee. I put in a lot of research to ensure that as far as was possible for me to my resignation was full and legally binding. I have resigned.
    • stoozie1
    • By stoozie1 19th Jul 17, 7:15 AM
    • 344 Posts
    • 187 Thanks
    stoozie1
    SavvySue for example asked me about board meetings and making decisions. If she was applying a test them a neutral 3rd party could read and see if my response would cover me in the unfortunate event.

    I think that would be a constructive way forward for the thread, but yes I totally accept that no-one is a legal expert or giving me legal advice.

    However in a lot of instances in UK law where if something is unclear, a test of 'what others would reasonably have known/done/concluded' etc.
    • 00ec25
    • By 00ec25 19th Jul 17, 10:21 PM
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    • 4,385 Thanks
    00ec25
    Yes that's fine I just wondered if there was a legal test which would be applied if there was difficulty establishing who were the charity's trustees.

    I'm not sure why you've said I've made a 'protestation' that I've resigned as a trustee. I put in a lot of research to ensure that as far as was possible for me to my resignation was full and legally binding. I have resigned.
    Originally posted by stoozie1
    if you are sure you have legally resigned what is this thread about? It seems to be about you having doubts that your resignation is valid?

    there is a legal "test", it is the review of the actions taken by the people involved in the charity to see which of them is performing trustee level activities as explained in the links already given. It is a matter of judgement based upon the facts of the individual case. If you wish to think of it as what would the man in the street reasonably think then that is precisely the test because they would be given the link, read what it means to be a trustee and then see if what you did, in what context, and with whom, fits that bill.
    Last edited by 00ec25; 19-07-2017 at 10:32 PM.
    • stoozie1
    • By stoozie1 20th Jul 17, 11:51 PM
    • 344 Posts
    • 187 Thanks
    stoozie1
    if you are sure you have legally resigned what is this thread about? It seems to be about you having doubts that your resignation is valid?

    there is a legal "test", it is the review of the actions taken by the people involved in the charity to see which of them is performing trustee level activities as explained in the links already given. It is a matter of judgement based upon the facts of the individual case. If you wish to think of it as what would the man in the street reasonably think then that is precisely the test because they would be given the link, read what it means to be a trustee and then see if what you did, in what context, and with whom, fits that bill.
    Originally posted by 00ec25
    Yes I am concerned that I could still be deemed a trustee.

    I don't make management decisions, and I have kept an audit trail where possible of not doing so.

    I understand that you are saying there's nothing further, so thanks for your time.

    I don't think the fears that I have can be solved by reading the charity commission guidance, and was hoping someone may know more, hopefully they still will comment, as it does trouble me a lot.
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