Articles

HOW TO PROTECT YOUR TRUSTEES AND YOUR ORGANISATION

05 November 2019

Reputable and committed Trustees are incredibly important to charities and community groups. However, it is important to recognise that Trustees of even very small charities bear considerable responsibility for both their actions and the actions of the organisation they represent.

Charities rely on their Trustees for the management and administration of their operations, who fulfil these roles frequently in a voluntary capacity.

WHAT IS A TRUSTEE?

Trustees are the individuals who take decisions on the governing body of the charity, regardless of their actual title. They have specific duties that should be set out in your organisation's constitution or governing document and must act collectively to govern the charity and take decisions. Trustees have no authority to act on their own and can only do so if it has been authorised by the Trustee Board as a whole and they have the overall legal responsibility for a charity.

The law describes Charity Trustees as “the persons having the general control and management of the administration of a charity”.

Although most Trustees operate in an unpaid capacity, they still have a number of duties and liabilities that are laid down by law.

 Any breach of duty on their part may result in the Trustee being held personally liable, jointly and severally, for any loss falling upon the charity.

REGULATORS

 

Trustees and organisations in the UK are increasingly being put under regulatory pressure. The Charity Commission for England and Wales alone conducted:

  • 35 inquiries in 2017
  • 12 in 2018, and
  • 2019 has already seen 32 inquiries undertaken to date.

 

Being on the radar of any of these regulators often distracts Trustees and their organisation from delivering on their mission and values. It is also quite common to find that once an organisation has been identified by one regulatory body, others are likely to follow, further compounding the situation.

INVESTIGATIONS

Being investigated by a regulator can lead to relevant punishments or even criminal proceedings in court. Both consequences can have a devastating and long-lasting impact on the organisation and on the private life of the Trustee.

Regulators hold many powers that they can use when investigating regulatory offences or related crimes. A minor case can take days or even weeks to conduct, meaning a Trustee’s time and energy is diverted from the work that really matters. In addition, large legal and professional advice costs can be incurred when conducting and supporting these investigations.

INSURANCE

Even when they have the best possible intentions, it is possible for Trustees to make errors of judgment that can lead to investigations, enquiries or even legal proceedings.

These claims can be financially crippling to defend, which is why Trustee Indemnity insurance is so important. It covers the legal costs and expenses of defending against disqualification as a Trustee, investigations and extradition proceedings.

The most important thing to remember is that without Trustee Indemnity insurance in place, the Trustee may have to pay the costs to defend the claim from their own personal wealth, which could be financially devastating.

This final point is crucial to remember; all allegations must be investigated and defended, even though there may be no grounds or substance to them. Should the incident or event be historical in nature costs can quickly escalate as paper archives will need to be investigated by your legal team, which is very time consuming and expensive.

A Trustee Indemnity insurance policy provides support for these costs.

GRIFFITHS & ARMOUR

At Griffiths & Armour we work with and support hundreds of charities and not-for-profit organisations, from large international to grassroots. Our core focus is that our clients receive the best advice and support we can deliver, regardless of their size.

Purchasing a Trustee Indemnity policy provides our clients and their Trustees with the peace of mind that should allegations be made, they have an insurer on hand to support them financially and provide immediate advice.

If you would like to understand more about your options when it comes to Trustee Indemnity insurance, or about other risk and insurance matters, please reach out to Troy Johnson on 07920 151 676 or [email protected]

Griffiths & Armour is authorised and regulated by the Financial Conduct Authority.

 

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