Harcus Sinclair v Your Lawyers - Another nail in the coffin of solicitors’ undertakings?
In this blog, we will take a brief look at what good governance looks like for trustees.
As a starting point, Trustees must:
There is a dauntingly long list of obligations to the uninitiated. However, taken in stages and using the many publically available resources for support, these obligations are well within reach of the committed trustee.
Charities are legally required to comply with their governing document in all their operations.
The governing document is the starting point for good governance as it specifies the focus and purpose(s) of the charity and the parameters within which trustees should act to fulfil them. For example, it contains rules on trustees’ meetings, appointment of trustees and how to close the charity, should that be necessary.
The form of the governing document will depend on the size and structure of the charity. For example, the governing document for charities which are limited companies will be the Memorandum and Articles of Association. The Charity Commission publishes useful guidance on how to prepare a governing document should wider reading on the usual contents of the document be required.
Trustees ought regularly to refer to the governing document to ensure that the charity only undertakes activities which are within its specified objects and that they are in turn, complying with the rules on the exercise of the charity’s powers.
Trustees must ensure that all relevant information is provided to the Charity Commission. This includes, but is not limited to:
While some trustees have special roles, such as the chair and the treasurer, trustees are jointly responsible for the charity, including management of the charity’s finances.
There are also some general laws which charities must comply with, such as equality, data protection and copyright legislation. The other laws and regulations with which trustees must comply depend upon what the charity does, where it works and how it is set up.
The Charity Commission does not expect trustees to be legal experts, but it does expect them to “take reasonable steps to find out about legal and regulatory requirements and keep up to date, for example by getting mailings from the Commission and other sources, reading relevant guidance and attending appropriate training.” The guidance also reminds trustees that ‘the charity should also have systems and procedures to ensure that it complies with legal requirements.”
Having the following core policies in place will assist the trustees to ensure their charity complies with the law:
Policies can assist in circumstances where a specific procedure must be followed, for example when recruiting staff or claiming expenses. Trustees should ensure they have access to the full suite of policies that the charity has in force, whilst bearing in mind that many day to day decisions in the running of a charity involve the exercise of judgment, for which policies are of limited assistance. For example, trustees must manage their charity’s resources responsibly: the application of sound judgment is essential in these circumstances.
Trustees will be regularly called upon to make and review judgment calls in the area of managing resources, using the charity’s assets in a way that furthers the charity’s objects without over-stretching its resources. This is particularly difficult at times when there is uncertainty in terms of the economy and future restrictions on charities and businesses. It may be that financial decisions, such as decisions about spending, investing or borrowing, which would have been perfectly acceptable a year ago, would now not be considered prudent. Trustees must be flexible, for example, while a charity’s Finance Policy may provide that finances are reviewed quarterly, it may currently be appropriate for reviews to be conducted on a monthly basis.
At its heart, the need to manage resources responsibly is aimed at managing risks. The Charity Commission states that trustees “…should manage risk responsibly. You have a duty to avoid exposing your charity to undue risk. This doesn’t mean being risk averse. Risk management is the process of identifying and assessing risks, and deciding how to deal with them. It may involve an element of responsible risk taking, and is central to how trustees make decisions.”
Risks might include fraud, financial crime, extremism and terrorism. Charities should assess their exposure to these and any other risks and take appropriate action.
No less important is protecting the charity from financial harm through proper budgeting. This involves both income in, for which trustees should plan what funds are needed and how to get these, and income out, for which the trustees should monitor expenditure and ensure it is being directed appropriately.
Trustees have a challenging task in ensuring their charity is run in a way which furthers its objects, complies with appropriate laws and is sustainable. This article simply skims the surface in terms of good governance. We would be happy to provide bespoke advice to any trustee seeking more detailed advice and assistance in relation to their duties to their charity.
Lucy Williams is Legal Counsel in the Regulatory Department with a particular specialism in legal, healthcare and financial regulation. In her defence practice Lucy represents regulated professionals and organisations facing professional disciplinary proceedings, including law firms, solicitors, barristers, doctors, nurses, psychotherapists and teachers.
Julie Norris is a partner in the Regulatory Team. She specialises in advising in the health, professional services, legal and financial fields, advising professionals, businesses and regulators on regulatory compliance, investigations, adjudication, enforcement and prosecutions.
 This article does not constitute legal advice; it provides general guidance only.
 Exempt charities include most universities in England, many national museums and galleries and some school governing bodies or academy trusts.
 Excepted charities include churches and chapels of some Christian denominations, charitable funds of the armed forces and Scout and Guide groups.
 Charities with an income over £250,000, and all charitable companies, must prepare their accounts and trustees’ annual report in accordance with the Statement of Recommended Practice - Accounting and Reporting by Charities (Charities SORP).
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