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Liabilities of Trustees

Liabilities of Trustees

A trustee’s duties derive from both statute and case law. They can give rise to potential governance or operational liabilities of trustees as follows. (See also the Guidance Note - Charity trustees’ duties, responsibilities and liabilities.)

A trustee must:

Governance Liabilities 

Governance liabilities can arise from the duties that are imposed on trustees automatically by the law. Those duties arise from the nature of their position as stewards of a charity. Such duties are personal to them, and a failure by them to discharge any such duty is usually called a “breach of duty” or “breach of trust”. Liability can arise as a result where the duty breached is to the charity and it suffers loss as a result. 

In addition, trustees will be personally liable for certain wrongs committed by them, for example, if the charity is insolvent and the trustees are guilty of wrongful or fraudulent trading (whether or not the charity is incorporated). There may also be personal liability for failures to file certain company or other documents, and for certain breaches by trustees of health & safety, environmental, discrimination, tax and other laws. 

Operational Liabilities 

Operational liabilities of trustees arise either from what the charity does or from its constitution. 

What a charity does will vary from charity to charity, but, for example, a charity might contract with a local authority to provide services to service users in return for fees, or a charity might hold a lease on premises used by it, or it might employ staff. In all those cases it will have entered into a legal relationship (a services or employment contract, or a lease) under which it could become liable, for example, for failure to provide services, pay rent, dismiss an employee fairly, or comply with other terms of the contract or lease. 

Another example might be where it runs a fundraising event, in doing so it is negligent in some respect, that causes injury or loss to a participant, and the charity is liable for his/her injury or loss.

Whether a trustee becomes personally liable in any case (separately from the charity) may depend on the legal form of the charity, i.e. on whether it is in incorporated form. 

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