Trustees’ Week – your quick guide to charity trustee duties

It’s a difficult and tumultuous time in the UK and many organisations will be facing the squeeze, particularly in the third sector. Many charitable organisations will still be dealing with the fallout from the pandemic while also grappling with increased operational costs. Some will also have seen a spike in demand due to the cost-of-living crisis, and the combination has led to strenuous financial pressures. Further, with recent high-profile cases relating to charity trustee duties (Kids Company, The Captain Tom Foundation, Parkrun, etc.), charity trustees may be left feeling anxious or concerned.

It is therefore a good time for the annual Trustees’ Week (8 November), which allows trustees to come together and share their experiences, while being able to take part in training and guidance. It should also serve as a reminder of the value and importance of trustees and the work they carry out.

Trustees are there to lead, control and supervise the charitable organisation’s activities. If things go wrong, it is the trustees who will be held to account. As such, it is very important that trustees fully understand what their duties are, and how comply with them. We’re offering a refresh for trustees on this topic during Trustees’ Week 2024.

We also note that if your charity is incorporated as a UK limited company, then the director duties which are set out in sections 171-177 of the Companies Act 2006 will additionally apply to charity trustees, further to those noted below which apply specifically under charity law. For more information on these, please see further guidance issued by the UK Government.

Act in the interests of the charity

When making any decision or acting in relation to a charity, a trustee must be guided by the overarching principle to act in the interests of the charity. This duty can be broken down further into three main parts.

Trustees must seek in good faith to ensure the charity operates in a manner consistent with its purposes

The charity’s purposes will be set out in its governing document (i.e., its constitution, trust deed or articles of association). Trustees must always act honestly and reasonably and ensure that their actions advance the charity’s purposes. Trustees have the responsibility of managing the charity’s funds and other assets, and these should always be used to further the charity’s purposes.

Each charity trustee should have a copy of the charity’s governing document and understand what it means. They must follow its rules and make sure that any decisions or actions taken on behalf of the charity comply with the purposes and powers set out in the governing document.

Trustees must act with care and diligence

Whatever your role in the charity, whether it be the day-to-day running or strategic management of the organisation, the decisions which you make should be taken with the care and diligence which is reasonable to expect of a person who is managing the affairs of another person. Simply put, you should manage the charity’s affairs as you would if you were looking after those of a friend or family member. If you were managing your own money for instance, you might take a higher risk for the promise of higher returns, but you wouldn’t if you were using someone else’s money.

Trustees are responsible for ensuring the charity has enough money to pay its staff and other costs, and that it remains in compliance with the law. This involves monitoring the performance of the charity and updating financial budgets and plans where necessary. Trustees should keep up to date with any changes to the law or regulatory framework.

Trustees must manage any conflict of interest

In making any decision, trustees must put the interests of the charity before their own interests, or those of any other person or organisation.

A conflict of interest can arise as a “personal conflict” (where the duty to act in the interests of the charity conflicts with the trustee’s own personal or business interest in the matter) or an “appointment conflict” (where the conflicting interest relates to the person or organisation that appointed the charity trustee).

In either case, the charity trustee must act in the interests of the charity. If it seems there may be a conflict of interest, charity trustees must take appropriate steps to manage the conflict and be seen to be acting in the best interests of the charity.

An example of where a conflict of interest may arise would be if a charity trustee is also an employee of a company that the charity is doing business with, or if an employee of the charity is connected to one of the trustees.

Charity trustees should have a conflict-of-interest policy and ensure that it is followed. OSCR has specific guidance on conflicts of interests and how to manage them.

Compliance with the 2005 Act

There are specific duties in the 2005 Act that all charity trustees must comply with. These duties can be delegated to staff, volunteers or external advisers of the charity, but charity trustees are responsible for ensuring that these duties are met.

Charity details on the Scottish Charity Register

The Scottish Charity Register must hold accurate and up-to-date information about the charity including: the name of the charity; the principal office or the name and address of one of the charity trustees; and the charity’s purposes. Any changes to these details must be reported to OSCR as below. The information OSCR holds is also to be expanded under changes brought in by the Charities (Regulation and Administration) (Scotland) Act 2023 (explained further below). The changes will mean that the Register will also hold the names of all the charity trustees and OSCR will maintain an internal database of the contact details for each charity trustee. Copies of accounts will also be available via the Scottish charity register (which change is likely to come into effect from summer 2025).

Reporting any changes to your charity to OSCR

When making any changes to a charity, the governing document should be checked first for any rules regulating the process. Under the 2005 Act, certain changes require OSCR’s prior consent before the proposed change is made.

Changes which require OSCR’s consent are:

• Changing the name of the charity
• Winding up or dissolving the charity
• Amending the objects or purposes of the charity
• Amalgamating the charity with another body
• Applying to the court to change purposes, amalgamate or wind-up
• Changing the charity’s legal form

Other changes which don’t require OSCR’s consent, must be reported to OSCR within three months and OSCR must be sent an updated version of the governing document.

Financial reporting

Charity trustees are responsible for ensuring that:

• Proper accounting records of the charity are kept
• A statement of account, including a report on its activities, is produced at the end of each financial year
• The statement of account is independently examined or audited (in accordance with the relevant rules)
• A copy of the accounts, along with the annual return, is sent to the Scottish Charity Regulator
• Accounting records are kept for at least six years

For further information, see OSCR’s charity finances page and charity accounting page.

Fundraising

Charity trustees are responsible for deciding how the charity raises funds. If the charity engages someone to raise money professionally for the charity, there must be an agreement in place which determines how much they will be paid for it. See OSCR’s fundraising guidance for further advice.

Providing information to the public

A charity’s name and Scottish charity number must be displayed on the organisation’s website and all external documents, such as letters, emails, adverts, etc. Charities must give a copy of their governing document and/or the latest examined or audited accounts to anyone who asks for them, provided it is a reasonable request. It’s good practice to publish the governing document on the charity’s website, if possible.

The 2023 Act

The Charities (Regulation and Administration) (Scotland) Act 2023 (the “2023 Act”) was passed by Parliament on 28 June 2023 and received Royal Assent on 9 August 2023. The 2023 Act makes important changes to the 2005 Act. The provisions of the 2023 Act are being brought into force in stages – the final stage of implementation is likely to be summer 2024. If you would like to read more about the 2023 Act, please read our article highlighting its key provisions.

Raise a concern

It is also worth mentioning that OSCR has moved away from its “notifiable events” regime – this was a system of encouraging charities to self-report events which threatened to have a significant impact on the charity or its assets. From 1 April 2024, OSCR have (in place of “notifiable events”) been asking charities to get in touch with them through the “raise a concern form” if there are any serious issues which the trustees have been unable to address. OSCR has published guidance on when and how to report.

Key takeaways

A failure to comply with any of the duties listed above (except the reporting of concerns using the raise a concern form) will be treated as misconduct and the Scottish Charity Regulator would have the power to take action. Where a charity trustee has acted reasonably and honestly however, it’s unlikely to be treated as misconduct.

There are various resources available to trustees for help and advice. OSCR has information available on trustee duties here and the SCVO also provides support and guidance. The Trustees’ Week website also provides links to the Charity Commission’s guides.

Through collective spirit in Scotland’s third sector, so much has been achieved in recent years, in spite of unanticipated challenges (with more to come, such as the recent changes to national insurance contributions as per the Autumn budget). We are proud to be able to help trustees to thrive and to be able to count ourselves among those advocates for Scotland’s third sector.

If you have any questions relating to any of the points raised in this article, please don’t hesitate to speak to our Charities team or your usual Anderson Strathern contact.