Almshouse charities – trustee duties and incorporation

We look at the legal duties of almshouse charity trustees when moving to an incorporated structure.

Operating from an incorporated charity (usually a charitable company or CIO) can provide greater protection and may assist in navigating challenges the 21^st century can bring, but what does this mean for charity trustees in terms of their ongoing legal duties and responsibilities? 

Incorporation 

In the past, almshouse charities were typically established as charitable trusts governed by a trust deed or scheme. One of the most notable transformations for the almshouse sector in recent years is the decision of some charities to transition away from this unincorporated structure to an incorporated one, thereby providing certain protection against personal liability of the individual trustees.

There are different routes a charity can take to incorporate, and whilst incorporation might usually be achieved by transferring assets and activities to a newly formed charitable company or CIO, for almshouse charities the situation is often complicated by the existence of permanently endowed property (e.g. the almshouses and/or investments held on trusts permitting only the income to be spent). Thanks to a recent change in charity law, incorporation by the appointment of a sole corporate trustee is now coming back into focus as a viable option for charity trustees, particularly where charity property needs to remain on its existing trusts.

Trustees thinking of incorporating their almshouse charity should take legal advice on the options available. 

Trustee duties and responsibilities

There are six main legal trustee duties that charity trustees should be aware of. When a charity changes to an incorporated structure there can sometimes be a misconception that these legal duties no longer apply.  The Charity Commission expects trustees of charities to comply with their legal duties to their charity, regardless of the legal structure.  Not all charities are registered with the Charity Commission, and it is likely that a corporate trustee will be a charity, even though it does not have a registered charity number. 

The six main charity trustee duties from the Charity Commission’s guidance are to:

 1.     Ensure the charity is carrying out its purposes for the public benefit

Trustees must know, understand, and act within their charity’s purposes as set out in their governing document. They must also understand how their activities benefit the public in furtherance of those purposes.  Particular care should be taken to ensure that the charity complies with any criteria set out in the purposes around who can live in the almshouses.

 2.     Comply with the charity’s governing document

Trustees must follow their charity’s governing document (which should be reviewed regularly) when running the charity, whilst at the same time making certain that they understand applicable regulation and the law, through reading Charity Commission guidance and taking legal and other professional advice where appropriate. 

 3.     Act in the charity’s best interests

Trustees must make informed decisions based on what is best for the charity, and they should not put themselves in a position of conflict or benefit from the charity unless it is authorised and in the best interests of the charity. Guidance on decision-making can be found here.

 4.     Manage the charity's resources responsibly 

Trustees must take special care when deciding what to do with the charity’s resources, which can only be used for furthering the charity’s purposes. Appropriate practices and procedures should be put in place to protect the charity’s assets.

 5.     Act with reasonable care and skill

Trustees must make adequate time to correctly carry out their duties to the best of their ability, using their skills and experience to inform decision-making, and taking advice when needed to manage risk.  Trustees should not be afraid to ask questions if there is something they do not understand – the chances are if you are struggling with it, others may be too. 

6.     Ensure the charity is accountable

Accountability means complying with reporting obligations, being able to demonstrate legal compliance, taking into consideration the views of people with an interest in the charity, and ensuring that clear delegated authorities and reporting lines are in place where decision-making is delegated.

The Charity Commission sets out these main duties in more detail in its guidance ‘The essential trustee: what you need to know, what you need to do.’

Complying with trustee duties

The Charity Commission is clear in its guidance that trustees are not expected to be perfect, but they are expected to do their best to comply with their duties. Charity law generally protects trustees who have acted honestly and reasonably, although trustees can still be held personally liable irrespective of their charity’s legal structure if they have acted dishonestly, negligently, or recklessly.   

Key takeaways

• Incorporating an almshouse charity can help protect its trustees from personal liability and assist with succession planning.

• Trustees must abide by the legal duties and responsibilities briefly outlined above and detailed in Charity Commission guidance, which continue irrespective of the legal structure of the charity.

If you would like to discuss any aspect of this article further, please contact the Almshouse team on 0113 244 6100.

You can also keep up to date by following Wrigleys Solicitors on LinkedIn.

The information in this article is necessarily of a general nature.  The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.