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Know your trustees – Sole Trustees

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We receive a lot of enquiries expressing confusion about the roles and responsibilities of different types of trustee. This is the second in our series of articles defining and explaining them. 

Just to re-cap, there are four types of trustee:

 

In this article we’ll be looking at Sole Trustees. It’s going to be complicated, so you might want to make a cup of tea or coffee before reading further!   And you are very welcome to talk to one of our experienced Community Development Officers for a one-to-one explanation. You can contact us on 01362 698216 or at  [email protected].

What is a Sole Trustee?

A Sole Trustee (sometimes called a Corporate Trustee) is an organisation appointed as trustee for the charity. For example, a parish council might be appointed as the Sole Trustee of a playing field charity. This means the parish councillors are the mechanism that the Trustee (the parish council) uses to carry out its decisions.

The organisation that is appointed as Sole Trustee might not be charitable, but the purpose of the charity must be compatible with the aims of the corporate body. So, in the example above, the parish council and playing field have similar aims, in that they want to provide facilities that enhance and improve the wellbeing of those in the parish. Conversely, for example, a private company might have unrelated or conflicting interests.

What powers do Sole Trustees have?

  • If their corporate governing document allows – as in our parish council example - they can delegate to a sub-committee to make decisisons. However, the responsibility and liabiity still rests with the whole of the cororate body.
  • When a corporation is appointed as a trustee, the powers available to it for the purposes of administering the charity will be those set out in the governing document of the charity. The powers in the corporation's own governing document are not applicable

 

Can you explain ‘corporate trustee’ a bit further?

A corporate trustee is a corporation which has been appointed to act as a trustee of a charity. The corporation may be:

  • a ‘trustee for all purposes’ acting on its own, that is, a sole trustee
  • one of a number on a body of charity trustees – this might be other corporate bodies, or individuals.

 

What’s a corporation then?

A corporation has:

  • a legal existence (and rights and duties) separate from those of the individual persons who form it from time to time. So, for example, third parties enter into contracts with the corporation and not with the individual directors or members.
  • its own liabilities and assets which are distinct from those of the directors or members
  • perpetual existence and a name or title of its own.
  • an occasional alternative name, particularly in legal volumes or documents -  a ‘body corporate’
  • no need to have charitable status to be a trustee of a charity. Local authorities, for example, are not exclusively charitable and yet are often trustees of local charities. There are however some types of charity that local authoities may not be trustees of.

 

Liability of Corporate Trustees

  • Where a body corporate is the sole trustee of a charity, the individual persons who, from time to time, handle the management of the corporate body are not themselves trustees of the charity. The duties, responsibilities and liabilities of trusteeship lie with the corporate body. However, that body must act through individual persons to express its will.
  • If the body corporate commits a breach of its duty as a trustee, it will have done so only because of a breach by its directors or other individual officers of their duties towards the body corporate.  They can’t be held liable directly by the charity, but they may be held liable to the corporate body for any liability it has incurred in respect of the charity. The officers of corporate trustees that they should familiarise themselves with the terms of the charity’s governing document and prescribed legal procedures.

 

Why would a charity appoint a Sole / Corporate Trustee?  

  • They can hold the assets on behalf of the charity (similar to Custodian Trustees). 
  • Sometimes charities struggle to recruit trustees and appoint a sole trustee, which as a corporate body, exists in perpetuity

Note: It is advisable first to check that the charity’s governing document actually allows the appointment of a corporation a trustee.  

 

Do the assets belongs to the corporate body?

No.  Assets are owned by the charity. These must be administered separately from the corporate body because the charity is an entirely separate entity from the corporate body.

Accounts and finances must be kept separately. The inherent danger there is that, when doing anything that affects the charity and its assets, the corporate body must act only in the charity’s best interest to further the aims of the charity. Using our example above, the parish council might want to sell the playing field for development. However, the charity’s aims are to provide a playing field, selling this for development would not be acting in the best interests of the charity or furthering its aims. The corporate body should make sure it keeps up to date with the roles and responsibilities of trusteeship by regularly reviewing the Charity Commissions’s Essential Trustee Guidance

 

Only the delegated sub-committee is responsible then?

No. The whole corporate body as Sole / Corporate Trustee is responsible and accountable. As mentioned before, it is important to make sure delegated authority is allowed. You might delegate any function that

  • carries out a decision of the trustees
  • relates to the investment of assets subject to the trust (for example, in the case of land held as an investment, managing the land, and creating or disposing of an interest in the land)
  • relates to raising funds for the trust other than where this is by primary purpose trading
  • is prescribed by an order of the Secretary of State.

The corporate body has a duty of care to ensure that the Trust is being managed well and its assets looked after appropriately, so even if some areas are delegated there has to be the knowledge and oversight to make sure this is being managed appropriately and in line with the charity’s aims.

 

Can the Sole Trustee can use the charity’s assets however they like?

Afraid not! The assets belong to the charity. They can only be used to further its aims, in line with charity law and the charity’s governing document. The Sole Trustee must act in the charity’s best interest. This may not always be the same as the interests of the corporate body. Sole / Corporate Trustees should have a process in place for making independent decisions for the charity when conflicts like this arise.

 

The charity’s profile on the Charity Commission Register lists a corporate body as the Trustee. Does this mean it is a Sole Trustee?

Yes. And no! Sometimes this is correct. If they are a Sole Trustee, the only name listed on the Charity Commission Profile will be the corporate body. However, as we covered in our article Custodian Trustees, people sometimes mistakenly list the Custodian Trustee as the Managing Trustee on their profile; it’s easily done, so you should always check the governing document. If in doubt, ask CAN’s Community Development Officers.

 

I’m not really interested in the charity. I don’t get involved, so it’s not my responsibility as Sole Trustee

As part of the corporate body, you are part of its Sole Trusteeship. This is not something you can opt out of, even if the corporate body has delegated authority to a sub-committee. You need to be sure the charities assets are being managed to further the charity’s purpose and in the best interest of the charity. One of the difficulties with Sole Trusteeships is that sometimes members of the corporate body feel ‘detached’ and the charity suffers or is not given suitable attention. In extreme cases this can lead to problems with breach of trust. To help combat this, members of the corporate body should regularly remind themselves of their responsibilities and the aims of the charity.

 

Not sure? Need some more clarification?

Talk to us. Call us on 01362 698216 or email [email protected] You don’t have to be a CAN member to ask for some basic advice and clarification – but membership opens a whole vista of benefits and in-depth services that help support the work of voluntary, community and social enterprise (VCSE) groups across Norfolk. Find out more here.