There is a difference between "trustee liability" and "contract liability. Unless the retirement was to facilitate a breach of trust(by the remaining trustees or to appoint somebody wholly inappropriate as a successor), a retiring trustee will not be liable for future breaches of trust. But if the charity is a trust (rather than a corporate charity) the retiring trustee should check that all liabilities under contracts (including leases, employment contracts, overdrafts etc) do cease on retirement. Because a charitable trust is not a "legal person" it can only contract in the name of its trustees. If a contract is entered into in the name of a retiring trustee (plus others) then the other contracting party is looking to all the trustees who signed the contract to meet any liabilities under the contract. However, it should be possible to agree with the other party that the retiring trustee is no longer at risk - with any new trustee "signing up" to the contract. In practice it may be possible when negotiating a major contract to agree that liabilities are to be confined to the value of the charity property - in such circumstances it should be easy for the retiring trustee to get a discharge. Although a retiring trustee has a right to be indemnified out of the charity property for proper liabilities of the charity it is not so comfortable when you no longer have the charity assets under your control. For "short term" liabilities (ie for supplies, utilities, services) it should be possible for the retiring trustee to check that adequate arrangements are in place to meet these liabilities before leaving the scene(future liabilities of this sort will fall to the continuing trustees.
Jon Taylor
The issue of trustee liabilities has come to dominate conversation in recent years because of the substantial responsibilities trustees carry when their charity takes on service level agreements or contracts. In working with charities, I urge those who are doing this type of work to ensure that they become Companies Limited by Guarantee BEFORE they take on SLAs or contracts. Then the situation changes. The charity becomes a legal entity, individual trustees are no longer liable (other than in the case of a failure of fiduciary duty) and the rules about liability change: it is the Board as a whole who are liable and individual liability is limited to (usually) a token £1. The Governance Hub is working on a document to clarify all this.
--
Limited liability helps the members, but sadly may not always help directors/trustees who are responsible for managing (or mismanaging) the charity, including whatever gives rise to the charity's liability.
1. If (I/ you/ we) arrange for (a thug/ company/ charity) to attack Mr. X, in justice (I am/you are/ we are) obviously just as liable as the actual attacker, and the victim X can sue any or all of us.
2. Likewise if we can manage something obviously risky, but mismanage it, we may be liable for recklessness or negligence.
3. After an "accident" causing loss, many risks are obvious with hindsight!
4. So, especially if the charity may not be good for damges, or in America, X will often be advised to sue the individual trustees as well as, or instead of, the charity for his loss.
5. Then the trustees, however innocent, may have to go through the process of litigation, which may involve separate legal representation from the charity, heavy legal costs, and even trial.
6. The verdict may depend on how directly responsible the trustees were for the management of relevant acts and omissions - a difficult question of impression and trial advocacy.
8. If they lose, a charicom often cannot even lawfully indemnify a trustee for the costs (and if the charity goes bust that is academic anyway)
9. Incidentally, a company/charity will normally be liable for its employees, including employed directors (even if they are acting on their own account, for instance while defrauding the charity).
10. So it makes sense to INSIST ON TRUSTEE INSURANCE (which the charity can usually pay for if appropriate; or else get it personally from CTN!)
OTS logo
It has no effect on issues that were during their period as a trustee. Obviously things that happen after their resignation they have no liability for
There is a difference between "trustee liability" and "contract liability. Unless the retirement was to facilitate a breach of trust(by the remaining trustees or to appoint somebody wholly inappropriate as a successor), a retiring trustee will not be liable for future breaches of trust. But if the charity is a trust (rather than a corporate charity) the retiring trustee should check that all liabilities under contracts (including leases, employment contracts, overdrafts etc) do cease on retirement. Because a charitable trust is not a "legal person" it can only contract in the name of its trustees. If a contract is entered into in the name of a retiring trustee (plus others) then the other contracting party is looking to all the trustees who signed the contract to meet any liabilities under the contract. However, it should be possible to agree with the other party that the retiring trustee is no longer at risk - with any new trustee "signing up" to the contract. In practice it may be possible when negotiating a major contract to agree that liabilities are to be confined to the value of the charity property - in such circumstances it should be easy for the retiring trustee to get a discharge. Although a retiring trustee has a right to be indemnified out of the charity property for proper liabilities of the charity it is not so comfortable when you no longer have the charity assets under your control. For "short term" liabilities (ie for supplies, utilities, services) it should be possible for the retiring trustee to check that adequate arrangements are in place to meet these liabilities before leaving the scene(future liabilities of this sort will fall to the continuing trustees.
Jon Taylor
The issue of trustee liabilities has come to dominate conversation in recent years because of the substantial responsibilities trustees carry when their charity takes on service level agreements or contracts. In working with charities, I urge those who are doing this type of work to ensure that they become Companies Limited by Guarantee BEFORE they take on SLAs or contracts. Then the situation changes. The charity becomes a legal entity, individual trustees are no longer liable (other than in the case of a failure of fiduciary duty) and the rules about liability change: it is the Board as a whole who are liable and individual liability is limited to (usually) a token £1. The Governance Hub is working on a document to clarify all this.
--
Jon Taylor
Jon Taylor
Oh dear - I have just discovered that the document on liabilities is out already: Reducing the Risks. Get one !
--
Jon Taylor
Limited liability helps the members, but sadly may not always help directors/trustees who are responsible for managing (or mismanaging) the charity, including whatever gives rise to the charity's liability.
1. If (I/ you/ we) arrange for (a thug/ company/ charity) to attack Mr. X, in justice (I am/you are/ we are) obviously just as liable as the actual attacker, and the victim X can sue any or all of us.
2. Likewise if we can manage something obviously risky, but mismanage it, we may be liable for recklessness or negligence.
3. After an "accident" causing loss, many risks are obvious with hindsight!
4. So, especially if the charity may not be good for damges, or in America, X will often be advised to sue the individual trustees as well as, or instead of, the charity for his loss.
5. Then the trustees, however innocent, may have to go through the process of litigation, which may involve separate legal representation from the charity, heavy legal costs, and even trial.
6. The verdict may depend on how directly responsible the trustees were for the management of relevant acts and omissions - a difficult question of impression and trial advocacy.
8. If they lose, a charicom often cannot even lawfully indemnify a trustee for the costs (and if the charity goes bust that is academic anyway)
9. Incidentally, a company/charity will normally be liable for its employees, including employed directors (even if they are acting on their own account, for instance while defrauding the charity).
10. So it makes sense to INSIST ON TRUSTEE INSURANCE (which the charity can usually pay for if appropriate; or else get it personally from CTN!)