Protecting your trustees and your charity

Believe it or not, the United Kingdom is among the most charitable nations in the world. Every day, millions of people across the country give their money and time to one or more of around 196,000 charities. Each of these organisations is run by a board of trustees who, together, make important decisions about the charity’s work, such as how to spend its money and what its objectives are. 

But with great power, comes great responsibility…

There are over 1 million trustees in the UK and each one must uphold certain duties according to charity law. These include using reasonable care and skill in their work, ensuring funds are used wisely and lawfully, and making sure the charity and all its activities complies with the legislation. Failure to do so can result in legal action, and a trustee can be held personally liable for any debts or losses the charity incurs. While there is no legal protection against dishonest, reckless or negligent behaviour, if a trustee makes an honest mistake, they could be financially protected by the charity’s insurance. 

Building trust in your trustees

Charities can be confident that their assets, and future, are in safe hands by reducing the risks of their trustees falling foul of the law. Here are a few tips to prepare, and protect, those in power:

• Make sure trustees fully understand the risks and responsibilities of their role.
• Establish thorough induction training for new trainees.
• Hold regular trustee meetings. Record all decisions made and the reasons for making them.
• Ensure the board takes professional advice on difficult decisions or when required by law.
• Prevent conflicts of interest from affecting decisions.
• Make trustees aware of other areas of law that could affect the charity’s work, such as employment, health and safety, and data protection.
• Make sure the charity has enough resources, financial or otherwise, to fulfil any contracts.
• Establish effective internal management and financial controls, including but not limited to:
• Keep receipts and records of the charity’s income and spending.
• Circulate regular financial reports
• File company accounts on time
• If trustees delegate any of their powers, they must provide clear, written instructions and check that they are being followed.
• Consider trustee indemnity insurance (TII) for your charity and its trustees.
  (We arrange a national policy for the Scouts, which covers trustees of any UK Scout charity. The good news is that your Scout group won’t need any additional cover for your trustees.)

Insuring the individual, protecting the whole

Trustee Indemnity Insurance protects trustees from personally paying the legal costs and settlements from a claim made against them. It also protects the charity itself from corporate liability. Charities can also get Directors & Officers (D&O) cover, which gives similar protection to other managers. But remember, neither policy will cover a person convicted of fraud, dishonesty or reckless conduct. And because of the wide range of roles these policies can cover, it is best to check that the policy wording definition of "insured person" is wide enough to capture them all.

The best way to arrange appropriate protection is through a specialist insurance broker, and our team of experts at Unity Insurance Services would be happy to talk through your charity’s needs.