Appointing and removing charity trustees

In January Liz Brownsell delivered a webinar for the Norfolk Community Foundation on charity trustee responsibilities. Several questions were submitted during the webinar, many of which were about uncertainty as to who is actually a ‘charity trustee’ within the legal definition, and issues with problematic or inactive trustees. In this article, Liz provides some additional guidance on these points.

It is incredibly common for confusion to arise due to the different terms used to describe charity trustees and the various methods of appointing and removing them. A charity is only as effective as its leadership, so ensuring that your charity has a strong and effective board and that your governing documents include appropriate provisions for the appointment and removal of charity trustees is absolutely critical.

Who is a charity trustee?

The term ‘charity trustee’ is defined in s177 of the Charities Act 2011 as “the persons having the general control and management of the administration of a charity”. The definition focuses on what you do; not what you’re called.

There are lots of different terms used to refer to charity trustees, including: trustee, board member, committee member, governor, director, etc. It does not matter what terminology is used: the people who are ultimately responsible for running the charity and from whom all delegated authority derives are the ‘charity trustees’.

It is also relatively common for a charity’s governing document to use different titles to describe those who are responsible for running the charity. For example:

• ex-officio trustees: appointed automatically by virtue of some other position or office that they hold – for example ‘The Bishop of X’.
• co-opted trustees: Often seen in the governing documents of charities with a wide membership, co-opted trustees are appointed by the board of trustees outside the usual annual AGM election process (and it is common for governing documents to provide that co-opted trustees only hold office until the next AGM, where they must resign, but may stand for election by the members at the AGM).
• officers and honorary officers: Some governing documents include specific ‘officer’ positions, including the Chair, Vice-Chair, Secretary, Treasurer, etc. In some cases, the term ‘Honorary’ is also seen. All such persons are usually charity trustees who have taken on particular responsibilities.

Although there are various different terms used and various different methods by which charity trustees may be appointed, it is very important to remember that all charity trustees are subject to the same legal duties and responsibilities (explained in more detail in my recent webinar for the Norfolk Community Foundation) and charity trustees should take decisions collectively.

It is also important to be clear about who is a charity trustee and who is a member of the senior management team. Charity trustees generally have broad powers to delegate to committees and employees, and it is very common for significant decision-making power to be delegated to the CEO. This does not usually result in the CEO being a ‘charity trustee’, and it is very important not to treat them as such. Charity trustees are volunteers and cannot be employed by the charity without the express authority of the Charity Commission (or an express provision in a charity’s governing documents permitting the employment of trustees, which is very unusual).

As we have seen from the recent Kids Company case, even significant delegation to a CEO does not usually result in that person being deemed to be a charity trustee. The case was Official Receiver v Batmanghelidjh and others [2021] EQHC 175 (Ch) in which the Official Receiver sought disqualification of the former directors of the charitable company (i.e. the charity trustees) and sought to include the charity’s CEO, Ms Batmanghelidjh, as a de facto director as a result of the significant role she had played in leading and running the charity. In her Judgment, Mrs Justice Falk commented as follows at paragraph 706:

“Neither the label nor functions of a CEO role are, by themselves, indicators that the holder has assumed to act as a director. This is particularly so for incorporated charities, which with narrow exceptions must have Boards comprised entirely of volunteer directors. Whilst many smaller charities will have Board members who take on day-to-day management roles, larger charities, and certainly those on the scale of Kids Company, routinely have full-time paid management teams, and in reality can only function with them. A CEO can properly provide leadership of the management and operations of the charity on a day-to-day basis, and the directors can properly rely on his or her judgment, information and advice, provided that he or she is supervised and (ultimately) controlled by the Board.”

The key here is supervision. It is entirely appropriate, particularly for larger charities, for the charity trustees to delegate authority to committees and senior management. However, this does not absolve the charity trustees of responsibility, and they must ensure appropriate oversight, supervision and control over all persons to whom functions are properly delegated.

To read more about the decision in the Kids Company case, please see our articles on Charity trustees in the dock and Charity trustees and delegated authority.

Appointment of trustees

Eligibility

Before appointing new charity trustees, it is important to consider eligibility. Certain individuals are disqualified from acting as charity trustees – see the Charity Commission website for more details.

A charity’s governing document often sets out additional eligibility criteria, such as a minimum age (if not, the legal minimum is 16 for charitable companies and CIOs and 18 for charitable trusts and unincorporated associations), requirement for trustees to be resident in a certain locality or of a specified religious denomination.

It is also common for a charity’s governing document to provide a minimum or maximum number of charity trustees (or both). As a matter of best practice, the Commission recommends that charities appoint at least three (unconnected) and no more than twelve trustees.

Procedure

The process for appointing new charity trustees is usually set out in the charity’s governing documents. There are four common procedures, and a charity’s governing documents might include any combination of these:

• election by the members at an AGM
• one or more particular organisations have a right to appoint (and remove/replace) a specific number of charity trustees by written notice
• co-option by the charity trustees
• ex officio appointments.

It is common for older charitable trusts not to include any express provisions about the appointment and resignation of charity trustees and for all appointments and retirements to be documented by Deed using statutory powers in the Trustee Act 1925. Where this is the case, the trustees might wish to consider updating their governing documents to include simpler trustee appointment and removal procedures.

Removal of trustees

A charity’s governing document usually specifies circumstances in which a trustee will cease to hold office, including:

• resignation
• failure to attend a certain number of meetings
• reaching the maximum permitted term of office
• automatic disqualification for ceasing to be eligible
• removal by resolution of the members or the charity trustees.

The members of charitable companies also have a statutory power to remove a charity trustee (i.e. a director in company law terminology) by ordinary resolution served by special notice, provided that the correct procedure is followed (section 168, Companies Act 2006).

Additionally, governing documents commonly specify that trustee appointments are either for a specified term or subject to annual rotation with a proportion of trustees being required to retire each year. These provisions are particularly useful for several reasons. Regular rotation of charity trustees provides for more opportunities to review and refresh the board and bring in new trustees with a fresh perspective or useful additional skills and experience. Additionally, if any particular problems arise with any trustees it can sometimes be preferable to simply not re-appoint them when their term of office expires, rather than having to take positive steps to remove them from the board.

If your charity’s governing documents do not contain any provisions about the circumstances in which charity trustees will automatically cease to hold office or may be removed from office, we would recommend that you consider updating them.

Amending governing documents

The correct process to follow to update the governing documents of a charity varies depending on the type of charity. It is beyond the scope of this article to provide details, but I will be delivering a free webinar on updating charity governing documents on 8 June 2021.

If you would like advice on any specific issues affecting your charity, please do get in touch with Liz Brownsell via [email protected] or 01473 406383. Alternatively, please contact another member of the Birketts’ Charities Team.