paying trustees - is it ever okay?

By Kevin Russell | 9 December 2014 | Comments (2)

image by essjay on Flickr, used under Creative Commons.

In a recent Charity Commission Operational Compliance case, the Commission responded to a complaint alleging unauthorised payments were being made to trustees of the Tag Pet rescue charity.

 

The case is interesting in that, although the Commission did find that unauthorised trustee remuneration was being paid, they did not order the amounts to be repaid, or for the recipients to stand down as trustees.

 

Rather, their enquiries revealed that the trustees (as a whole) had acted in the best interests of the charity (rather than in the interests of the trustees being paid), that their remuneration had been paid in good faith and that the charity had benefitted as a result. The decision to employ and the levels of pay had been set in accordance with best policy (for example, the benefitting trustees not taking part in any discussion on their remuneration, and level of pay being set with reference to similar comparable roles in other organisations).

 

Aside from the Commission’s decision not to seek repayment of the remuneration, the independent trustees themselves needed to formally consider whether it was in the interests of the charity to seek repayment. Further, if payments were to continue (in the best interests of the charity), the governing document would need to be amended to give the trustees power to pay the two trustees involved, and the charity needed to put a conflicts of interest policy in place.

 

These requirements were all met by the charity and the trustees concerned continue to be paid.

 

Comment

In general, payment of trustees is not permitted under charity law because there is a danger that the personal interests of the trustees may conflict with their duty to act at all times in the interests of the charity. Making a payment to a trustee without proper authority is a breach of trust and can result in any trustee receiving payments having to repay the amounts received.

 

Where the charity’s governing document gives power to make payment (which is usually couched in restrictive terms), or where the trustees follow the procedures on trustee remuneration set out in Part 9, Charities Act 2011, remuneration/expenses can legitimately be paid.

 

The Charity Commission publish guidance on Trustee expenses and payments (CC11 guide) and on Conflicts of interest: a guide for trustees (CC29).

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 

comments:

Priscilla

December 17, 2014 5:26 PM
Hi Kevin

I am a lite confused
You commented on your own og?

I am reading this correctly?
Also there are a nber of blogs posted 9 December

A little too much to read

Cheers

Kevin Russell

May 13, 2015 4:09 PM
Hi Priscilla,

Thank you for your comment and I apologise for the delay in replying.

Just to clarify, I am not commenting on my own Blog, but on the outcome of the Charity Commission's Operational Compliance Case. The interesting point of the case is that the Commission did not press the letter of the law, but they used their powers to take a pragmatic and proportionate approach. But one cannot assume that they will do this in all cases and my comment was designed to make this clear.

And apologies for giving readers a lot of bedtime reading! This sometimes happens, for example, in the run up to Christmas, when we are trying to disseminate a lot of information before the holiday period begins.

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