Q&As

A charities constitution says it has to have a minimum of four trustees to make decisions. Two trustees have recently resigned going against the constitution rules and leaving the charity with three trustees. The trustees resigned as they refused to agree with a specific action that needed to be taken for the company to start operating again after coronavirus (COVID-19). The remaining trustees cannot appoint new trustees as they cannot get anyone willing to do the role because of the disagreements. What can the remaining trustees do in this situation to protect their liability if they are not able to make decisions as per their constitution? Is there any other way they can make decisions?

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Published on LexisPSL on 08/09/2020

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • A charities constitution says it has to have a minimum of four trustees to make decisions. Two trustees have recently resigned going against the constitution rules and leaving the charity with three trustees. The trustees resigned as they refused to agree with a specific action that needed to be taken for the company to start operating again after coronavirus (COVID-19). The remaining trustees cannot appoint new trustees as they cannot get anyone willing to do the role because of the disagreements. What can the remaining trustees do in this situation to protect their liability if they are not able to make decisions as per their constitution? Is there any other way they can make decisions?
  • Liability
  • Decisions with Three Trustees
  • Changing the governing document/constitution
  • 1) Charitable incorporated organisation
  • 2) Private company limited by guarantee
  • Charity Commission Guidance
  • Further guidance

It is unclear from the question how the charity is constituted. For the purposes of this response we have assumed that it is either a private company limited by guarantee or a charitable incorporated organisation (CIO) (as described in Practice Note: Charities—governing documents).

In the case of the CIO, it has been further assumed that the ‘foundation’ model of CIO has been adopted, which allows only the trustees to be voting members (versus the ‘association’ model, which allows for a wider voting membership). See Practice Note: Charities—choosing a charity structure for further guidance.

For the purpose of this Q&A it is assumed that the resignation of the two trustees was effective.

Liability

If the resignation of the two trustees (the Two Trustees) was effective and the constitution of the Charity requires a minimum of four trustees to make decisions, it would appear that it will be necessary for the three remaining trustees (the Three Trustees) to appoint a fourth trustee. This may be the easiest solution to the impasse.

In order to protect their liability, the Three Trustees must act in accordance with charity law and their trustee duties. The Charity Commission has provided comprehensive guidance in relation to the duties of charity trustees. To this end, the Three Trustees must be able to demonstrate that they are acting in accordance with the Charity's constitution and in the best

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