Charity insolvency—personal liability of charity trustees
Produced in partnership with Rebecca Walker of Irwin Mitchell
Charity insolvency—personal liability of charity trustees

The following Restructuring & Insolvency guidance note Produced in partnership with Rebecca Walker of Irwin Mitchell provides comprehensive and up to date legal information covering:

  • Charity insolvency—personal liability of charity trustees
  • Breach of duty
  • Wrongful and fraudulent trading (incorporated charities only)
  • Personal liability under contracts (unincorporated charities only)
  • Practical tips for limiting liability

The term 'charity trustee' is defined in section 177 of the Charities Act 2011 (CA 2011) as anyone who has general control and management of the administration of a charity. As such, charity trustees can encompass directors of charitable companies and community benefit societies, charity trustees of charitable incorporated organisations as well as management committee members of unincorporated associations and trustees of charitable trusts.

The liability of charity trustees largely comes down to how the charity is constituted. A key distinction in liability terms is whether the charity is an incorporated entity.

The most common types of incorporated charity are:

  1. companies limited by guarantee

  2. charitable incorporated organisations (CIOs) and

  3. community benefit societies (formerly industrial and provident societies)

Examples of unincorporated charities are unincorporated associations and charitable trusts.

For more information on the different types of charity and available insolvency procedures, see Practice Note: Charity insolvency—a guide to available insolvency procedures.

Please note that Community Interest Companies are not charities and so are excluded from this note.

Broadly, a charity trustee might find themselves personally liable for losses suffered by the charity in the following circumstances:

  1. if they have breached their duty to the charity (regardless of whether the charity is incorporated or not)

  2. (in the case of an incorporated charity) if they traded the business of the charity wrongfully or fraudulently; and/or

  3. (in the case of an