Charity trustees of corporate charities are subject to not only regulation under charity law but also company law. This places quite a responsibility on them but the recent Kids Company judgment reported on 12 February gives some comfort to trustee directors that when acting in good faith and seeking to act in the best interest of a charity facing financial difficulties they will not be hung out to dry if at a later date and with the benefit of hindsight their decisions turn out not to have saved the company from closure or, as in the case, insolvent liquidation.

Charity trustees have a duty to their charity to manage its resources responsibly and to act with reasonable skill and care. Failure to do so can have personal consequences for charity trustees not only of an unincorporated but also an incorporated charity including disqualification. Disqualification action can be taken by the Charity Commission (irrespective of insolvency) but also the Official Receiver if the charity company becomes insolvent and goes into a formal insolvency procedure such as liquidation.

This case highlights that for public policy reasons unpaid director volunteers (i.e trustees) of charities should not be held to an unrealistically high standards of legal skill, financial analysis or detailed factual knowledge as this could have the effect of discouraging people from volunteering to be charity trustees.

Conclusions from a charity law perspective:

• Trustees of charities incorporated under the Companies Act are subject to the same duties and responsibilities as those of directors of commercial companies.

• The courts will take a benevolent approach to charity trustees in circumstances where no dishonesty or wilful misconduct is alleged.

• Charity trustees are expected to make informed decisions within a reasonable range of decisions that the board could have made in the best interests of the charity. They are not required to make the right or best decision based on hindsight. The fact that such a decision subsequently turns out to not to be the best choice is neither here nor there.

For further help or advice, please contact our Charity specialist Katie Dawson on 01904 561408 or