We are regularly approached by charities asking whether their trustees can be paid for being trustees and for providing goods or services. For example a charity recently asked us whether an accountant, who was on their board, could quote for their annual accounts and payroll work.
As a general rule trustees cannot be paid for actually being trustees, that is they cannot be paid for the role they play in being a trustee. Any such arrangement requires the express authority of the Charity Commission and the situation is rare. However, whether a trustee, such as an accountant, can bid to provide services will depend entirely upon your Memorandum and Articles* or other governing document.
If your governing document does allow for such an arrangement then it will be subject to the Charities Acts. There are various conditions that need to be met in order to comply, for example:
- there is a written agreement between the charity and the trustee (or their company);
- the agreement sets out the exact or maximum amount to be paid;
- the trustee concerned may not take part in the decision about the making of the agreement or about the acceptability of the service provided;
- the payment is reasonable in relation to the service provided;
- the trustees are satisfied that the payment is in the best interests of the charity;
- the total number of trustees who are receiving payment or who are connected to someone receiving payment are in a minority.
Trustees must also have regard to all of the Charity Commission’s guidance and show that they have taken the guidance into account.
If the charity is also a company then the trustee will also have to take into account their director’s duties in respect of avoiding conflicts of interest and will also have a company law duty to declare an interest in the proposed transaction or arrangement with the company.
Charities should also assess their ability to maintain an arms length relationship with trustees who do provide goods and services to the charity.
(* Recently constituted limited companies will have all of their rules contained within their Articles)
For further information on this topic contact Iona Horsburgh