Navigating Charity Laws: What UK Non-Profits Need to Know

Charity law in the UK is complex and broad in scope, covering a range of issues from governance and financial management to public benefit requirements. Trustees must understand the legal framework governing charities to ensure they fulfil their duties responsibly and avoid risks. This article explores some of the key issues and questions charity trustees should be aware of regarding their duties and charity laws. 

What Should Trustees Understand About Rules Applying to Charities?

UK charity law establishes clear rules regarding charities’ creation, management, and operation. These rules impact almost every area of a charity’s operations, from how funds are raised and used to governance and public accountability. Trustees must understand and comply with this legal framework while ensuring their charity remains true to its objectives.

Public and media scrutiny often places additional pressure on charities, so transparency and good governance can significantly help maintain public trust. Trustees need to balance their legal responsibilities with the charity’s goals and ensure that they meet legal requirements. 

What is a Governing Document and Why is It Important?

A charity’s governing document is the foundational framework that sets out its objectives (often called “objects”) and operational rules. It also defines the powers trustees have and governs the making of decisions. This document can take different forms depending on the charity’s legal structure.

Trustees should refer to the governing document when making decisions, ensuring that all actions align with the charity’s stated purposes. If trustees act beyond these purposes, they could be personally liable for any misuse of funds. 

Have You Registered Your Charity When Required?

Charity trustees must apply to register their organisation with the Charity Commission unless the charity’s annual income was £5,000 or less in the previous financial year or the charity is exempted from registration. 

Charitable incorporated organisations must register regardless of income. Charity trustees must understand and comply with these requirements. 

Are You Focusing on Your Charity’s Purposes?

Trustees have a duty to ensure that all activities and funding directly support the charity’s stated purposes. Deviating from these purposes can lead to serious legal consequences, including breach of trust and personal liability for any misused funds.

For example, if your charity is established to promote education, all activities and resources must be directed towards this aim. Engaging in unrelated projects without amending your charity’s governing document could result in trustees being held accountable for mismanagement.

Are You Meeting the Public Benefit Requirement?

One of a UK charity’s core obligations is to operate for public benefit. Trustees must ensure that the charity’s activities promote this benefit. In the annual report, trustees should demonstrate how their charity has provided public benefit each year. 

Failure to meet public benefit requirements can lead to regulatory scrutiny and, in extreme cases, the charity’s loss of registered status.

Are You Acting Collectively as Trustees?

Trustees share collective responsibility for a charity’s operations. Even if individual tasks are delegated to staff or particular trustees, all trustees must participate in key decision-making and ensure these decisions are in the charity’s best interests.

Are You Avoiding Conflicts of Interest?

Trustees are legally required to avoid conflicts of interest, meaning personal interests must not interfere with their duty to act in the charity’s best interests. Trustees should disclose and take steps to manage disputes appropriately.

Managing conflicts of interest effectively is critical to maintaining the charity’s integrity and public trust.

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Are You Complying with Other Legal Obligations?

Charities must comply with various legal obligations under charity laws (such as the Charities Act 2022) and other wider legal rules. 

Depending on the charity’s activities, trustees may need to follow employment law and property law. They should also follow data protection law rules under the UK GDPR. 

There is no expectation for trustees to be legal experts. Rather, they should take reasonable steps to understand the legal framework surrounding the charity.

Charities must also comply with laws and regulations that govern their fundraising activities, including compliance with the Fundraising Regulator’s Code of Fundraising Practice. These rules seek to protect donors and ensure that fundraising efforts are ethical, transparent, and carried out with integrity. 

Key Takeaways

As a trustee, your role is vital and involves ensuring legal compliance and your charity’s smooth, practical operation. You must regularly consult the charity’s governing document, ensuring that all activities align with its purposes and public benefit requirements. Trustees must work together, avoid conflicts of interest, and meet all relevant legal obligations. Given the complexity of charity law, trustees should seek legal advice if they need clarification on any aspect of their duties. 

Frequently Asked Questions