Protecting Your Charity’s Assets: Key Legal Considerations

As a charity trustee, you should safeguard a wide range of assets, including your charity’s financial resources, intellectual property rights, and physical assets, to ensure they are managed effectively and aligned with the charity’s core objectives. In contrast to for-profit businesses, charities have several additional charity-specific duties to understand and comply with. This includes robust financial management taking active steps to safeguard the charity’s assets. This article explores key considerations and legal issues concerning different types of charity assets in the UK and how to protect them. 

How Should Charity Trustees Manage Finances and Assets?

Trustees have a legal duty to ensure that charity finances are managed effectively and funds are used solely for the charity’s purposes. They must protect the charity’s financial assets from mismanagement, fraud, and inappropriate use and ensure these funds support its mission. 

Here are some key considerations for trustees:

• trustees should implement comprehensive financial controls that dictate how funds are received, authorised, and spent;
• a well-structured budget is essential for a charity’s financial health. Trustees should seek to create an annual budget that forecasts income and expenditure and regularly review the charity’s financial performance against this budget. Trustees can then detect discrepancies early on and take action to prevent more significant issues by closely monitoring financial reports. This can help make sure that the charity’s resources are efficiently used and its financial sustainability is maintained;
• trustees are required to maintain accurate financial records. These records must detail all income, expenditures, assets, and liabilities. Transparent and accurate record-keeping can also help reassure donors, beneficiaries, and the public that the charity is managing its funds responsibly and in line with its charitable objectives; and
• if the charity encounters financial difficulties, trustees must act swiftly. This may involve taking various steps, e.g. reducing costs or exploring new funding streams. If the charity risks insolvency, trustees should seek professional advice immediately to minimise liability and protect the charity.

How Can Trustees Safeguard Physical Assets?

Trustees must act to protect charity assets such as buildings and vehicles. Steps to take include maintaining adequate insurance coverage and regularly inspecting assets. Trustees should also ensure that security measures are in place to protect against theft or damage.

Trustees must act in the charity’s best interests when managing property, and any decisions regarding selling, leasing, or purchasing property require careful consideration. It is vital that trustees ensure that any property-related decisions comply with legal requirements, including obtaining necessary approvals.

Trustees should also be aware of the recent changes in law introduced by the Charities Act 2022. This Act brings new powers and flexibilities for managing charity assets, property transactions, and mergers. These changes will start taking effect in phases through 2024.

How Can Trustees Protect Intellectual Property Rights?

Intellectual property (IP) can be a valuable charity asset. It can include the charity’s name, logo, publications, and digital content. Protecting these assets is essential to prevent misuse (for example, copyright infringement) and protect the charity’s reputation.

Trustees should monitor the charity’s IP portfolio and act if third parties misuse it.

If the charity allows other organisations to use its IP (such as its name or logo). Trustees should ensure that clear and robust agreements are in place to protect the charity’s IP rights and how they can be used.

How Can Trustees Manage Cyber Risks?

Cyber threats are an increasingly significant risk for charities—particularly in the context of sensitive information and financial transactions. A cyberattack could result in financial loss and reputational damage, so trustees should take active steps to implement robust cybersecurity measures and ensure robust cybersecurity protocols are in place. This could include various actions such as regularly updating website security, using secure systems for financial transactions, and training staff on best practices and avoiding cyber security risks.

As we have explored above, there are various issues to consider concerning non-profits protecting their assets. If you require support understanding the legal framework around protecting charity assets and detailed information on which steps your charity should take to protect its assets, you should seek legal advice. Legal counsel from a lawyer specialising in charity law (and employment law) can work with you to help you navigate and tackle legal compliance issues and guide you on how best to protect your charity and its assets.

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Key Takeaways

Protecting a charity’s assets is a significantly important responsibility of trustees. For instance, trustees should take active steps to ensure that financial controls are in place, charity IP is safeguarded, and cybersecurity measures are robust. 

Frequently Asked Questions