(Act Reference: Section 66)

Charity Law in Scotland: The Charities and Trustee Investment (Scotland) Act 2005

If you haven’t already done so, please read our 'Introduction and Overview’ before reading further (see link below).

The Duties of Charity Trustees are set out in Section 66 of the Act. In order not to mislead this section is reproduced here verbatim with an explanatory note attached.

(1) A charity trustee must, in exercising functions in that capacity, act in the interests of the charity and must, in particular—

(a) seek, in good faith, to ensure that the charity acts in a manner which is consistent with its purposes,

(b) act with the care and diligence that it is reasonable to expect of a person who is managing the affairs of another person, and

(c) in circumstances capable of giving rise to a conflict of interest between the charity and any person responsible for the appointment of the charity trustee

(i) put the interests of the charity before those of the other person, or

(ii) where any other duty prevents the charity trustee from doing so, disclose the conflicting interest to the charity and refrain from participating in any deliberation or decision of the other charity trustees with respect to the matter in question.

(2) The charity trustees of a charity must ensure that the charity complies with any direction, requirement, notice or duty imposed on it by virtue of this Act.

(3) Subsections (1) and (2) are without prejudice to any other duty imposed by enactment or otherwise on a charity trustee in relation to the exercise of functions in that capacity.

(4) Any breach of the duty under subsection (1) or (2) is to be treated as being misconduct in the administration of the charity.

(5) All charity trustees must take such steps as are reasonably practicable for the purposes of ensuring—

(a) that any breach of a duty under subsection (1) or (2) is corrected by the trustee concerned and not repeated, and

(b) that any trustee who has been in serious or persistent breach of either or both of those duties is removed as a trustee.

Note

N.B. this note is not an authoritative interpretation of the law, it is an attempt to provide clarity for the layperson without misleading. It should not be read separately from the text of the Act.

(1) ‘put the charity first

(a) make sure it does what it was set up to do

(b) act as if you were looking after someone else’s stuff

(c) if there is a conflict of interest between a charity and anyone who appointed that trustee the trustee must

(i) put the charity’s interests first

(ii) if the trustee can’t do that he/she must say so, explain why and not take part in any discussions about the matter that creates the conflict of interest

(2) make sure the charity complies with the Act

(3) The above does not stop you from doing things that you have to do because of other duties imposed on charity trustees by other laws or otherwise (e.g. the duties of a company director)

(4) If you don’t carry out (i.e. breach) your duties it will be deemed misconduct

(5) All charity trustees must do whatever they can to make sure that

(a) breaches are rectified and not repeated

(b) trustees who seriously or persistently breach their duties are removed

There are some things to bear in mind here:

The Punishment must fit the Crime

Section 66 outlines general duties. Breaching any of these general duties is considered to be ‘misconduct’ but does not constitute an offence. The Office of the Scottish Charity Regulator (OSCR) must act proportionately at all times and so even though a breach must be deemed to be ‘misconduct’ the action taken in respect of that misconduct will depend on what actually happened.

In order to both identify misconduct and take appropriate action OSCR must instigate an inquiry. This is because OSCR may only exercise its punitive powers as a result of an inquiry. Thus, under section 31, OSCR may do a number of things after an inquiry if it discovers that there has been misconduct. These are outlined on our page entitled “OSCR: Inquiries and Information - Part 3 (Suspensions, Directions and Reports)”

The definition of misconduct proved extremely controversial during the passage of the Bill through Parliament, especially as it was originally deemed to constitute an offence. MSPs feared that the definition confused ‘making silly mistakes’ with ‘being deliberately dodgy’ and could lead to excessive punishment. Their fears were allayed when the Scottish Executive changed the Bill to mean that ‘misconduct’ would no longer constitute an offence and assured them that OSCR’s duty to be proportionate would require it to meet out a punishment that fitted the crime.

Offences

That said, there are a number of duties in other parts of the Act for which non-compliance is specifically deemed to be an offence and specific punishments are attached to each offence by the Act.

For example, when a charity has not submitted its accounts to OSCR, it is an offence for a charity trustee not to comply with the requirements made by a person appointed by OSCR to prepare accounts and make a report on what has been going on. This offence is punishable by a fine.

Because of Section 66 (2) and (4) the trustee would also be guilty of misconduct because they had breached ‘a duty’ under the Act.

OSCR must act proportionately at all times. It seems therefore likely that OSCR would seek to ensure that it had done everything it could to give the trustees the chance to comply with their duties before it deemed them to have failed in their duties. In the case of a proven failure which constitutes an offence OSCR would have no choice but to refer the matter to the Procurator Fiscal.

For a list of offences under the Act please see our page ‘Offences under the Charities and Trustee Investment (Scotland) Act 2005: A Summary’

Additional Note: ‘Expenses’ and Trustees

In the case of wrongdoing that reaches the Court of Session, the Court can award costs – or ‘expenses’ as the Charities Act calls them - against a charity.

However it can also decide that one or more of the individual trustees should be liable for those costs.

This may sound daunting to a trustee but its actually designed to make sure that if the Court is satisfied that particular individuals are to blame then it can single them out rather than punishing the whole charity or the whole group of trustees.

Please see our page on
“OSCR: Inquiries and Information - Part 4 (Powers of the Court of Session) ”

OSCR Guidance
OSCR has produced a leaflet called 'Guidance for Charity Trustees', which is available free from their website under 'publications'.