L3.0 Payment of Trustees L3.0 Payment of Trustees
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Note: MUST* and MUST NOT* (with asterisk) denotes legal requirement
MUST and MUST NOT (without asterisk) denotes requirement of the Code of Fundraising Practice
L3.1 England and Wales
These limits on the payment of trustees relate only to fundraising organisations which are charities.
- the charity’s constitution specifically provides for the type of payment proposed or the payment is authorised by an order of the Charity Commission or the Court
- the charity’s constitution does not expressly prohibit the type of payment proposed
- the payment is not for being a trustee or under a contract of employment
- the charity complies with the provisions of section 185 of the Act 2011 (“the Act”) (see below)
a) The provisions of section 185 of the Act which MUST* be complied with are:
- the trustees MUST* have regard to the relevant Charity Commission guidance (currently CC11 – Trustee Expenses and Payments) before entering into an arrangement to pay a trustee;
- the payment or maximum amount MUST* be set out in a written agreement;
- the payment or maximum amount MUST NOT* exceed what is reasonable;
- the trustees MUST* decide, before entering into the agreement, that the arrangement is in the best interests of the charity; and the number of trustees remunerated under s.185, or otherwise, MUST* constitute a minority of the total number of trustees of the charity.
These provisions also apply to payments to certain persons connected to trustees, including business associates and family. Further guidance is available on the Charity Commission’s website.
A payment to a charity trustee (or connected person) may only be made if:
- the charity’s constitution contains an authorising provision specifically permitting the payment of remuneration to the service provider, trustee or connected person concerned, and this provision was in force on 15th November 2004 (the date that the 2005 Act was first laid before the Scottish Parliament)
- the charity complies with the provisions of section 67 of the 2005 Act (see below)
a) The provisions of section 67 of the 2005 Act which MUST* be complied with are:
- the maximum amount of the payment MUST* be set out in a written agreement between the individual providing the services and the charity;
- the maximum amount MUST* be reasonable in the circumstances;
- the charity trustees MUST* be satisfied before entering into the agreement that it is in the interests of the charity for the services to be provided by the charity trustee or connected person for that maximum amount;
- immediately after the agreement is entered into, the number of trustees receiving remuneration, entitled to receive remuneration or connected with another charity trustee who is remunerated or entitled to remuneration MUST* be in the minority; and
- the charity’s constitution or governing document MUST NOT* expressly prohibit the payment of remuneration.
b) Under the common law on conflicts of interest, a charity trustee who is to receive remuneration or who is connected with a person who is to receive remuneration MUST NOT* take part in any of the relevant decisions. There is no obligation to refer to the Office of the Scottish Charity Regulator (OSCR) but trustees should have regard to the relevant guidance (presently section 5 of ‘Guidance for Charity Trustees: Acting with care and diligence’).
There is nothing to prevent a trustee from being remunerated for services provided in his capacity as a charity or under a contract of employment.
These provisions also apply to payments to those persons connected to trustees, including business associates and family, where the charity trustee might benefit either directly or indirectly from the remuneration provided to the connected person. Further guidance is available in OSCR’s guidance for charity trustees and in section 68(2) of the 2005 Act.
The remuneration rules also do not prevent the receipt of remuneration where it is authorised by an order of the Court in Session or any enactment.
L3.3 Northern Ireland
In Northern Ireland the provision which covers remuneration of trustees is s.88 of the Charities Act (Northern Ireland) 2008. It applies to the trustee and anyone connected with the trustee. ‘In connection with’ can be interpreted as immediate family; partner, a company of the trustee; person in business with the trustee.
Guidance for trustees on the making of agreements for remuneration has not yet been agreed by the Charity Commission for Northern Ireland.