The Payment for Services and Trustee Indemnity Insurance Issues Solved?

S36 of the 2006 Act is a new provision which entitles a trustee of a charity, or a person connected with him or her, to receive remuneration out of the funds of the charity. This does not apply to remuneration for services provided by a person in his capacity as a charity trustee or under a contract of employment. Before the remuneration can be obtained, four conditions must be fulfilled:

• The amount of the remuneration must be set out in an agreement in writing under which the relevant person is to provide the services in question to the charity; and it must not exceed what is reasonable in the circumstances for the provision by that person of the services in question

• Before entering into the agreement, the charity trustees must have decided that they were satisfied that it would be in the best interests of the charity for the services to be provided by the relevant person to the charity for the amount set out in the agreement. For these purposes the duty of care in S1 of the Trustee Act 2000 applies, and the trustees must have regard to any guidance given by the Commission concerning the making of such agreements

• Immediately after the agreement is entered into the total number of trustees to which such an agreement relates must constitute a minority of the trustees

• The trusts of the charity do not contain any express provision that prohibits the relevant person from receiving the remuneration.

S37 disqualifies a charity trustee from acting as such in relation to any decision or other matter connected with the agreement. If a trustee does so act the Commission may make an order requiring the disqualified trustee to reimburse the whole or part of the remuneration received (or the monetary value of a benefit in kind), or not to be paid the whole or part of the remuneration.

This provision should save trustees from seeking to amend their constitutions to permit payment to trustees for services rendered other than in the capacity as a trustee.

Similarly, S39 of the Act permits the trustees of a charity to arrange for the purchase out of the funds of the charity of insurance designed to indemnify the charity against personal liability in respect of any breach of trust or duty committed by them in their capacity as charity trustees; or any negligence, default, breach of duty or trust committed by them in their capacity as directors or officers of the charity or of any body corporate carrying on any activities on behalf of the charity.

The terms of the insurance must, however, exclude the provision for an indemnity for any person in respect of:

• a fine imposed in criminal proceedings

• a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature

• any liability incurred in defending any criminal proceedings in which he is convicted of an offence arising from any fraud or dishonesty, or wilful or reckless misconduct

• any liability incurred to the charity arising from any conduct which he know or must reasonably be assumed to have known was not in the interests of the charity or in the case of which he did not care whether it was in the best interests of the charity or not.

The trustees may not purchase insurance under this provision unless they decide they are satisfied that it is in the best interests of the charity for them to do so; and the S1 duty of care under the Trustee Act 2000 applies when making such a decision.

Again, this provision should mean that trustees who do not have a power to take out trustee indemnity insurance in their governing document, will not have to petition the Commission to obtain permission to purchase it, provided that the provisions of S39 are complied with.