Charity trustee liability

The rule: liability is rare, and honesty and reasonableness are the test

Section 10 of the Charity Commission's The essential trustee (CC3) sets out the position: “It's extremely rare, but not impossible, for charity trustees to be held personally liable: to their charity, for a financial loss caused by them acting improperly; to a third party that has a legal claim against the charity that the charity can't meet.” CC3's opening section is reassuring: “The Commission recognises that most trustees are volunteers who sometimes make honest mistakes. Trustees are not expected to be perfect - they are expected to do their best to comply with their duties. Charity law generally protects trustees who have acted honestly and reasonably.”

The same section draws the line on the other side: “There is no legal protection for trustees who have acted dishonestly, negligently or recklessly. However, there may be financial protection for those trustees who have made an honest mistake and can rely on the indemnity provisions in the charity's governing document, insurance cover or relief from the Commission or the court.”

It applies whatever the board calls itself. CC49 defines charity trustees as “the people who, under the charity's governing document, are responsible for the general control and management of the administration of the charity”, and notes that “they may be called trustees, managing trustees, committee members, governors, or directors”. A committee member of an unincorporated association and a director of a charitable company are charity trustees for these purposes.

Two things follow. First, the duties in CC3, summarised in our guide to charity trustee responsibilities, are what liability is measured against; a trustee who has met them is rarely at risk. Second, almost every protection in this guide turns on whether the trustee acted honestly and reasonably, and that is a question of evidence.

The three kinds of personal liability

Liability to the charity. CC3: “Trustees can be held liable to their charity for any financial loss they cause or help to cause. This applies to any type of charity whatever its legal form.” The usual causes are spending funds outside the charity's purposes (“in some cases trustees may have to reimburse the charity personally”), acting outside the governing document's powers, failing to manage a conflict of interest, or a loss caused by a careless decision. Unauthorised benefits are treated more strictly still: “Trustees who receive an unauthorised payment or benefit from their charity have a duty to account for (ie repay) it. The Commission can't relieve trustees from this duty.” The Commission and the courts, CC3 says, “rarely enforce liability on an unpaid trustee who has made an honest mistake”, but “expect higher standards from trustees who act in a professional capacity or are paid for being trustees”.

Liability to third parties. CC3 gives examples of claims against a charity: “breaches of an employee's terms, conditions or rights”, “failing to pay for goods or services, or to fulfil the terms of a contract”, “a member of the public being injured on the charity's premises” and “liability to any staff pension scheme”. Who pays depends on the charity's legal form (see the next section). The Commission's guidance on vicarious liability of a charity or its trustees adds the risk of being liable for others: “'Vicarious liability', in the context of running a charity, means the charity or its trustees being liable for wrongdoing of others.”

Criminal liability. CC3: “In some cases, the charity or its trustees can become liable for offences committed by the charity's staff (for example, under the Bribery Act or corporate manslaughter law).” Some statutes reach the individual board members of an incorporated charity directly. Section 37 of the Health and Safety at Work etc. Act 1974 makes a director or similar officer guilty of an offence by a body corporate where it was “committed with the consent or connivance of, or to have been attributable to any neglect on the part of” that person, and section 198 of the Data Protection Act 2018 does the same for offences under that Act. Acting as a trustee while disqualified is itself an offence under section 183 of the Charities Act 2011, with a narrow exception for some disqualifications in charitable companies and CIOs.

Why the legal structure matters

Third-party liability is where the charity's legal form makes the biggest difference. CC3 explains: “If the charity is incorporated, the charity itself will be liable for the claim. Some types of incorporated body (companies, CIOs and Community Benefit Societies) can specifically limit the liability of their trustees and members.” By contrast, “If the charity is unincorporated, the trustees have to sign contracts and other agreements personally, and will have to meet any claim. The charity can normally meet any liabilities that you incur as a trustee provided you have acted honestly and reasonably … But if you incur liabilities that exceed the value of the charity's assets, you could be liable for any amount that the charity can't cover.”

• Trust or unincorporated association. Set up, in CC3's words, “by a trust deed, constitution or similar governing document”, with no legal personality; contracts and employment are in the trustees' names; liability to third parties is not limited. CC3: “Trustees' personal liability is unlimited.”
• Charitable company, usually a company limited by guarantee. Its trustees are also its company directors: CC3 notes that “Company law and the Charities Act impose similar duties on directors of charitable companies and trustees of CIOs”. The company contracts and employs; trustees' liability to third parties is limited, and company law adds duties. If the company goes into insolvent liquidation, a director who “knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation” can be ordered to contribute to its assets under section 214 of the Insolvency Act 1986 (wrongful trading), unless they “took every step with a view to minimising the potential loss to the company's creditors”.
• CIO. Also incorporated with limited liability. The Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 apply the company winding-up provisions of the Insolvency Act 1986, including section 214, to CIOs, reading “any reference to a director of a company” as “a reference to a charity trustee of a CIO”.

CC3 sums up the trade-off: “Incorporation gives trustees more protection from personal liability … The law places duties on board members to prevent the abuse of limited liability.” Its advice to unincorporated charities is direct: “If your charity is unincorporated and employs staff or enters into other contracts, the trustees should seriously consider changing the charity into an incorporated form. You may need to take professional advice about this, particularly in relation to any pension liabilities which could be triggered by incorporation.”

What protects trustees: relief, indemnity and insurance

Relief from the Commission. Section 191 of the Charities Act 2011 lets the Commission make an order relieving a person who “is or has been” a charity trustee “wholly or partly” from personal liability for a breach of trust or breach of duty if it considers that the person “has acted honestly and reasonably and ought fairly to be excused”. It “does not apply in relation to any personal contractual liability”. Because the section covers a person who “is or has been” a charity trustee, a former trustee can also be relieved, which implies that leaving the board does not by itself end exposure for a breach committed while on it.

Relief from the court. Section 61 of the Trustee Act 1925 gives the court the same kind of power where a trustee “has acted honestly and reasonably, and ought fairly to be excused”, and section 1157 of the Companies Act 2006 does so for company officers, “having regard to all the circumstances of the case”.

Indemnity from the charity. The Commission's Charities and insurance (CC49) says: “Where charity trustees have acted honestly and reasonably, they are in any event entitled to an indemnity from the charity's assets for any liabilities incurred by them as trustees.” For trustees of a trust, section 31 of the Trustee Act 2000 entitles a trustee to be reimbursed from the trust funds for “expenses properly incurred by him when acting on behalf of the trust”. Many governing documents add an express indemnity. Company law limits what a charitable company can promise: section 232 of the Companies Act 2006 makes void any provision exempting a director from liability for “negligence, default, breach of duty or breach of trust in relation to the company”, and any indemnity against it, except insurance (section 233), a qualifying pension scheme indemnity (section 235) and a qualifying third party indemnity (section 234), which still cannot cover, among other things, criminal fines, regulatory penalties or the costs of defending criminal proceedings that end in conviction.

Trustee indemnity insurance. Section 189 of the Charities Act 2011 lets trustees buy insurance out of charity funds against personal liability for “any breach of trust or breach of duty committed by them in their capacity as charity trustees”. CC49 explains that it “covers trustees from having to personally pay legal claims that are made against them (by their charity or by a third party)”, that it “is regarded as a form of personal benefit to a trustee”, and that “the only time a charity needs to approach the Commission for authority to buy TII is when the charity's governing document explicitly forbids its purchase”. The trustees must decide that buying it is in the charity's best interests (section 189(4)), applying the Trustee Act 2000 duty of care (section 189(5)). The policy must exclude fines, regulatory penalties, the costs of defending criminal proceedings ending in conviction for fraud, dishonesty or wilful or reckless misconduct, and liability to the charity for conduct the trustee knew, or must reasonably be assumed to have known, was not in its interests, or where the trustee “did not care whether it was in the best interests of the charity or not”. Trustees can also buy cover themselves: “Trustees are free to buy TII out of their own pockets if they wish - this would not require any legal authority.”

Reducing the risk: CC3's list, and the records behind it

CC3 section 10.4 lists what trustees should do “To reduce the risk of becoming personally liable”:

• “ensure trustees understand their responsibilities”
• “ensure the charity can meet its financial obligations, particularly before agreeing to any contract or substantial borrowing”
• “ensure the charity can meet any obligations to staff pension schemes”
• “hold regular trustee meetings and keep proper records of decisions made and the reasons for those decisions”
• “ensure you prevent conflicts of interest from affecting decisions” and “ensure any transactions with and benefits to trustees or connected persons are properly authorised”
• “take appropriate advice from a suitably qualified person when you need to”
• “if you delegate any powers, give clear written instructions and make sure the instructions are being followed”
• “ensure the charity has effective management and financial controls”, including receipts and records of income and expenditure, regular financial reports and accounts filed on time
• “ensure the charity is complying with other laws that apply to it”
• “consider whether the charity needs additional insurance or needs to become incorporated”

Read that list as a records list and most of it is about evidence. Honesty and reasonableness are judged after the event, from what the board can show: the papers trustees had, the advice they took, the options they considered, the reasons they gave and who disagreed. Our guides to minute taking, the conflict of interest policy and trustee decisions between meetings cover the records themselves.

Dissent deserves its own record. CC3 says a trustee who strongly disagrees with a decision “can ask for your disagreement to be recorded in the minutes of the meeting”, and that a trustee who thinks colleagues are acting in breach of duty should raise it with the chair or fellow trustees and, if still concerned, the Commission. Under section 79 of the Charities Act 2011, the Commission can, once it has opened an inquiry and is satisfied both that there has been misconduct or mismanagement and that it is necessary or desirable to act to protect the charity's property, remove a trustee “who knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it”. A trustee who did oppose it will want to be able to prove it.

The objection that only exists on one phone

Picture a board that approves a lease the charity cannot really afford. The decision is minuted at a meeting: approved, with the treasurer abstaining. The real discussion happened the week before, in the trustees' group chat and in direct messages. The treasurer set out the cash-flow risk in a long message to the chair. Another trustee asked whether anyone had taken advice and was told it was not needed. The chair replied that the funder had more or less promised a grant.

Two years later the charity is in difficulty and someone asks whether the trustees acted honestly and reasonably. The minute shows a decision, not reasons. Everything that would show what the board knew, what it was warned about, what advice it did or did not take, and who objected, is in messages on personal phones. Some trustees have changed phones; one has left. The treasurer who raised the warning may still have it, and may produce it, but the charity's own record cannot show that the board considered the risk, and a trustee who agreed in the thread cannot show the reservations they say they had.

That is the practical side of every protection in section 04. Relief under section 191, the court's power under section 61 and the indemnity from the charity's assets all depend on showing honest and reasonable conduct, and that showing is made from records. The conversation that shaped the decision is one of them.

A question for the next board meeting: if one of last year's decisions were challenged, could each of us show what we knew, what advice we had and whether we objected, from the charity's own records rather than our personal phones?

Questions people ask

Is a charity trustee financially liable?

A charity trustee can be financially liable, but the Charity Commission says it is “extremely rare, but not impossible”: a trustee can be liable to the charity for a financial loss caused by acting improperly, and, in an unincorporated charity, to a third party for a claim the charity's assets cannot meet. The law generally protects trustees who have acted honestly and reasonably, and the Commission and the courts “rarely enforce liability on an unpaid trustee who has made an honest mistake”.

Can a charity trustee be sued?

A charity trustee can be sued personally in some circumstances: for a loss to the charity caused by a breach of trust or duty, and, in an unincorporated charity, by a third party on a contract the trustees signed or another claim against the charity. In an incorporated charity, such as a charitable company or a CIO, CC3 says “the charity itself will be liable for the claim”.

Are trustees personally liable for a charity's debts?

Trustees of an unincorporated charity can be personally liable for its debts beyond the value of its assets: CC3 says “you could be liable for any amount that the charity can't cover”. Trustees of a charitable company or a CIO normally are not, but if the charity goes into insolvent liquidation, a trustee who knew or ought to have concluded that there was no reasonable prospect of avoiding it, and did not take every step to minimise creditors' losses, can be ordered to contribute under section 214 of the Insolvency Act 1986.

What does trustee indemnity insurance not cover?

Trustee indemnity insurance bought with charity funds cannot cover criminal fines, regulatory penalties, the costs of defending criminal proceedings that end in a conviction for fraud, dishonesty or wilful or reckless misconduct, or liability to the charity for conduct the trustee knew was not in its interests or did not care about: section 189(2) of the Charities Act 2011 requires the policy to exclude them.

Official guidance and your next step

The primary guidance is section 10 of the Charity Commission's The essential trustee (CC3), with section 11 on legal structures, Charities and insurance (CC49) for trustee indemnity insurance, and the Commission's guidance on vicarious liability. The statutes are on legislation.gov.uk: sections 189 and 191 of the Charities Act 2011, section 61 of the Trustee Act 1925, sections 232 to 234 and 1157 of the Companies Act 2006, and section 214 of the Insolvency Act 1986. Quotations are from those sources as published on 3 October 2026.

This guide is a general summary for charities in England and Wales, not legal advice. A trustee who is worried about personal liability for a particular decision, or a charity facing insolvency, should take professional advice early: several of the protections above depend on what the trustees did once they knew there was a problem.

Then do one thing: find out, before the next meeting, whether your charity is incorporated, whether it holds trustee indemnity insurance, and what its governing document says about indemnity. Put the three answers in the next induction pack.