Am I personally liable as a charity trustee?

The answer

This page covers trustee personal liability in England and Wales, where the Charity Commission’s CC3 is the main source. It notes Scotland and Northern Ireland at the end. The useful distinction is not “incorporated or not”, but liable to whom.

Liability to your own charity applies to every structure. Liability to third parties — creditors, staff, someone injured on your premises — is the part incorporation changes.

Can a trustee be liable to their own charity?

Yes, whatever the charity’s legal form, including a CIO.

This is the correction this page exists for. CC3 §10.1, verbatim: “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 myth comes from the structure comparison tables everyone reads. Their column heading is “liability to third parties limited”. The qualifier gets dropped somewhere between the table and the conversation.

Understand what you are personally taking on sets out the Commission’s table in full, with its heading. Nothing in it limits liability to the charity itself.

Two limits on the protection you do have, both verbatim from CC3 and both routinely omitted:

1. “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.” This is CC3’s point, flowing from the equitable duty to account. It is not a carve-out in the relief statute — see the section on whether the Charity Commission can relieve a trustee.
2. “There is no legal protection for trustees who have acted dishonestly, negligently or recklessly.”

Note the middle word. Sector writing routinely renders that list as “dishonestly or recklessly” and drops negligence. Negligence is a much lower bar than either of the other two. Dropping it materially understates what you are carrying.

CC3 also records what the Commission and the courts do in practice. They “rarely enforce liability on an unpaid trustee who has made an honest mistake”. They also “expect higher standards from trustees who act in a professional capacity or are paid”.

Liability to third parties, and what incorporation changes

Incorporation can limit a trustee’s liability to creditors, staff and injured visitors, but only for some forms. CC3 names the claims:

• breaches of an employee’s terms, conditions or rights
• failing to pay for goods or services or to fulfil a contract
• a member of the public injured on the premises
• liability to a staff pension scheme

If the charity is incorporated, “the charity itself will be liable for the claim”. Keep the Commission’s own qualifier when you repeat this. CC3 §11.1 says “Some incorporated forms can limit trustees’ liability to third parties.” Not all, and not automatically.

CC3 adds a sentence worth sitting with: “The law places duties on board members to prevent the abuse of limited liability.” Limited liability arrives with its own obligations.

If the charity is unincorporated, CC3 is blunt: “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.“

Nothing caps your exposure except the size of the charity’s assets. In other words, it is not capped.

Incorporating the trustee body is not incorporation. Someone may have told you that a certificate of incorporation for the trustee body has solved this. That certificate comes under Part 12 of the Charities Act 2011. It has not solved it.

Section 254 is headed “Liability of charity trustees not affected by incorporation”. It provides that the trustees remain answerable and accountable after a certificate is granted. They remain so “in the same manner and to the same extent as if no such incorporation had been effected”.

Part 12 gives the trustee body corporate status for holding property, so title does not have to be transferred every time a trustee changes. It is a property-holding convenience, not a shield.

If the charity runs out of money, the answer again turns on structure. For an unincorporated association or trust, CC12 states it plainly: “The trustees of an unincorporated charity are personally liable for the charity’s debts and liabilities.” There is no separate legal person to be insolvent, and no formal statutory insolvency regime. The exposure is personal throughout.

What that means in practice is covered in what happens if the charity cannot pay.

For a charitable company or a CIO, limited liability is the default — but it is not absolute. The wrongful trading regime reaches CIO trustees as well as company directors. This is because the Insolvency Act 1986 is applied to CIOs with “director” read as “charity trustee of a CIO”.

Two things about that regime are usually got wrong. First, no creditor can bring the claim: only a liquidator or administrator can. And the order is a contribution to the company’s assets, not a payment to anyone in particular.

Second, there is a statutory safe harbour. It protects a trustee who “took every step with a view to minimising the potential loss to the company’s creditors” that they ought to have taken. Continuing to operate can be entirely consistent with that defence. Stopping badly does not earn it.

When and how to stop is covered in take formal insolvency advice and know when to stop.

Can the Charity Commission relieve a trustee of liability?

Yes, for a breach of trust or duty, but not for personal contractual liability. Charities Act 2011 s.191 lets the Commission relieve a trustee from personal liability for a breach of trust or duty. The statutory test is in s.191(2). It is met where the person “has acted honestly and reasonably and ought fairly to be excused for the breach of trust or duty“.

Quote the statute, not the gloss. CC3 summarises the power as relieving trustees who “have acted honestly and reasonably and have not benefited from their actions”. Those last words are the regulator’s shorthand and are not in the section. Publishing a regulator’s plain-English summary as the statutory test is the same failure that produces most of the wrong answers in this area.

s.191(4) is decisive. “Subsection (2) does not apply in relation to any personal contractual liability of a charity trustee or trustee for a charity.”

That single subsection decides the matter for unincorporated charities. Their trustees’ largest real exposure is contractual — leases, employment contracts, supplier agreements, signed personally because the charity has no legal personality of its own. The Commission’s relief power does not reach any of it.

An unincorporated charity that signs a three-year lease is putting its trustees’ own money behind the rent. If income collapses in year two, s.191 offers nothing.

Three things to keep alongside it. Relief may cover the whole loss or only part of it, on such terms as the Commission thinks fit (s.191(3)).

s.191(4) is the section’s only express carve-out. The unauthorised-benefit point, in the section on liability to your own charity, is CC3’s, not the statute’s.

Two separate court routes also survive untouched under s.191(6):

• Trustee Act 1925 s.61, for trustees
• Companies Act 2006 s.1157, for company officers and auditors

The Commission is not the only door.

What trustee indemnity insurance must exclude

Trustee indemnity insurance is permitted, but the statute makes it exclude fines, penalties and some conduct. Buying cover is permitted.

The power is in Charities Act 2011 s.189(1). The trustees “may arrange for the purchase, out of the funds of the charity, of insurance designed to indemnify” them against personal liability. It also reaches liability incurred as directors or officers of a body corporate carrying on activities on behalf of the charity — your trading subsidiary.

Then s.189(2) turns round and makes the exclusions mandatory. It says “the terms of such insurance must be so framed as to exclude the provision of any indemnity” for a defined list. The list has 3 paragraphs excluding 4 things. Here they are in full:

• a fine imposed in criminal proceedings — s.189(2)(a)(i)
• a sum payable to a regulatory authority by way of a penalty for non-compliance with a requirement of a regulatory nature, however arising — s.189(2)(a)(ii)
• the cost of defending criminal proceedings in which the trustee is convicted of an offence arising out of fraud, dishonesty, or wilful or reckless misconduct — s.189(2)(b)
• liability to the charity arising out of either of these — s.189(2)(c):
  • conduct “which P knew (or must reasonably be assumed to have known) was not in the interests of the charity”
  • conduct where the trustee “did not care whether it was in the best interests of the charity or not”

On the third item, s.189(3) defines when a conviction “has become final”. Defence costs are recoverable unless and until it is.

Read the words in brackets in the last item. It is an objective test: not knowing is not a defence.

Notice what the statute has done overall. It requires the policy to exclude regulatory penalties and conduct you should have recognised as against the charity’s interests. That is close to a description of the thing a worried trustee is imagining. The cover stops where the worry starts.

Buying it is itself a decision with conditions attached. All three are easy to miss. First, s.189(4): the trustees “may not purchase insurance under this section unless they decide that they are satisfied that it is in the best interests of the charity for them to do so”. Second, under s.189(5), the Trustee Act 2000 s.1(1) duty of care applies to that decision.

Third, the section does not authorise buying cover that the governing document expressly prohibits (s.189(6)(a)). However, s.189(6)(b) means the usual no-personal-benefit rule does not block it. A minute that records buying the cover, but not the s.189(4) satisfaction, is defective.

What the market offers — typical limits, typical premiums — is not established here. No figures appear on this site, and you should be suspicious of any that appear elsewhere without a source.

Where this page applies, and where it does not

England and Wales: this page sets out the position in full. Three things are established from the provisions and the guidance, read at source:

• the statutory positions under ss.189, 191 and 254
• the CC3 material
• the insolvency analysis

Scotland: partly covered. The structural logic carries: a SCIO has legal personality and an unincorporated Scottish association does not. But three things are not established here:

• the Scottish relief power
• the Scottish position on trustee indemnity insurance
• the Scottish restitution rules

One thing that is established points the other way. Under s.66(4) of the 2005 Act, any breach of the general trustee duties is deemed misconduct. That is a harsher starting point than England and Wales, not a softer one.

Northern Ireland: covered. CCNI organises the same ground by legal structure, not by who the liability runs to.

• An unincorporated association’s trustees can be held personally responsible for what the charity does.
• A charitable company’s trustees get limited liability. They are protected if they acted openly, honestly and to the best of their ability, but not for fraud or deliberate wrongdoing.
• A charitable trust’s trustees share legal responsibility for the trust.

There is no CIO in Northern Ireland. Part 11 of the 2008 Act was never brought into force. So the limited-liability option is a charitable company only.

Two protections mirror the England and Wales position closely.

• The Commission may relieve a trustee, auditor or examiner who “acted honestly and reasonably and ought fairly to be excused” (s.91).
• Trustees may buy indemnity insurance from charity funds under s.93. Its mandatory exclusions map almost word-for-word onto the England and Wales list in the section on what trustee indemnity insurance must exclude.

Wrongful trading also reaches an NI charitable company’s trustees. Article 178 of the Insolvency (Northern Ireland) Order 1989 is near word-for-word Insolvency Act 1986 s.214. It has the same “knew or ought to have concluded” test, and the same safe harbour for taking every step to minimise creditor loss.

One narrow point is flagged, not confirmed. Great Britain’s equivalent was extended to administration in 2015 (s.246ZB). Article 178’s text mentions only liquidation.

On that reading, an NI director facing administration rather than liquidation may not face an equivalent claim. This is an inference from an absence, not a provision that says so. It should be checked before you rely on it.

What to do about it

Do not stop at understanding this. The two things that change your position are a decision and a record.

Understand what you are personally taking on. A signed trustee declaration and a minuted record that every trustee has read the duties and this liability position. It is the difference between a board that took a risk knowingly and one that did not know it was taking one.

Decide your liability position: incorporation and trustee indemnity insurance. Both are minuted trustee decisions with reasons. If your charity is unincorporated and holds a lease or employs anyone, this is not a filing task. It is the most consequential governance decision you will make.

CC3’s own recommendation is to consider incorporating. It attaches a warning: incorporation can itself trigger a pension liability. That warning is why this is advice territory rather than a form-filling exercise.

Where this page stops. It sets out what the law says. It does not tell you what to do in your situation.

Before paying for advice, the free routes are:

• the provisions themselves at legislation.gov.uk
• the Charity Commission, OSCR or CCNI, all of whom answer questions without charge
• LawWorks and Advocate, for pro bono legal help
• your local council for voluntary service

Get someone if any of these is true:

• you have already signed a lease or an employment contract as an unincorporated charity
• a claim has been intimated
• there is an open regulatory case