Harriet Morgan, Head of the Charities Team at Hugh James, highlights the key points trustees should understand, why governing documents matter, and common pitfalls.
WHAT IS A CHARITY’S GOVERNING DOCUMENT?
A charity’s governing document is its foundation. It sets out how the charity operates, who runs it, and what it exists to do, yet it is often overlooked until something goes wrong.
A governing document is the legal document establishing a charity and outlining how it must be run. Its form depends on the structure, for example:
- A trust deed for charitable trusts
- A constitution for charitable incorporated organisations (CIOs)
- Articles of association for charitable companies
It sets out the charity’s purposes, powers, governance structure, and administrative rules. Trustees should ensure they use the latest version filed with the Charity Commission (and Companies House for charitable companies), as unfiled updates are not valid. Copies can be requested via the Charity Commission portal.
WHY IS YOUR GOVERNING DOCUMENT IMPORTANT?
The governing document is legally binding and trustees must always act in accordance with it. It is this document which:
- Defines the charity’s purposes
- Sets out trustee powers and responsibilities
- Provides a decision-making framework
- Protects trustees by ensuring actions are lawful
Failure to follow it can lead to regulatory action and potential personal liability.
WHAT ARE THEY KEY CLAUSES IN A GOVERNING DOCUMENT?
- Charitable objects
The objects clause defines what your charity exists to achieve. Trustees must ensure all activities further these objects. Acting outside them risks breaching charity law, regulatory intervention, and reputational damage.
Trustees should review objects regularly to avoid any gradual shift from the mission and ensure they are not overly restrictive (for example if they have a defined area of benefit or class of beneficiaries, such as children, then you cannot carry out activities with adults).
- Trustee Benefit Clause
This clause governs whether trustees can receive benefits. Generally:
- Trustees cannot be paid unless expressly authorised
- Any benefit must be properly managed to avoid conflicts of interest
Non-compliance can result in unauthorised benefit, a serious issue that may lead to personal liability or regulatory action.
- Trustee Appointments and Removals
Your governing document sets out how trustees are appointed and removed, including who appoints them, term limits, and procedures. These must be followed strictly, as invalid appointments may result in decisions being called into question.
- Membership
For charities with members, the governing document outlines eligibility, voting rights, and meeting procedures. Members may appoint trustees or approve major decisions. Trustees should ensure provisions reflect practice, particularly where member engagement has reduced. Updating these provisions may simplify governance as it may remove the need to call a separate general meeting to appoint trustees, for example.
WHAT ARE THE MOST COMMON PITFALLS?
- Acting outside of your objects – This is known as ‘mission creep’ and can occur when charities carry out activities which are usually closely related to their objects but are not technically allowed by the objects. For example, if the objects are limited to helping children then once a beneficiary turns 18 the charity is no longer able to help that person as this would be outside of its objects.
- Electronic meetings – Many governing documents, particularly older ones, do not expressly permit electronic or hybrid meetings. If your governing document is silent or restrictive, decisions made in this way will be invalid. You will need to amend your governing document to allow electronic meetings.
- Not following the correct procedure for appointing trustees – your governing document may contain specific procedures to be followed to appoint trustees, for example you may need to call a special meeting of the board or a general meeting. If you do not follow this procedure, the trustees will not be validly appointed and the validity of their decisions can be called into question.
HOW DO YOU AMEND YOUR GOVERNING DOCUMENT?
You should follow the procedure in your governing document to update it. Amendments to the objects, trustee benefit clause, and dissolution clause always require prior Charity Commission consent, which should be requested through your ‘My Charity Commission’ account. Administrative amendments can be made without consent, provided the correct internal procedures are followed. All changes must then be filed with the Charity Commission (and Companies House, where applicable).
WHAT ARE THE CONSEQUENCES FOR ACTING OUTSIDE OF YOUR GOVERNING DOCUMENT?
Any decisions made outside of your governing document are made in breach of trust and may result in:
- Charity Commission investigation or regulatory action
- Transactions being declared invalid
- Potential personal liability for trustees in certain circumstances
- In more serious cases, trustees may be removed.
Trustees should regularly review the governing document to ensure it remains up-to-date and fit for purpose.
Speaking on the importance of the governing document Eleanor Jones, Governance Manager at WCVA, said ‘A charity’s governing document is its rulebook. In my role at WCVA I am frequently contacted by organisations that are not fully aware of its critical importance and the consequences of not adhering to and maintaining its content. The expert guidance provided by Hugh James is essential and valuable to all voluntary organisations therefore I encourage you to take it on board and ensure your organisation is acting in accordance with the guidance provided’.
FURTHER SUPPORT:
Hugh James is a WCVA Trusted Associate. If you would like assistance with updating your charity’s governing document, please contact Harriet at Hugh James on Harriet.Morgan@hughjames.com.
If you require support and guidance on any governance related concerns, please contact the governance practitioner within your local CVC or Eleanor Jones, Governance Manager at WCVA, on ejones@wcva.cymru. A range of resources can also be found on https://knowledgehub.cymru/