Further memorandum from Bates, Wells and
Braithwaite (DCH 294)
TRUSTEE INDEMNITY INSURANCE
1. INTRODUCTION
Bates, Wells and Braithwaite is one of the leading
charity law firms in the country. This submission supplements
the detailed submission to the pre-legislative scrutiny of the
Joint Houses of Parliament sent to the Committee by Bates, Wells
& Braithwaite on 24 June 2004.
2. TRUSTEE INDEMNITY
INSURANCE
2.1 I believe that the draft Charities Bill
is an opportunity to amend the unsatisfactory legal and procedural
position regarding the ability of trustees of charities to take
out indemnity insurance.
2.1.1 Trustee indemnity insurance provides
personal protection to the trustees of charities in the event
that they are found to have committed a breach of trust and, in
the case of charitable companies, are guilty of fraudulent or
wrongful trading.
2.1.2 Since this type of insurance
is considered to confer a personal benefit on trustees, the Charity
Commission has always taken the view that the premiums on such
policies cannot be met by the charity in the absence of specific
power to that effect in the charity's constitution.
2.1.3 Most modern constitutions, therefore,
including the Charity Commission's models, include such a power.
The problem arises in the case of older charities, where there
is frequently no such power.
2.1.4 However, in increasingly litigious
times, trustee indemnity insurance is often a pre-requisite to
suitable individuals agreeing to serve on trustee boards.
2.1.5 The solution is for the charity
in question to apply to the Charity Commission for permission
to take out such insurance, which may include amending the charity's
constitution. Charity Commission practice in this area has become
more relaxed in recent years, and takes a more proportionate approach
to this issue than was frequently the case in the past. However,
despite the Charity Commission's flexible approach, the procedure
of applying to the Commission can be costly for a charity in terms
of both time and money.
2.2 My suggestion is that the Bill should
be amended to include a power for trustees of all charities to
take out trustee indemnity insurance, subject to safeguards similar
to those imposed in clause 27 of the Bill in relation to the proposed
new power to remunerate trustees who provide services to the charity.
July 2004
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