DCH 294 Bates, Wells and Braithwaite
DRAFT CHARITIES BILL 2004
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 24th 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.
Alice Faure Walker, consultant
Bates, Wells & Braithwaite
Cheapside House, 138 Cheapside, London EC2V 6BB
14th July 2004
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