Charitable company members have duties too

It is long established that the director trustees of charitable companies are under duties to act in the best interests of their charitable company. However, charitable companies also have members (who may or may not be the same as the trustees), and their has never been a case where the courts have said that they too are subject to same duties – until now.

The High Court has held in a case recently reported ((Children’s Investment Fund Foundation (UK) v Attorney General and others [2017] EWHC 1379) that the members of a charitable company limited by guarantee owed fiduciary duties to act in the best interests of the company when considering whether to approve a payment to a director for loss of office. The court makes clear that this is a special circumstance, and therefore it may not be a precedent for all members’ decisions, but it is the first clear statement that members are subject to an overriding duty.

For each charitable structure, this means:

  • Charitable Company: members have duties in at least exceptional circumstances (if not all circumstances)
  • Charitable Incorporated Organisations: members have duties in all circumstances (under statute)
  • Trusts: no members
  • Unincorporated Organisations (clubs and associations): since this new case dealt with company law, it could be possible to distinguish decisions made by members of clubs.