The Charity Commission has published a revised version of its guidance to charity trustees, The Essential Trustee (CC3). This is important reading for all charity trustees, including members of  governing bodies of academy trusts[1], who are in the position of charity trustees as well as being directors of the academy trust company. The guidance is accessible at:

https://www.gov.uk/government/publications/the-essential-trustee-what-you-need-to-know-cc3/the-essential-trustee-what-you-need-to-know-what-you-need-to-do

The revised version does not change charity law. It is, however, presented more clearly than previously, contains links to other Commission guidance and is marginally shorter than the previous version.

Nevertheless there have been concerns in the charity sector at what has been described as “regulatory creep” on the part of the Charity Commission. If this is correct it should concern academy trusts since, although their compliance with charity law is regulated in the first instance by the DfE as principal regulator, government intends there to be no difference in approach to charity law enforcement whether a charity is registered with the Commission or is exempt from registration. In any event the ultimate enforcement powers remain with the Commission.

The claim of regulatory creep is the result of the changed definition in the guidance of the word “should” in relation to complying with best practice. While the guidance uses the word “must” to refer to trustees’ legal obligations it uses the word “should” in relation to good practice. Previous versions of the guidance used “should” to refer to “items we regard as minimum good practice, but for which there is no specific legal requirement. Trustees should follow the good practice guidance unless there’s a good reason not to”. 

The draft revised guidance published for consultation in November 2014 contained the following definition:

‘Should’ is a minimum good practice requirement which may, if not complied with, constitute a breach of duty. In consequence, the Commission expects you to follow these unless you have a good reason not to.

If you don’t follow the specified good practice:

  • the Commission may ask you to explain and justify your decision;
  • you may struggle to comply with your legal responsibilities;
  • if something goes wrong as a result, you may be in breach of your legal duties and held responsible for any loss your charity incurs;
  • the Commission may treat this as evidence of incompetence or mismanagement.

This revised definition was criticised by lawyers advising charities. The definition in the final published guidance is as follows:

‘Should’ means something is good practice that the Commission expects trustees to follow and apply to their charity.

  1. Following the good practice specified in this guidance will help you to run your charity effectively, avoid difficulties and comply with your legal duties. Charities vary in terms of their size and activities. Consider and decide how best to apply this good practice to your charity’s circumstances. The Commission expects you to be able to explain and justify your approach, particularly if you decide not to follow good practice in this guidance.    
  2. In some cases you will be unable to comply with your legal duties if you don’t follow the good practice…Trustees who act in breach of their legal duties can be held responsible for consequences that flow from such a breach and for any loss the charity incurs as a result. When the Commission looks into cases of potential breach of trust or duty or other misconduct or mismanagement, it may take account of evidence that trustees have exposed the charity, its assets or its beneficiaries to harm or undue risk by not following good practice.”

While the tone of the published version is more emollient, the underlying message of the guidance remains the same: departing from those parts of the guidance that are stated to be good practice is fraught with risk. That risk will be compounded if the guidance is supported by guidance from the EFA or DfE. Accordingly, trustees considering departing from the guidance should seriously consider taking legal advice before making a decision that may have serious consequences for the academy trust and in some cases for trustees personally.