The Charities and Trustee Investment (Scotland) Act 2005 defines a charity trustee as someone who has general control and management of a charity and can therefore include directors, committee members, management board and trustees.
General and Specific Duties
All charity trustees must comply with the general duties set out in the Act regardless of whether the charity is an unincorporated association; company; trust; or Scottish Charitable Incorporated Organisation (“SCIO”). The general duties of all charity trustees are:
- To act in the interests of the charity;
- To seek, in good faith, to ensure that the charity operates in a manner that is consistent with its objects or purposes;
- To act with the care and diligence that is reasonable to expect of a person who is managing the affairs of another person; and
- To ensure that the charity complies with the provisions of the Act, and other relevant legislation.
The 2005 Act also lists some specific duties that charity trustees must ensure are met e.g. in relation to reporting to the Office of the Charity Regulator, fundraising, financial record keeping and maintaining the correct charity details on the Register.
Investment Powers and Duties
When the 2005 Act came into force it also introduced an extension to the investment powers of trustees relatively limited under previous legislation.
As far as charities are concerned, the investment powers introduced by the 2005 Act do not extend to other charitable bodies and are only relevant to charity trustees and trustees of non-charitable trusts. Therefore, they do not apply to charitable companies and SCIOs.
By virtue of the provisions in the 2005 Act trustees now have wider investment powers and can:
- make any kind of investment of the trust estate including a wider power to acquire stocks and shares; and
- acquire heritable property (i.e. land or buildings)
However, the 2005 Act also stipulates that before a trustee exercises a power of investment, they are under a duty to consider the following:
- the suitability to the trust of the proposed investment;
- the need for diversification of the trust’s investments, in so far as is appropriate to its;
- the need to obtain and consider proper advice about the way in which the power should be exercised;
- when reviewing the investments of the trust, a trustee shall obtain and consider proper advice about whether the investments must be varied; and
- If a trustee reasonably concludes that in all the circumstances it is unnecessary or inappropriate to obtain such advice the trustee need not obtain it.
So while investment powers of charity trustees are far broader than they were historically, they come with important duties and charity trustees should seek appropriate advice. If you would like some further information about the investment powers of charity trustees, or trustees' powers and responsibilities more broadly, then please get in touch with a member of our Third Sector Team.
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