Liability of board members and trustees of charities on liquidation

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Trustees and board members of incorporated charitable trusts or societies can be personally liable if the trust or society has not kept proper accounts that give a true and fair view of the affairs of the entity.

They can be liable of that failure if:

  • they contributed to the inability to pay debts
  • resulted in substantial uncertainty as to assets and liabilities 
  • impeded an orderly liquidation, or
  • for any proper reason.

In their defense trustees and board members can say

  • they took all reasonable steps to ensure compliance, or
  • they believed on reasonable grounds that a responsible person had done it.

Trustees and board members can also be liable on liquidation if they were a person involved in the formation, promotion or governance of a charity and they misapplied, retained or became accountable for money or property.

A court will take into account the degree to which:

  • the person caused the loss
  • the person was culpable
  • and how long it went on for.

You can’t rely on staying ignorant. You have a duty to get involved. If you can’t or won’t do that then you should decide whether you should continue as a board member or trustee.