Registered Charitable Trusts – Trustee Duties and Liabilities

Trustee Duties

The Trustees have certain duties and liabilities placed on them under the relevant Trust Deed, New Zealand Legislation and Common Law (decisions of the Courts in New Zealand and Overseas). These duties include:

– to know the trust deed, the trust assets and liabilities;
– to advance charitable purposes;
– fiduciary duties of honesty and loyalty and acting in the best interests of the trust;
– exercise care, skill and prudent diligence;
– act impartially amongst beneficiaries;
– to sell wasting property;
– to exercise reasonable care;
– to insure assets and keep property safe;
– to keep inventories;
– to invest within a reasonable time;
– to repair trust property;
– to invest prudently;
– to not delegate;
– to act jointly where there is more than one trustee;
– to not profit from trust property;
– to be accountable; and
– to be honest, loyal, diligent and prudent in carrying out the terms of the trust.

If you would like further explanation of any of these duties, please get in touch with us.

Generally a charitable trust will have between 3 to 7 trustees. Usually trustees are a mix of professional executives and non-executives. They will be held to the same standard of care in their actions as applies to directors of a business (there is not a lower standard due to it being a charitable trust).

Trustee Liability

Trustees are representatives of the Trust. As noted above when discussing duties, they act as fiduciaries who hold the trust property for the benefit of the charitable purpose set out in the deed. It is important that trustees clearly understand what those purposes are and do not overreach and act in a way that is further than what was set out in the deed. If trustees fail to perform their duties then they may be subject to proceedings taken out by interested persons. Ultimately the New Zealand Attorney General has certain rights as the ultimate power ensuring accountability. It is common for trust deeds to include some limits on trustee liability. However, as mentioned before it is possible that trustees will be jointly and severally liable where a trust fails to account for GST, ACC levies or PAYE payments.

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you. We offer advice on all aspects of charitable trusts and are happy to answer any questions that you might have. Contact Steven Moe at stevenmoe@parryfield.com or 03-348-8480 for more information.

This article is the second in a series on charitable trusts. To have a look at our first article which sets out the advantages and disadvantages of charitable trusts, click here.